<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 17, 2000
REGISTRATION NO. 333-33666
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HANDSPRING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3571 77-0490705
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
189 BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 230-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
BERNARD WHITNEY
CHIEF FINANCIAL OFFICER
189 BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 230-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
DENNIS R. DEBROECK, ESQ. WILLIAM M. KELLY, ESQ.
ROBERT A. FREEDMAN, ESQ. DAVIS POLK & WARDWELL
AUSTIN CHOI, ESQ. 1600 EL CAMINO REAL
BENJAMIN HADARY, ESQ. MENLO PARK, CALIFORNIA
FENWICK & WEST LLP (650) 752-2000
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
(650) 494-0600
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, 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 of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE PRICE(2) REGISTRATION FEE(3)
- --------------------------------------------------------------------------------------------------------------------------------
Common stock, $0.001 par value per
share............................. 11,500,000 $22.00 $253,000,000 $66,792
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 1,500,000 shares that the underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act of 1933.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 OFFERS TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 17, 2000
10,000,000 Shares
[HANDSPRING LOGO]
Common Stock
------------------
Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $19.00 and $22.00 per share. We have applied to list our common stock on
The Nasdaq Stock Market's National Market under the symbol "HAND".
The underwriters have an option to purchase a maximum of 1,500,000
additional shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 7.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS HANDSPRING, INC.
----------- ------------- ----------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
U.S. BANCORP PIPER JAFFRAY
The date of this prospectus is , 2000.
<PAGE> 3
DESCRIPTION OF GRAPHICS
INSIDE FRONT COVER
The right two-thirds of the page is a snapshot of the front of a Visor
handheld computer. It is set at an angle on the page. The display shows a page
from the calendar with entries. The left one-third of the page shows five
snapshots of the Visor handheld computer set at a 45 degree angle on the page
and in a column, with the display of each showing a different function of the
unit. The five displays from the top of the page to the bottom of the page are:
calendar, city time, memo list, to do list and the calculator. There are no
captions.
INSIDE BACK COVER
The left two-thirds of the page is a snapshot of the back of a Visor
handheld computer that is actual size. A module is half-inserted into the
Springboard expansion slot. The right one-third of the page shows five snapshots
of other modules for the Springboard expansion slot in a column inserted inside
a device. Each screenshot shows the springboard module applications. There are
no captions.
2
<PAGE> 4
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................. 4
RISK FACTORS........................ 7
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS................ 19
USE OF PROCEEDS..................... 20
DIVIDEND POLICY..................... 20
CAPITALIZATION...................... 21
DILUTION............................ 22
SELECTED CONSOLIDATED FINANCIAL
DATA.............................. 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..................... 24
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BUSINESS............................ 29
MANAGEMENT.......................... 41
RELATED PARTY TRANSACTIONS.......... 51
PRINCIPAL STOCKHOLDERS.............. 53
DESCRIPTION OF CAPITAL STOCK........ 55
SHARES ELIGIBLE FOR FUTURE SALE..... 57
UNDERWRITING........................ 59
NOTICE TO CANADIAN RESIDENTS........ 62
LEGAL MATTERS....................... 63
EXPERTS............................. 63
WHERE YOU MAY FIND MORE
INFORMATION....................... 63
INDEX TO 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.
Except as otherwise indicated, information in this prospectus reflects the
following:
- the conversion of all our outstanding shares of preferred stock into
shares of common stock immediately upon the closing of this offering;
- no exercise of the underwriters' over-allotment option; and
- a 3-for-2 stock split of our common stock in May 2000.
Handspring, the Handspring logo, Springboard and Visor are our trademarks.
Palm, Palm OS operating system and HotSync are trademarks of Palm, Inc. All
other trademarks or trade names appearing elsewhere in this prospectus are the
property of their respective owners.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS
OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before buying shares in this offering. You should read the
entire prospectus carefully.
HANDSPRING, INC.
We are a leading provider of handheld computers. Our first product, the
Visor handheld computer, is a personal organizer that is enhanced by an open
expansion slot, which we refer to as our Springboard platform. Since its
introduction in October 1999, our Visor has won numerous awards, including PC
Magazine's annual "Technical Excellence" award for handheld devices, first place
in CNET.com's Consumer Electronics "Top Ten Must-Haves" and inclusion in
Business Week's "Best Products of the Year." More than 2,500 developers have
registered with Handspring to receive support in developing modules that can be
easily snapped into the Springboard expansion slot. Examples of modules
commercially available or in development include content such as books and
games; consumer applications such as an MP3 player, a digital camera and a
global positioning system receiver; and communications applications such as
wireless modems and two-way pagers offering Internet and intranet connectivity.
We will continue to be an innovator in designing expandable handheld devices
that enable new mobile computing and communications applications.
The handheld computing and communications industry is growing rapidly as
users, particularly mobile professionals, increasingly rely on electronic
management of critical personal and professional information, interaction with
Internet-based information resources and mobile voice and data communications.
This increased need for productivity and connectivity "anywhere, anytime" has
led to a wide array of handheld devices. Some handheld devices focus on handheld
computing functions, including calendar and contact management, while others
focus on communications functions, including voice communications, email and
Internet access.
While demand for these devices has grown rapidly, we believe that product
evolution in this sector is still in its early stage. International Data
Corporation estimates that worldwide shipments of smart handheld devices will
grow from approximately 8.2 million units in 1999 to approximately 35.5 million
units in 2003. We believe that the emergence of more powerful, flexible devices
with increased functionality and broad consumer applications will further expand
the potential market for handheld computing and communications devices. The key
challenge in addressing this market is designing a device that is small, elegant
and easy to use, yet flexible enough to support a wide variety of personal
preferences and professional requirements.
Our team has extensive experience in handheld computing design. Our Visor
handheld computer combines the functionality of a handheld organizer with the
flexibility of our Springboard expansion slot, enabling users to customize their
device to deliver a broad range of applications. Key elements of our solution
include:
- EASY TO USE PRODUCTS. Our Visor handheld computers are designed to
delight our customers with a simple, intuitive solution for their
computing, information and entertainment needs. In addition, users can
simply insert modules into our Springboard expansion slot without the
need to separately install or delete software.
- FLEXIBLE PLATFORM. The Springboard expansion slot enables users to
customize the functionality of their Visor handheld computers. To
encourage widespread module development, our Springboard expansion slot
was designed with an open face allowing great flexibility in the size,
form and functionality of the modules that developers create.
4
<PAGE> 6
- OPEN DEVELOPMENT ENVIRONMENT. Our Springboard technology provides an open
platform to developers, with all documentation available on our Web site,
allowing them to create modules without paying royalties or license fees.
We offer a wide variety of marketing and support programs to help our
developers build successful businesses based on Springboard modules.
- VALUE LEADERSHIP. Our products are designed to combine superior
functionality with competitive pricing in order to drive widespread
adoption within the broad consumer market.
- COMPATIBILITY. The compatibility of our products with the Palm OS
operating system, which we have licensed from Palm, allows our Visor
handheld computers to run thousands of applications developed for that
operating system.
Our objective is to become a global market leader in the handheld computing
and communications marketplace. Key elements of our strategy include:
- DEVELOP PRODUCTS BASED ON CUSTOMER FOCUSED DESIGN AND INNOVATION. We
intend to continue building on the history of innovation of key members
of our management and product development teams, who founded and led the
Palm Computing business from its inception until the founding of
Handspring in mid-1998.
- PENETRATE LARGE AND GROWING HANDHELD COMPUTING AND COMMUNICATIONS
MARKET. Our Visor handheld computer's Springboard expandability,
organizer functionality and competitive pricing provide us with immediate
access to the large and growing handheld computing and communications
market.
- ESTABLISH MULTIPLE REVENUE SOURCES. We intend to derive additional
sources of revenue from internally developed Springboard modules,
distribution of Springboard modules developed by third parties, product
accessories and services.
- ESTABLISH A STRONG BRAND IDENTITY. Our goal is to establish Handspring as
the premier brand in the consumer handheld computing market by creating
an image that is innovative, fun, smart, approachable, compelling and
personal.
- ADDRESS ADDITIONAL MARKETS BY ATTRACTING AND SUPPORTING THE DEVELOPMENT
COMMUNITY. Our goal is to develop a competitive advantage from a large
and innovative developer community focused on our Springboard platform.
These developers will enable Handspring to sell into new and broader
areas, such as the education and medical device markets.
- LEVERAGE OUTSOURCE MODEL. Our strategy is to focus on what we do best,
creating innovative products. We believe that by outsourcing many other
functions, including manufacturing, order fulfillment and repair, we will
keep the number of our employees small relative to our scale. This
strategy will allow us to be more creative, flexible, aggressive and
competitive.
We initiated our product launch exclusively through our handspring.com Web
site. Beginning in March 2000, we extended our distribution to include initially
three national retailers, Best Buy, CompUSA and Staples. In May 2000, we
expanded our international presence by beginning to sell our products in Europe
through both our Web site and retail distribution. In all markets, we plan to
work closely with our retail partners to provide an outstanding retail presence,
and to enable an efficient channel for broad consumer availability of our
products. We recently announced the establishment of our office in Japan in
order to start building our business in that market.
We were incorporated in California as JD Technology, Inc. in July 1998 and
changed our name to Handspring, Inc. in November 1998. We reincorporated in
Delaware in May 2000. Our principal executive offices are located at 189
Bernardo Avenue, Mountain View, California, and our telephone number is (650)
230-5000. Our Web site address is handspring.com. The information on the Web
site is not part of this prospectus.
5
<PAGE> 7
THE OFFERING
Common stock offered.................... 10,000,000 shares
Common stock to be outstanding after the
offering................................ 125,253,728 shares
Use of proceeds......................... For general corporate purposes,
including working capital.
Proposed Nasdaq National Market
Symbol.................................. HAND
The number of shares of our common stock to be outstanding after this
offering is based on the number outstanding on April 1, 2000 plus 895,342 shares
issued in May 2000 upon the exercise of a right to purchase shares, and
excludes:
- 20,684,999 shares subject to options outstanding as of April 1, 2000 at a
weighted average exercise price of $0.99 per share, and
- 7,651,243 shares that are available for issuance under our stock option
plans.
After April 1, 2000, we adopted stock option and purchase plans, which will
become effective on the effective date of this offering, with a total of
15,750,000 shares available for issuance.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 29, 1998 JULY 29, 1998 NINE MONTHS
(DATE OF INCEPTION) (DATE OF INCEPTION) ENDED
TO JUNE 30, 1999 TO MARCH 31, 1999 APRIL 1, 2000
---------------------- ---------------------- -------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATION DATA:
Revenue......................................... $ -- $ -- $ 50,111
Cost of revenue................................. -- -- 34,171
Amortization of deferred stock compensation..... 3,646 2,425 26,420
Total costs and operating expenses.............. 8,835 4,460 91,212
Loss from operations............................ (8,835) (4,460) (41,101)
Net loss........................................ (8,389) (4,159) (40,764)
Basic and diluted net loss per share............ $ (0.71) $ (0.36) $ (1.34)
Shares used in calculating basic and diluted net
loss per share................................ 11,772 11,451 30,403
</TABLE>
<TABLE>
<CAPTION>
APRIL 1, 2000
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 17,407 $18,907 $209,082
Working capital............................................. 6,297 7,797 197,972
Total assets................................................ 38,651 40,151 230,326
Long-term liabilities....................................... 64 64 64
Redeemable convertible preferred stock...................... 27,962 -- --
Total stockholders' equity (deficit)........................ (15,909) 13,553 203,728
</TABLE>
See Note 2 to the notes to our consolidated financial statements for an
explanation of the determination of the number of shares used in computing per
share data.
The pro forma column in the consolidated balance sheet data reflects the
automatic conversion of all shares of preferred stock into common stock and the
exercise of a right to purchase 895,342 shares of common stock at an exercise
price of $1.6753 per share in May 2000. The pro forma as adjusted column in the
consolidated balance sheet data reflects the receipt of the net proceeds from
the sale of shares of common stock offered by us at the assumed initial public
offering price of $20.50 per share, after deducting the estimated underwriting
discounts and commissions and offering expenses payable by us.
6
<PAGE> 8
RISK FACTORS
You should carefully consider the risks described below before making a
decision to buy our common stock. The risks and uncertainties described below
are not the only ones we face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also materialize and impair
our business operations. If any of the following risks actually materializes,
our business could be harmed. In that case, the trading price of our common
stock could decline, and you might lose all or part of your investment. You
should also refer to the other information set forth in this prospectus,
including our financial statements and the related notes.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR YOU TO EVALUATE OUR
BUSINESS AND PROSPECTS.
We incorporated in July 1998. We did not start selling our Visor handheld
computer or generating revenue until the quarter ended January 1, 2000.
Accordingly, we are still in the early stages of development and have only a
limited operating history upon which you can evaluate our business. The revenue
and income potential of our products and business are unproven. You should
consider our chances of financial and operational success in light of the risks,
uncertainties, expenses, delays and difficulties associated with starting a new
business in a highly competitive field, many of which may be beyond our control.
If we fail to address these risks, uncertainties, expenses, delays and
difficulties, the value of your investment will decline.
FLUCTUATIONS IN OUR QUARTERLY REVENUES AND OPERATING RESULTS MIGHT LEAD TO
REDUCED PRICES FOR OUR STOCK.
Given our lack of operating history, you should not rely on
quarter-to-quarter comparisons of our results of operations as an indication of
our future performance. In some future periods, our results of operations could
be below the expectations of investors and public market analysts, if any choose
to follow our stock. In this event, the price of our common stock would likely
decline. Factors that are likely to cause our results to fluctuate include the
following:
- the announcement and timely introduction of new products by us and our
competitors;
- the timing and the availability of software programs and Springboard
modules that are compatible with our products;
- market acceptance of existing and future versions of our products and
compatible Springboard modules;
- fluctuations in the royalty rates and manufacturing costs we pay to
produce our handheld computers;
- the seasonality of our product sales;
- our ability to avoid potential system failures on our Web site;
- the price of products that both we and our competitors offer; and
- the mix of products that we offer.
WE HAVE A HISTORY OF LOSSES, WE EXPECT LOSSES TO CONTINUE AND WE MIGHT NOT
ACHIEVE OR MAINTAIN PROFITABILITY.
Our accumulated deficit as of April 1, 2000 was approximately $49.2
million. We had net losses of approximately $8.4 million for the period from
July 29, 1998 (date of inception) to June 30, 1999
7
<PAGE> 9
and $40.8 million in the first nine months of fiscal 2000. To date we have
funded our operations primarily through the sale of equity securities. Moreover,
we expect to incur significant operating expenses. We also expect to incur
substantial non-cash costs relating to the amortization of deferred
compensation, which will contribute to our net losses. As of April 1, 2000, we
had a total of $63.5 million of deferred compensation to be amortized. As a
result, we expect to continue to incur losses into calendar year 2001. Even if
we ultimately do achieve profitability, we may not be able to sustain or
increase profitability on a quarterly or annual basis. If our revenue grows more
slowly than we anticipate, or if our operating expenses exceed our expectations
and cannot be adjusted accordingly, our business will be harmed. See "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a more complete description
of our historical losses.
WE DEPEND HEAVILY UPON OUR LICENSE FROM PALM, INC. AND OUR FAILURE TO MAINTAIN
THIS LICENSE COULD SERIOUSLY HARM OUR BUSINESS.
We rely on technologies that we license or acquire from third parties,
including Palm. Our failure to maintain these licenses could seriously harm our
business. The Palm OS operating system is integrated with our
internally-developed software and hardware, and is used to enhance the value of
our products. Our license of the Palm OS operating system is critical to our
Visor handheld computer. The license agreement extends until September 2003 and
may be renewed for successive one-year terms if both parties agree. It is
possible that Palm will choose not to renew the license at the end of its term
for competitive or other reasons. Upon expiration or termination of the Palm OS
operating system license agreement, other than due to our breach, we may choose
to keep the license granted under the agreement for two years following the
expiration or termination. However, the license during this two-year period is
limited and does not entitle us to upgrades to the Palm OS operating system. If
we were not a licensee of the Palm OS operating system, we would be required to
license a substitute operating system, which could be less desirable and could
be costly in terms of cash and other resources. In the alternative, we could
develop our own operating system, which would take considerable time, resources
and expense, would divert our engineers' attention from product innovations and
would not have the advantage of Palm OS operating system applications
compatability. In addition, we may not assign that license agreement to a third
party without the written consent of Palm unless it is to a purchaser of
substantially all of our assets who is not a competitor of Palm. The existence
of these license termination provisions may have an anti-takeover effect in that
it could discourage competitors of Palm from acquiring us.
OUR BUSINESS COULD BE HARMED BY LAWSUITS WHICH HAVE BEEN FILED OR MAY IN THE
FUTURE BE FILED AGAINST PALM INVOLVING THE PALM OS OPERATING SYSTEM.
Suits against Palm involving the Palm OS operating system, which we license
from Palm, could adversely affect us. A disruption in Palm's business because of
these suits could disrupt our operations and cost us money. Palm is a defendant
in several patent infringement lawsuits involving the Palm OS operating system.
Although we are not a party to these cases and we are indemnified by Palm for
damages arising from lawsuit of this type, we could still be adversely affected
by a determination adverse to Palm as a result of market uncertainty or product
changes that could arise from such a determination.
A SIGNIFICANT PORTION OF OUR REVENUES HAS BEEN DERIVED FROM SALES ON OUR WEB
SITE AND SYSTEM FAILURES OR DELAYS HAVE IN THE PAST AND MIGHT IN THE FUTURE HARM
OUR BUSINESS.
To date, we have generated a significant portion of our revenue through our
Web site. As a result, our business depends on our ability to maintain and
expand our computer systems. We must also protect our computer systems against
damage from fire, water, power loss, telecommunications
8
<PAGE> 10
failures, computer viruses, vandalism and other malicious acts and similar
unexpected adverse events. During our initial product launch, we experienced
system interruptions and slowdowns due to an improper design and implementation
of our Web site from which consumers purchase our products. This caused long
wait times on our Web site, long delivery times, lost orders, lost revenues and
harm to our reputation. Despite precautions we have taken, unanticipated
problems affecting our systems could again in the future cause temporary
interruptions or delays in the services we provide. Our customers might become
dissatisfied by any system failure or delay that interrupts our ability to
provide service to them or slows our response time. Sustained or repeated system
failures or delays would affect our reputation, which would harm our business.
Slow response time or system failures could also result from straining the
capacity of our systems due to an increase in the volume of traffic on our Web
site. While we carry business interruption insurance, it might not be sufficient
to cover any serious or prolonged emergencies.
WE EXPECT TO INCREASE OUR RELIANCE ON RETAILERS TO SELL OUR PRODUCTS, AND
DISRUPTIONS IN THIS CHANNEL AND OTHER EFFECTS OF SELLING THROUGH RETAILERS WOULD
HARM OUR ABILITY TO GENERATE REVENUES FROM THE SALE OF OUR HANDHELD COMPUTERS.
We sell our products both through our handspring.com Web site as well as
through major retail partners. In March 2000, we entered into agreements with
Best Buy, CompUSA (and Wynit, Inc., a supplier to CompUSA) and Staples to resell
our products in their stores in the United States. In May 2000 we began selling
our products through major European retailers, namely Dixons in the United
Kingdom and MediaMarkt in Germany (and ALSO ABC Trading GmbH, a supplier to
MediaMarkt). We expect to add additional retail partners through the remainder
of 2000 including U.S. and Canadian retail chains, retailers in other
international markets and Internet retailers. Because we expect to increase the
portion of our products we sell to retailers, we are subject to many risks,
including the following:
- retailers may not maintain inventory levels sufficient to meet customer
demand;
- if we reduce the prices of our products, we may have to compensate
retailers for the difference between the higher price they paid to buy
their inventory and the new lower prices;
- product returns could increase as a result of our strategic interest in
assisting retailers in balancing inventories;
- retailers may emphasize our competitors' products or decline to carry our
products;
- we may not be able to attract or retain a sufficient number of qualified
retailers; and
- as increased sales are made through our retail distribution channel, a
conflict may develop between that channel and direct sales through our
handspring.com Web site;
In addition, as revenues through our retail distribution channel increase
as a percentage of total revenues, we expect our gross margins will decrease as
sales through retailers are made at lower margins than sales through our Web
site. We also expect a higher percentage of retail distribution sales to
negatively impact our cash cycle.
OUR PRODUCTION WOULD BE SERIOUSLY HARMED IF OUR SUPPLIERS ARE NOT ABLE TO MEET
OUR DEMAND AND ALTERNATIVE SOURCES ARE NOT AVAILABLE.
Our products contain components, including liquid crystal displays, touch
panels, memory chips and microprocessors, that are procured from a variety of
suppliers. We do not carry any inventory of our products or product components.
We rely on our suppliers to deliver necessary components in a timely manner
based on forecasts that we provide. At various times, some of the key components
for handheld computers, including display components and flash memory, have been
in short supply, taking up to 180 days between ordering and delivery. The
recurrence of this delay would harm our
9
<PAGE> 11
ability to deliver our products on a timely basis. The cost, quality and
availability of components are essential to the successful production and timely
sale of our products.
Some components, such as displays, power supply integrated circuits,
microprocessors and certain discrete components, come from sole or single source
suppliers. Alternative sources are not currently available for these sole and
single source components. If suppliers are unable to meet our demand for sole
source components and if we are unable to obtain an alternative source or if the
price for an alternative source is prohibitive, our ability to maintain timely
and cost-effective production of our handheld computer products would be
seriously harmed. In addition, because we rely on purchase orders rather than
long-term contracts with our suppliers, including our sole and single source
suppliers, we cannot predict with certainty our ability to procure components in
the longer term. If we receive a smaller allocation of components than is
necessary to manufacture products in quantities sufficient to meet customer
demand, customers could choose to purchase competing products.
IF WE FAIL TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGE AND EVOLVING INDUSTRY
STANDARDS, OUR PRODUCTS COULD BECOME LESS COMPETITIVE OR OBSOLETE.
The market for our products is characterized by rapidly changing
technology, evolving industry standards, changes in customer needs, heavy
competition and frequent new product introductions. If we fail to modify or
improve our products in response to changes in technology or industry standards,
our products could rapidly become less competitive or obsolete. Our future
success will depend, in part, on our ability to:
- use leading technologies effectively;
- continue to develop our technical expertise;
- enhance our current products and develop new products that meet changing
customer needs;
- time new product introductions in a way that minimizes the impact of
customers delaying purchases of existing products in anticipation of new
product releases;
- adjust the prices of our existing products to increase customer demand;
- successfully advertise and market our products; and
- influence and respond to emerging industry standards and other
technological changes.
We must respond to changing technology and industry standards in a timely
and cost-effective manner. We may not be successful in effectively using new
technologies, developing new products or enhancing our existing products on a
timely basis. These new technologies or enhancements may not achieve market
acceptance. Our pursuit of necessary technology may require substantial time and
expense. We may need to license new technologies to respond to technological
change. These licenses may not be available to us on terms that we can accept.
Finally, we may not succeed in adapting our products to new technologies as they
emerge.
IF WE ARE NOT SUCCESSFUL IN THE DEVELOPMENT AND INTRODUCTION OF NEW PRODUCTS,
DEMAND FOR OUR PRODUCTS COULD DECREASE.
We depend on our ability to develop new or enhanced products that achieve
rapid and broad market acceptance. We may fail to identify new product
opportunities successfully and develop and bring to market new products in a
timely manner. In addition, our product innovations may not achieve the market
penetration or price stability necessary for profitability.
As the uses for our Visor handheld computer and potential uses for our
Springboard slot continue to evolve, we plan to develop additional complementary
products and services as additional sources of revenue. Accordingly, we may
change our business model to take advantage of new business opportunities,
including business areas in which we do not have extensive experience. For
10
<PAGE> 12
example, we may create products that rely on a wireless infrastructure. If we
fail to develop these or other products successfully, our business would be
harmed.
IF POPULAR SPRINGBOARD MODULES ARE NOT DEVELOPED FOR OUR VISOR HANDHELD
COMPUTER, DEMAND FOR OUR PRODUCTS MAY BE LIMITED.
To differentiate our products from competitors and attract large numbers of
consumer purchasers of our products, we and third parties need to develop
compelling Springboard modules for our Visor handheld computer. We may be unable
to attract a sufficient number of talented third-party Springboard module
developers because of our relatively small market share in the handheld computer
industry or for technological or other reasons. There is a limited number of
Springboard modules available for sale. If Springboard module developers fail to
anticipate market needs in a timely manner, or if there is not a successful
distribution outlet for the sale of Springboard modules, demand for our Visor
handheld computer may diminish.
OUR REPUTATION COULD BE HARMED IF THE SPRINGBOARD MODULES DEVELOPED BY THIRD
PARTIES ARE DEFECTIVE.
Because we offer an open development environment, third party developers
are free to design, market and sell modules for our Springboard slot without our
consent, endorsement or certification. Nevertheless our reputation is
inextricably tied to the Springboard modules designed for our Visor handheld
computer. If modules sold by third parties are defective or are of poor quality,
our reputation could be harmed and the demand for our Visor handheld computer
and modules could decline.
IF THE EXPANDABLE DESIGN OF OUR PRODUCTS IS NOT ACCEPTED BY CONSUMERS, OUR
REVENUES WILL FAIL TO MEET OUR EXPECTATIONS.
Much of the perceived value of our Visor handheld computer lies in the
Springboard expansion slot, which enables users to add functions by inserting
modules into the base device. Many of these modules will perform functions that
are today generally performed by a dedicated standalone device. While we believe
that the simple customization provided by the Springboard slot will be
attractive to users, the uniqueness of the feature combined with the recent
introduction of the product make it unclear whether consumers will prefer our
approach as compared either to multiple dedicated devices or to other designs
for multifunction devices.
IF WE FAIL TO ACCURATELY ANTICIPATE DEMAND FOR OUR PRODUCTS, WE MAY NOT BE ABLE
TO SECURE SUFFICIENT QUANTITIES OR COST-EFFECTIVE PRODUCTION OF OUR HANDHELD
COMPUTERS OR WE COULD HAVE COSTLY EXCESS PRODUCTION.
Because we have a limited operating history and did not begin selling our
products until October 1999, we have very little information about demand for
our products. The demand for our products depends on many factors and is
difficult to forecast. We experienced product shortages when we introduced our
Visor handheld computer because we underestimated initial demand. We expect that
it will become even more difficult to forecast demand as we introduce and
support multiple products and as competition in the market for our products
intensifies. Significant unanticipated fluctuations in demand could cause
problems in our operations.
If demand does not develop as expected, we could have excess production
resulting in excess inventories of finished products and components, which would
use cash. We have limited capability to reduce manufacturing capacity within a
90-day period. Excess materials would likely result in material scrap and
obsolesence costs.
If demand exceeds our expectations, we will need to rapidly increase
production at our third-party manufacturers. We will also need our suppliers to
provide additional volumes of components,
11
<PAGE> 13
which may not be possible within our timeframe. For example, some components,
including plastics, require a lead time of approximately three months to
increase quantity. Even if we are able to obtain enough components, our
third-party manufacturers might not be able to produce enough of our products as
fast as we need them. The inability of either our manufacturers or our suppliers
to increase production rapidly enough could cause us to fail to meet customer
demand. In addition, rapid increases in production levels to meet unanticipated
demand could result in higher costs for manufacturing and supply of components
and other expenses. These higher costs would lower our profit margins.
IF ANY OF OUR MANUFACTURING PARTNERS FAIL TO PRODUCE QUALITY PRODUCTS ON TIME
AND IN SUFFICIENT QUANTITIES, OUR REPUTATION AND RESULTS OF OPERATIONS WOULD
SUFFER.
We depend on third-party manufacturers to produce sufficient volume of our
handheld devices, modules and accessories in a timely fashion and at
satisfactory quality levels. The cost, quality and availability of third-party
manufacturing operations are essential to the successful production and sale of
our products. We have a manufacturing agreement with Flextronics under which we
order products on a purchase order basis in accordance with a forecast. In
addition, in April 2000, we qualified a second manufacturer of our products,
Solectron. We expect Solectron's Guadalajara, Mexico facility to be operational
by the end of summer 2000. The absence of dedicated capacity under our
manufacturing agreements means that, with little or no notice, our manufacturers
could refuse to continue to manufacture all or some of the units of our devices
that we require or change the terms under which they manufacture our device
products. If they were to stop manufacturing our devices, it could take up to
six months to qualify an alternative manufacturer to replace the lost
manufacturing capacity and our results of operations could be harmed. In
addition, if our manufacturers were to change the terms under which they
manufacture for us, our manufacturing costs could increase and our profitability
could suffer.
Our reliance on third-party manufacturers exposes us to the following risks
outside our control:
- unexpected increases in manufacturing and repair costs;
- interruptions in shipments if one of our manufacturers is unable to
complete production;
- inability to control quality of finished products;
- inability to control delivery schedules;
- unpredictability of manufacturing yields; and
- potential lack of adequate capacity to fill all or a part of the services
we require.
WE RELY ON THIRD PARTIES FOR ORDER FULFILLMENT, REPAIR SERVICES AND TECHNICAL
SUPPORT. OUR REPUTATION AND RESULTS OF OPERATIONS COULD BE HARMED BY OUR
INABILITY TO CONTROL THEIR OPERATIONS.
We rely on third parties to package and ship customer orders, repair units
and provide technical support. If our order fulfillment services, repair
services or technical support services are interrupted or experience quality
problems, our ability to meet customer demands would be harmed, causing a loss
of revenue and harm to our reputation. Although we have the ability to add new
service providers or replace existing ones, transition difficulties and lead
times involved in developing additional or new third party relationships could
cause interruptions in services and harm our business.
WE EXPECT TO FACE SEASONALITY IN OUR SALES, WHICH COULD CAUSE OUR QUARTERLY
OPERATING RESULTS TO FLUCTUATE.
We expect to experience seasonality in the sales of our products. We
anticipate sales to be higher in our second fiscal quarter due to increased
consumer spending patterns on electronic devices
12
<PAGE> 14
during the holiday season. We also expect that sales may decline during the
summer months because of typical slower consumer spending in this period. These
seasonal variations in our sales may lead to fluctuations in our quarterly
operating results.
OUR FAILURE TO DEVELOP BRAND RECOGNITION COULD LIMIT OR REDUCE THE DEMAND FOR
OUR PRODUCTS.
We believe that continuing to strengthen our brand will be critical to
increasing demand for, and achieving widespread acceptance of, our handheld
computer products. Some of our competitors and potential competitors have better
name recognition and powerful brands. Promoting and positioning our brand will
depend largely on the success of our marketing efforts, our ability and the
ability of third party developers to deliver software and Springboard modules
that are engaging to our users and our ability to provide high quality support.
To promote our brand, we expect to increase our marketing expenditures and
otherwise increase our financial commitment to creating and maintaining brand
loyalty among users. Brand promotion activities may not yield increased revenues
or customer loyalty and, even if they do, any increased revenues may not offset
the expenses we incur in building and maintaining our brand.
IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH EXISTING OR NEW COMPETITORS, OUR
RESULTING LOSS OF COMPETITIVE POSITION COULD RESULT IN PRICE REDUCTIONS, FEWER
CUSTOMER ORDERS, REDUCED MARGINS AND LOSS OF MARKET SHARE.
The market for handheld computing and communication products is highly
competitive and we expect competition to increase in the future. Some of our
competitors or potential competitors have significantly greater financial,
technical and marketing resources than we do. These competitors may be able to
respond more rapidly than us to new or emerging technologies or changes in
customer requirements. They may also devote greater resources to the
development, promotion and sale of their products than we do.
Our handheld computers compete with a variety of handheld devices,
including keyboard-based devices, sub-notebook computers, smart phones and
two-way pagers. Our principal competitors include:
- Palm, from whom we license the Palm OS operating system;
- licensees of the Microsoft Windows CE operating system for devices such
as the PocketPC, including Casio, Compaq and Hewlett-Packard;
- members of the Symbian consortium, including Psion, Ericsson and
Motorola; and
- other Palm OS operating system licensees, including Nokia, Sony and
QUALCOMM.
We expect our competitors to continue to improve the performance of their
current products and to introduce new products, services and technologies. For
example, in April 2000, Microsoft and its partners introduced the PocketPC
handheld computer based on Microsoft's Windows CE operating system. Successful
new product introductions or enhancements by our competitors could reduce sales
and the market acceptance of our products, cause intense price competition or
make our products obsolete. To be competitive, we must continue to invest
significant resources in research and development, sales and marketing and
customer support. We cannot be sure that we will have sufficient resources to
make these investments or that we will be able to make the technological
advances necessary to be competitive. Increased competition could result in
price reductions, fewer customer orders, reduced margins and loss of market
share. Our failure to compete successfully against current or future competitors
could seriously harm our business.
13
<PAGE> 15
OUR MANAGEMENT AND INTERNAL SYSTEMS MIGHT BE INADEQUATE TO HANDLE OUR POTENTIAL
GROWTH.
We have experienced rapid growth and expansion since our inception. From
July 29, 1998 to April 1, 2000, we increased the number of our employees from
two to 132. This growth has placed, and will continue to place, a significant
strain on our management and information systems and operational and financial
resources. To manage future growth, our management must continue to improve our
operational and financial systems and expand, train, retain and manage our
employee base. Our management may not be able to manage our growth effectively.
If our systems, procedures and controls are inadequate to support our
operations, our expansion would be halted and we could lose our opportunity to
gain significant market share. Any inability to manage growth effectively may
harm our business.
OUR PRODUCTS MAY CONTAIN ERRORS OR DEFECTS, 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 COSTS AND WARRANTY CLAIMS.
Our Visor handheld computer and Springboard modules are complex and must
meet stringent user requirements. We must develop our products quickly to keep
pace with the rapidly changing handheld computing and communications market.
Products as sophisticated as ours are likely to contain undetected errors or
defects, especially when first introduced or when new models or versions are
released. In addition, we have been selling our products for only a very short
period of time. In the future, we may experience delays in releasing new
products as problems are 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, damage to our reputation, lost revenues, diverted
development resources and increased customer service and support costs and
warranty claims. In addition, some undetected errors or defects may only become
apparent as new functions are added to our Visor handheld computer through the
use of future Springboard modules. Currently, consumers may return their Visor
handheld computer for any reason within 30 days of purchase. In addition, we
warrant that our hardware will be free of defects for one year from date of
purchase. Delays, costs and damage to our reputation due to product defects
could harm our business.
IF WE LOSE OUR KEY PERSONNEL, WE MAY NOT BE ABLE TO MANAGE OUR BUSINESS
SUCCESSFULLY.
Our future success depends to a significant extent on the continued service
of our key technical, sales and senior management personnel and their ability to
execute our growth strategy. In particular, we rely on Jeffrey C. Hawkins, our
Chief Product Officer, Donna L. Dubinsky, our Chief Executive Officer, and
Edward T. Colligan, our Senior Vice President, Marketing and Sales. The loss of
the services of any of our senior level management, or other key employees,
could harm our business. Our future performance will depend, in part, on the
ability of our executive officers to work together effectively. Our executive
officers may not be successful in carrying out their duties or running our
company. Any dissent among executive officers could impair our ability to make
strategic decisions quickly in a rapidly changing market.
IF WE FAIL TO ATTRACT, RETAIN AND MOTIVATE QUALIFIED EMPLOYEES, OUR ABILITY TO
EXECUTE OUR BUSINESS PLAN WOULD BE COMPROMISED.
Our future success also depends on our ability to attract, retain and
motivate highly skilled employees. Competition for employees in our industry is
intense. Although we provide compensation packages that include stock options,
cash incentives and other employee benefits, we may be unable to retain our key
employees or to attract, assimilate and retain other highly qualified employees
in the future. For example, after this offering, fluctuations in the market
price of our common stock could lead potential and existing employees to believe
that our equity incentives are less attractive, which
14
<PAGE> 16
could adversely affect our ability to attract and retain qualified employees. We
expect to experience difficulty in hiring and retaining highly skilled employees
with appropriate qualifications.
WE DEPEND ON PROPRIETARY RIGHTS TO DEVELOP AND PROTECT OUR TECHNOLOGY.
Our success and ability to compete substantially depends on our internally
developed proprietary technologies, which we protect through a combination of
patent, copyright, trade secret and trademark laws. No U.S. or foreign patents
have been granted to us and only three U.S. patent applications have been filed.
Patent applications or trademark registrations may not be approved. Even if they
are approved, our patents or trademarks may be successfully challenged by others
or invalidated. In addition, any patents that may be granted to us may not
provide us a significant competitive advantage. If our trademark registrations
are not approved because third parties own these trademarks, our use of these
trademarks would be restricted unless we enter into arrangements with the
third-party owners, which might not be possible on commercially reasonable terms
or at all. If we fail to protect or enforce our intellectual property rights
successfully, our competitive position could suffer.
We may be required to spend significant resources to monitor and police our
intellectual property rights. We may not be able to detect infringement and may
lose competitive position in the market before we do so. In addition,
competitors may design around our technology or develop competing technologies.
Intellectual property rights may also be unavailable or limited in some foreign
countries, which could make it easier for competitors to capture market share.
WE COULD BE SUBJECT TO CLAIMS OF INFRINGEMENT OF THIRD-PARTY INTELLECTUAL
PROPERTY, WHICH COULD RESULT IN SIGNIFICANT EXPENSE AND LOSS OF INTELLECTUAL
PROPERTY RIGHTS.
Our industry is characterized by uncertain and conflicting intellectual
property claims and frequent intellectual property litigation, especially
regarding patent rights. From time to time, third parties have in the past and
may in the future assert patent, copyright, trademark or other intellectual
property rights to technologies that are important to our business. We recently
received a letter from NCR notifying us of potential infringement of its
patents. While we are still reviewing these patents, we do not believe that
resolution of this matter would have a material impact on us. We may in the
future receive other notices of claims that our products infringe or may
infringe intellectual property rights. Any litigation to determine the validity
of these claims, including claims arising through our contractual
indemnification of our business partners, regardless of their merit or
resolution, would likely be costly and time consuming and divert the efforts and
attention of our management and technical personnel. We cannot assure you that
we would prevail in this litigation given the complex technical issues and
inherent uncertainties in intellectual property litigation. If this litigation
resulted in an adverse ruling, we could be required to:
- pay substantial damages;
- cease the manufacture, use or sale of infringing products;
- discontinue the use of certain technology; or
- obtain a license under the intellectual property rights of the third
party claiming infringement, which license may not be available on
reasonable terms, or at all.
OUR FUTURE RESULTS COULD BE HARMED BY ECONOMIC, POLITICAL, REGULATORY AND OTHER
RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS.
To date, we have generated substantially all of our revenue from sales in
the United States. In May 2000, we entered the European market, and we expect to
enter additional international markets over time. To the extent that our revenue
from international operations represents an increasing
15
<PAGE> 17
portion of our total revenue, we will be subject to increased exposure to
international risks. In addition, the facility where our Visor handheld
computers are manufactured today is located outside the United States. A
substantial number of our material suppliers are based outside of the United
States, and are subject to a wide variety of international risks. Accordingly,
our future results could be harmed by a variety of factors, including:
- changes in foreign currency exchange rates;
- changes in a specific country's or region's political or economic
conditions, particularly in emerging markets;
- trade protection measures and import or export licensing requirements;
- development risks and expenses associated with customizing our products
for local languages;
- potentially negative consequences from changes in tax laws;
- impact of natural disasters with an inability of the local government to
quickly provide recovery services;
- difficulty in managing widespread sales and manufacturing operations; and
- less effective protection of intellectual property.
WE MAY PURSUE STRATEGIC ACQUISITIONS AND WE COULD FAIL TO SUCCESSFULLY INTEGRATE
ACQUIRED BUSINESSES.
We expect to evaluate acquisition opportunities that could provide us with
additional product or services offerings, technologies or additional industry
expertise. Any future acquisition could result in difficulties assimilating
acquired operations and products, diversion of capital and management's
attention away from other business issues and opportunities and amortization of
acquired intangible assets. Integration of acquired companies may result in
problems related to integration of technology and management teams. Our
management has had limited experience in assimilating acquired organizations and
products into our operations. We could fail to integrate the operations,
personnel or products that we may acquire in the future. If we fail to
successfully integrate acquisitions, our business could be materially harmed.
WE MIGHT NEED ADDITIONAL CAPITAL IN THE FUTURE AND ADDITIONAL FINANCING MIGHT
NOT BE AVAILABLE.
We currently anticipate that our available cash resources, combined with
the net proceeds from this offering and financing available under our existing
loan agreement, will be sufficient to meet our anticipated working capital and
capital expenditure requirements for the next 12 months. However, our resources
may prove to be insufficient for these working capital and capital expenditure
requirements. We may need to raise additional funds through public or private
debt or equity financing in order to:
- take advantage of opportunities, including the purchase of technologies
or acquisitions of complementary businesses;
- develop new products or services; or
- respond to competitive pressures.
Any additional financing we need may not be available on terms acceptable
to us, or at all. If adequate funds are not available or are not available on
acceptable terms, we might not be able to take advantage of unanticipated
opportunities, develop new products or services or otherwise respond to
unanticipated competitive pressures, and our business could be harmed. Our
forecast of the period of time through which our financial resources will be
adequate to support our operations is a forward-
16
<PAGE> 18
looking statement that involves risks and uncertainties, and actual results
could vary materially as a result of a number of factors, including those set
forth in this "Risk Factors" section.
RISKS RELATED TO THIS OFFERING
THE PRICE OF OUR COMMON STOCK IS LIKELY TO BE VOLATILE AND SUBJECT TO WIDE
FLUCTUATIONS.
The market price of the securities of technology-related companies have
been especially volatile. Thus, the market price of our common stock is likely
to be subject to wide fluctuations. If our revenues do not grow or grow more
slowly than we anticipate, or, if operating or capital expenditures exceed our
expectations and cannot be adjusted accordingly, or if some other event
adversely affects us, the market price of our common stock could decline. In
addition, if the market for technology-related stocks or the stock market in
general experiences a loss in investor confidence or otherwise fails, the market
price of our common stock could fall for reasons unrelated to our business,
results of operations and financial condition. The market price of our stock
also might decline in reaction to events that effect other companies in our
industry even if these events do not directly affect us. The initial public
offering price of the common stock will be determined through negotiations
between the representatives of the underwriters and us and may not be
representative of the price that will prevail in the open market. You might be
unable to resell your shares of our common stock at or above the offering price.
In the past, companies that have experienced volatility in the market price of
their stock have been the subject of securities class action litigation. If we
were to become the subject of securities class action litigation, it could
result in substantial costs and a diversion of management's attention and
resources.
PROVISIONS IN OUR CHARTER DOCUMENTS MIGHT DETER A COMPANY FROM ACQUIRING US.
We have adopted a classified board of directors. In addition, our
stockholders are unable to call special meetings of stockholders, to act by
written consent, to remove any director or the entire board of directors without
a super majority vote or to fill any vacancy on the board of directors. Our
stockholders must also meet advance notice requirements for stockholder
proposals. Our board of directors may also issue preferred stock without any
vote or further action by the stockholders. These provisions and other
provisions under Delaware law could make it more difficult for a third party to
acquire us, even if doing so would benefit our stockholders. See "Description of
Capital Stock" for a more complete description of the anti-takeover provisions
of our charter and Delaware law.
OUR OFFICERS AND DIRECTORS EXERT SUBSTANTIAL INFLUENCE OVER US.
We anticipate that our executive officers, our directors and entities
affiliated with them together will beneficially own approximately 83.2% of our
outstanding common stock following the completion of this offering. As a result,
these stockholders will be able to exercise substantial influence over all
matters requiring approval by our stockholders, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership may also have the effect of delaying or preventing a change in our
control that may be viewed as beneficial by other stockholders.
MANAGEMENT COULD INVEST OR SPEND THE PROCEEDS OF THIS OFFERING IN WAYS WITH
WHICH OUR STOCKHOLDERS MIGHT NOT AGREE.
We have no specific allocations for the net proceeds of this offering.
Consequently, management will retain a significant amount of discretion over the
application of these proceeds. Because of the number and variability of factors
that will determine our use of these proceeds, our applications may vary
substantially from our current intentions to invest the net proceeds of the
offering in short-term, interest-bearing, investment-grade securities.
17
<PAGE> 19
FUTURE SALES OF SHARES BY EXISTING STOCKHOLDERS COULD AFFECT OUR STOCK PRICE.
If our existing stockholders sell substantial amounts of our common stock
in the public market following this offering, the market price of our common
stock could decline. Based on shares outstanding as of April 1, 2000, upon
completion of this offering we will have outstanding approximately 125,253,728
shares of common stock including the exercise of a right to purchase 895,342
shares of common stock in May 2000 and assuming no exercise of the underwriters'
over-allotment option. Of these shares, only the 10,000,000 shares of common
stock sold in this offering will be freely tradeable, without restriction, in
the public market. After the lockup agreements pertaining to this offering
expire 180 days from the date of this prospectus, an additional 115,253,728
shares will be eligible for sale in the public market at various times,
102,980,142 of which are held by directors, executive officers and other
affiliates, and are subject to volume limitations under Rule 144 of the
Securities Act of 1933 and various vesting agreements. In addition, the
20,684,999 shares subject to outstanding options and 23,401,243 shares reserved
for future issuance under our stock option and purchase plans will become
eligible for sale in the public market to the extent permitted by the provisions
of various vesting agreements, the lock-up agreements and Rules 144 and 701
under the Securities Act. See "Shares Eligible for Future Sale" for more
information regarding shares of our common stock that may be sold by existing
stockholders after the closing of this offering.
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price is substantially higher than the pro
forma net book value per share of the outstanding common stock. As a result, if
you purchase common stock in this offering, you will incur immediate and
substantial dilution in the amount of $18.87 per share. In addition, we have
issued options to acquire common stock at prices significantly below the initial
public offering price. To the extent these outstanding options are exercised,
you will be further diluted. See "Dilution" for a more complete description of
the dilution that you will incur.
18
<PAGE> 20
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements under the captions "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and in other sections of this prospectus that
are forward-looking statements. In some cases, you can identify these statements
by forward-looking words such as "may," "might," "will," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue," the negative of these terms and other comparable terminology. These
forward-looking statements, which are subject to risks, uncertainties and
assumptions about us, may include projections of our future financial
performance, our anticipated growth strategies and anticipated trends in our
business. These statements are only predictions based on our current
expectations and projections about future events. There are important factors
that could cause our actual results, level of activity, performance or
achievements to differ materially from the results, level of activity,
performance or achievements expressed or implied by the forward-looking
statements, including those factors discussed under the caption entitled "Risk
Factors." You should specifically consider the numerous risks outlined under
"Risks Factors."
Although we believe 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 any of these
forward-looking statements. We are under no duty to update any of these
forward-looking statements after the date of this prospectus to conform our
prior statements to actual results or revised expectations.
19
<PAGE> 21
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of 10,000,000 shares
of common stock in this offering will be approximately $190.2 million, or
approximately $218.9 million if the underwriters exercise their over-allotment
option in full, at an assumed initial public offering price of $20.50 per share,
after deducting the estimated underwriting discounts and commissions and
offering expenses payable by us.
The principal purposes of this offering are to obtain additional working
capital, establish a public market for our common stock and facilitate our
future access to public capital markets. We currently expect to use the net
proceeds from this offering for general corporate purposes, including sales and
marketing expenses and working capital. Our management will retain broad
discretion in the allocation of the net proceeds of this offering. The amounts
we actually spend will depend on a number of factors, including the amount of
our future revenues and other factors described elsewhere in this prospectus. We
may use a portion of the net proceeds to acquire or invest in complementary
businesses, technologies, products or services. We have no present commitments
or agreements with respect to any acquisition or investment. Pending these uses,
we intend to invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently expect to retain earnings, if any, to finance the growth and
development of our business. Therefore, we do not anticipate declaring or paying
cash dividends on our common stock in the foreseeable future. In addition, under
our loan agreement with Comdisco, Inc., we cannot declare or pay any cash
dividend without the prior written consent of Comdisco.
20
<PAGE> 22
CAPITALIZATION
The following table sets forth our capitalization as of April 1, 2000. Our
capitalization is presented:
- on an actual basis;
- on a pro forma basis to reflect the conversion of our outstanding
preferred stock into common stock immediately prior to the closing of
this offering and the exercise of a right to purchase 895,342 shares of
common stock at an exercise price of $1.6753 per share in May 2000; and
- on a pro forma as adjusted basis to reflect the sale of the shares of
common stock offered by us at an assumed initial public offering price of
$20.50 per share, after deducting the estimated underwriting discounts
and commissions and offering expenses payable by us.
<TABLE>
<CAPTION>
APRIL 1, 2000
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Long-term liabilities................................ $ 64 $ 64 $ 64
Redeemable convertible preferred stock, $0.001 par
value per share, 9,300,000 shares authorized,
actual and pro forma, 9,005,430 shares issued
and outstanding, actual, no shares, issued or
outstanding, pro forma and no shares authorized,
issued or outstanding pro forma as adjusted..... 27,962 -- --
Stockholders' equity (deficit):
Preferred stock, $0.001 par value per share, no
shares authorized, actual or pro forma,
10,000,000 shares authorized, pro forma as
adjusted, no shares issued or outstanding,
actual, pro forma or pro forma as adjusted...... -- -- --
Common stock, $0.001 par value per share,
105,000,000 shares authorized, actual and pro
forma, 73,833,951 shares issued and outstanding,
actual, 115,253,728 shares issued and
outstanding, pro forma, 1,000,000,000 shares
authorized, pro forma as adjusted, 125,253,728
shares issued and outstanding pro forma as
adjusted........................................ 74 115 125
Additional paid-in capital......................... 96,580 126,001 316,166
Deferred stock compensation........................ (63,458) (63,458) (63,458)
Accumulated other comprehensive income............. 48 48 48
Accumulated deficit................................ (49,153) (49,153) (49,153)
-------- -------- --------
Total stockholders' equity (deficit)............ (15,909) 13,553 203,728
-------- -------- --------
Total capitalization............................ $ 12,117 $ 13,617 $203,792
======== ======== ========
</TABLE>
The common stock to be outstanding after the offering, as of April 1, 2000,
excludes:
- 20,684,999 shares of our common stock subject to options outstanding as
of April 1, 2000 at a weighted average exercise price of $0.99 per share;
and
- 7,651,243, additional shares of our common stock that are available for
issuance under our stock option and purchase plans.
After April 1, 2000, we adopted stock option and purchase plans, which will
become effective on the effective date of this offering, with a total of
15,750,000 shares available for issuance.
21
<PAGE> 23
DILUTION
Our pro forma net tangible book value as of April 1, 2000 was approximately
$13.6 million, or $0.12 per share of common stock. Our pro forma net tangible
book value per share represents our total tangible assets less total liabilities
divided by the pro forma total number of shares of common stock outstanding at
such date and including the exercise of a right to purchase 895,342 shares of
common stock at an exercise price of $1.6753 per share in May 2000, assuming the
conversion of all outstanding shares of preferred stock into shares of common
stock immediately prior to the closing of this offering. The dilution in pro
forma 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.
Without taking into account any changes in net tangible book value after
April 1, 2000, other than to give effect to the sale of the shares of common
stock offered by us at an assumed initial public offering price of $20.50 per
share, after deducting the estimated underwriting discounts and commissions and
offering expenses payable by us, our pro forma net tangible book value as of
April 1, 2000 would have been approximately $203.7 million or $1.63 per share of
common stock. This amount represents an immediate increase in pro forma net
tangible book value of $1.51 per share to the existing stockholders and an
immediate dilution in pro forma net tangible book value of $18.87 per share to
new investors purchasing shares in this offering. The following table
illustrates the dilution in pro forma net tangible book value per share to new
investors.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $20.50
Pro forma net tangible book value per share as of April 1,
2000................................................... $0.12
Increase per share attributable to new investors.......... 1.51
-----
Pro forma net tangible book value per share after the
offering.................................................. $ 1.63
------
Dilution per share to new investors......................... $18.87
======
</TABLE>
The following table summarizes on a pro forma basis as of April 1, 2000,
the number of shares of common stock purchased from us, the total consideration
paid to us and the average price per share paid by existing stockholders and to
be paid by new investors purchasing shares of common stock in this offering at
an assumed initial public offering price of $20.50 per share, before deducting
estimated underwriting discounts and commissions and offering expenses payable
by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 115,253,728 92.0% $ 31,993,833 13.5% $ 0.28
New investors.............. 10,000,000 8.0 205,000,000 86.5 20.50
----------- ---- ------------ ----
Total.................... 125,253,728 100% $236,993,833 100% 1.89
=========== ==== ============ ====
</TABLE>
The above information assumes no exercise of the underwriters'
over-allotment option and excludes exercises of stock options after April 1,
2000. As of April 1, 2000, there were outstanding options to purchase a total of
20,684,999 shares of our common stock at a weighted average exercise price of
$0.99 per share. After April 1, 2000, we adopted stock option and purchase
plans, which will become effective on the effective date of this offering, with
a total of 15,750,000 shares available for issuance. To the extent any of these
options are exercised, there will be further dilution to new investors.
22
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and related
notes included elsewhere in this prospectus. The selected consolidated balance
sheet data as of June 30, 1999 and April 1, 2000 and the selected consolidated
statement of operations data for the period from July 29, 1998 (date of
inception) to June 30, 1999 and the nine-month period ended April 1, 2000 have
been derived from our audited consolidated financial statements, and are
included elsewhere in this prospectus. The consolidated statement of operations
data for the period from July 29, 1998 (date of inception) to March 31, 1999,
are derived from unaudited interim financial statements included elsewhere in
this prospectus. The unaudited financial statements have been prepared on
substantially the same basis as the audited financial statements and, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations for such periods. Historical results are not necessarily indicative
of the results to be expected in the future, and results of interim periods are
not necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 29, 1998 JULY 29, 1998 NINE MONTHS
(DATE OF INCEPTION) (DATE OF INCEPTION) ENDED
TO JUNE 30, 1999 TO MARCH 31, 1999 APRIL 1, 2000
------------------- ------------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue.................................. $ -- $ -- $ 50,111
------- ------- --------
Costs and operating expenses:
Cost of revenue....................... -- -- 34,171
Research and development.............. 2,738 1,137 6,733
Selling, general and administrative... 2,451 898 23,888
Amortization of deferred stock
compensation........................ 3,646 2,425 26,420
------- ------- --------
Total costs and operating
expenses......................... 8,835 4,460 91,212
------- ------- --------
Loss from operations.................. (8,835) (4,460) (41,101)
Interest and other income, net........... 446 301 337
------- ------- --------
Net loss................................. $(8,389) $(4,159) $(40,764)
======= ======= ========
Basic and diluted net loss per share..... $ (0.71) $ (0.36) $ (1.34)
======= ======= ========
Shares used in calculating basic and
diluted net loss per share............ 11,772 11,451 30,403
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, APRIL 1,
1999 2000
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments...... $13,767 $ 17,407
Working capital........................................... 13,108 6,297
Total assets.............................................. 15,631 38,651
Long-term liabilities..................................... -- 64
Redeemable convertible preferred stock.................... 17,972 27,962
Total stockholders' deficit............................... (3,616) (15,909)
</TABLE>
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of our results of operations and financial
condition should be read in conjunction with the consolidated financial
statements and other financial information included in this prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may be materially different from those
anticipated in these forward-looking statements resulting from various factors,
including those discussed under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
We were incorporated in July 1998 to develop innovative handheld computers
that are fun, smart, approachable, compelling and personal. Our business is
focused on the sale of our Visor handheld computer, Springboard modules that we
have developed and related accessories. Shipments of these products began in
October 1999 for orders received through our Web site. In March 2000, we began
shipping our products to selected retailers.
During the period from inception to June 30, 1999, our operating activities
were focused on developing our products, obtaining license rights, establishing
third party manufacturing and distribution relationships, recruiting personnel
and raising capital. During that period, we incurred expenses and generated no
revenue. We first recognized revenue in the second quarter of fiscal 2000. The
following discussion compares the period from inception to March 31, 1999 with
the nine-month period ended April 1, 2000 and also addresses activity from the
date of inception to June 30, 1999. For the purpose of this discussion, when we
refer to the period ended March 31, 1999, we are referring to the period from
inception to March 31, 1999, and when we refer to fiscal 1999, we are referring
to the period from inception to June 30, 1999.
During fiscal 1999 our fiscal months coincided with calendar month ends.
Effective July 1, 1999, we changed our fiscal year to a 52-53 week fiscal year
ending on the Saturday nearest to June 30. Unless otherwise stated, all years
and dates refer to our fiscal year and fiscal periods.
We expect to experience seasonality in the sales of our products. We
anticipate sales to be higher in our second fiscal quarter due to increased
consumer spending patterns on electronic devices during the holiday season. We
also expect that sales may decline during the summer months because of typical
decreased consumer spending patterns during this period. These seasonal
variations in our sales may lead to fluctuations in our quarterly operating
results.
RESULTS OF OPERATIONS
Revenue. Revenue is comprised almost entirely of sales of our handheld
computer devices and related peripherals and accessories. We began shipping
products in October 1999 for orders received through our handspring.com Web
site. In March 2000, we extended our distribution strategy to include initially
three national retailers, Best Buy, CompUSA and Staples. Product orders placed
by end user customers are received via our handspring.com Web site or over the
telephone via our third party customer support partner. Retail sales orders are
placed in our internal order processing system. All orders are then transmitted
to our logistics partner. We take title at the point of transfer from this
logistics partner to the common carrier. Once the carrier has received the
products, title then transfers to the customer. We may in the future enter into
agreements under which title is transferred to the customer upon the customer's
receipt. We recognize revenue when a purchase order has been received, the
product has been shipped, the sales price is fixed and determinable and
collection of the resulting receivable is probable. Provisions are made at the
time the related revenue is recognized for estimated product returns and
warranty. Total revenue recognized during the nine months ended April 1, 2000
was $50.1 million.
24
<PAGE> 26
Cost of revenue. Cost of revenue consists primarily of materials, labor,
royalty expenses, warranty expenses and freight. Cost of revenue was $34.2
million during the nine months ended April 1, 2000.
Research and development. Research and development expenses consist
principally of salaries and related personnel expenses, consultant fees and the
cost of materials and software used in product development. Research and
development expenses increased from $1.1 million during the period ended March
31, 1999 to $6.7 million during the nine months ended April 1, 2000. The
increase is associated with the hiring of personnel devoted to the development
of new products. Research and development expenses for fiscal 1999 were $2.7
million. We believe that continued investment in research and development is
critical to attaining our strategic objectives and we expect research and
development expenses to increase in the future.
Selling, general and administrative. Selling, general and administrative
expenses consist primarily of Web site design and maintenance expenses, salaries
and related expenses, promotional and advertising costs, accounting and
administrative expenses, costs for legal and professional services and general
corporate expenses. Selling, general and administrative expenses increased from
$898,000 during the period ended March 31, 1999 to $23.9 million during the nine
months ended April 1, 2000 due to a general increase in the level of operations,
including more personnel and larger facilities. Fiscal year 1999 selling,
general and administrative expenses totaled $2.5 million.
Amortization of deferred stock compensation. We granted stock options to
our officers and employees at prices subsequently deemed to be below the fair
value of the underlying stock. The cumulative difference between the fair value
of the underlying stock at the date the options were granted and the exercise
price of the granted options was $93.5 million at April 1, 2000. This amount is
being amortized, using the multiple option method, over the four-year vesting
period of the granted options. Accordingly, our results of operations will
include amortization of deferred stock compensation through fiscal 2004. We
recognized $2.4 million of this expense during the period ended March 31, 1999
and $26.4 million during the nine months ended April 1, 2000. A total of $3.6
million of deferred stock compensation amortization was recognized during fiscal
year 1999.
Future compensation expense from options granted through April 1, 2000 is
estimated to be $11,152,000, $28,380,000, $16,188,000, $6,742,000 and $996,000
for the fiscal years ended 2000, 2001, 2002, 2003 and 2004, respectively,
assuming no change in the number of outstanding options.
Interest and other income, net. Interest and other income, net increased
from $301,000 during the period ended March 31, 1999 to $337,000 during the nine
months ended April 1, 2000. The increase was primarily a result of increased
interest income from higher average cash and cash equivalents and short-term
investments balances during the nine months ended April 1, 2000 as compared with
the period ended March 31, 1999. This increase was partially offset by costs
associated with our financing agreement which were amortized to interest expense
during the nine months ended April 1, 2000. These costs relate to the inclusion
of a right granted to our lender to purchase 198,965 shares of Series A
preferred stock in our subordinated debt facility agreement obtained in June
1999. The total cost is being amortized over the 12 month term of the agreement.
Interest and other income, net was $446,000 during fiscal year 1999, which was
almost entirely associated with interest earned on cash and cash equivalents and
short-term investments. This income was slightly offset by amortization of costs
to interest expense during June 1999.
QUARTERLY RESULTS OF OPERATIONS
The following table shows unaudited consolidated statements of operations
data for each of the seven fiscal quarters ended April 1, 2000. The information
for each of these quarters has been prepared on the same basis as the audited
consolidated financial statements included in this
25
<PAGE> 27
prospectus. In the opinion of management, all necessary adjustments, which
consist only of normal and recurring accruals, have been included to fairly
present the unaudited quarterly results. This data should be read together with
our consolidated financial statements and the notes to those statements included
in this prospectus. The historical financial information for any quarter is not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS ENDED
JULY 29, 1998 ------------------------------------------------------------------------
(DATE OF INCEPTION) TO DECEMBER 31, MARCH 31, JUNE 30, OCTOBER 2, JANUARY 1, APRIL 1,
SEPTEMBER 30, 1998 1998 1999 1999 1999 2000 2000
---------------------- ------------ --------- -------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenue...................... $-- $ -- $ -- $ -- $ -- $ 15,790 $ 34,321
--- ------- ------- ------- ------- -------- --------
Costs and operating expenses:
Cost of revenue............ -- -- -- -- -- 10,822 23,349
Research and development... -- 367 770 1,601 2,472 2,146 2,115
Selling, general and
administrative........... 9 443 446 1,553 3,656 6,720 13,512
Amortization of deferred
stock compensation....... -- 1,590 835 1,221 3,202 6,221 16,997
--- ------- ------- ------- ------- -------- --------
Total costs and operating
expenses............... 9 2,400 2,051 4,375 9,330 25,909 55,973
--- ------- ------- ------- ------- -------- --------
Loss from operations......... (9) (2,400) (2,051) (4,375) (9,330) (10,119) (21,652)
Interest and other income,
net........................ -- 142 159 145 129 59 149
--- ------- ------- ------- ------- -------- --------
Net loss..................... $(9) $(2,258) $(1,892) $(4,230) $(9,201) $(10,060) $(21,503)
=== ======= ======= ======= ======= ======== ========
</TABLE>
Before the second quarter of fiscal 2000, our operations were limited and
consisted primarily of start-up activities. During the second quarter of fiscal
2000 we began shipping products for orders received through our handspring.com
Web site, resulting in revenue of $15.8 million and associated cost of revenue
of $10.8 million during that quarter. In March 2000, we extended our
distribution strategy to include initially three national retailers, Best Buy,
CompUSA and Staples. Revenue generated from Web site sales as well as shipments
to our retailers totaled $34.3 million during the quarter ended April 1, 2000,
with associated cost of revenues of $23.3 million.
Our operating expenses were minimal during the first quarter of fiscal
1999, as we were incorporated in July 1998 and had no development,
manufacturing, selling or marketing personnel. From inception there was a
consistent increase in research and development expenses until the quarter ended
January 1, 2000 when all start-up production expenses were then included within
cost of revenue. The increase in research and development expenses is due to our
growth and continuous focus on the development of new products. Selling, general
and administrative expenses have also steadily increased with a general increase
in the level of operations and personnel.
Interest and other income, net consists of interest income which has
fluctuated over the quarters with the average cash and cash equivalents balance,
as well as short-term investments. Also included within interest and other
income, net is the amortization of costs associated with our financing agreement
which is being amortized over the one-year term of our subordinated debt
facility expiring in June 2000. Most of our cash has been provided by private
placement financing, and is used in operations. We sold Series A convertible
preferred stock in October 1998 for net proceeds of $18.0 million, and sold
Series B convertible preferred stock in July 1999 for net proceeds of $10.0
million.
Our limited operating history makes the prediction of future operating
results difficult. We have a history of losses and we expect to continue to
incur losses into calendar year 2001. We believe that period-to-period
comparisons of our operating results should not be relied upon as predictive of
future
26
<PAGE> 28
performance. In some future periods, our results of operations could be below
the expectations of investors and public market analysts, if any choose to
follow our stock. In this event, the price of our common stock would likely
decline.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations primarily from the sale of
preferred stock, through which we raised net proceeds of $28.0 million through
April 1, 2000. As of April 1, 2000 cash and cash equivalents were $17.4 million.
We also have a $6.0 million subordinated debt facility, which is available until
June 2000. Borrowings under this facility bear interest at 10.0% per annum, and
are collateralized by substantially all of our assets. Without the lender's
consent, we may not incur any other indebtedness in excess of $1.0 million.
There has been no drawdown on this facility to date. In addition, we have a
secured equipment lease facility with this lender that allows a maximum
borrowing of $1.0 million, of which $904,000 was available as of April 1, 2000.
Net cash used in operating activities for the nine months ended April 1,
2000 was $3.1 million, primarily attributable to a net loss of $40.8 million and
an increase in accounts receivable of $13.7 million. These uses of cash were
largely offset by the amortization of deferred stock compensation of $26.4
million as well as an increase in accounts payable and accrued liabilities of
$25.2 million. During the period ended March 31, 1999 and fiscal 1999 net cash
used in operating activities was $1.7 million and $4.0 million, respectively,
which was primarily attributable to a net loss of $4.2 million during the period
ended March 31, 1999 and $8.4 million during fiscal 1999. These net losses were
partially offset by the amortization of deferred stock compensation of $2.4
million and $3.6 million during the period ended March 31, 1999 and fiscal 1999,
respectively.
Net cash provided by investing activities for the nine months ended April
1, 2000 was $981,000, and primarily consisted of $8.3 million received from
maturities of short-term investments. This source of cash was partially offset
by purchases of short-term investments of $2.0 million as well as purchases of
property and equipment of $5.4 million. During the period ended March 31, 1999
net cash used in investing activities was $9.1 million, and was attributable to
purchases of short-term investments of $9.5 million as well as property and
equipment of $577,000, offset by maturities or sales of short-term investments
of $982,000. During fiscal 1999 net cash used in investing activities was $6.9
million, due to purchases of short-term investments and property and equipment
of $11.0 million and $780,000, respectively, partially offset by maturities or
sales of short-term investments of $4.8 million.
Net cash provided by financing activities totaled $12.0 million during the
nine months ended April 1, 2000, primarily due to net proceeds of $10.0 million
received from the issuance of Series B redeemable convertible preferred stock.
We received an additional $2.0 million from the issuance of common stock upon
exercise of stock options by employees. During the period ended March 31, 1999,
and fiscal 1999 net cash provided by financing activities was $18.0 million and
$18.5 million, respectively, primarily attributable to the issuance of Series A
redeemable convertible preferred stock, and to a lesser extent the issuance of
common stock.
Our future capital requirements will depend upon many factors, including
the timing of research and product development efforts and expansion of our
marketing efforts. We believe that the net proceeds of this offering, together
with our current cash and cash equivalents balance, will be sufficient to meet
our working capital needs for at least the next 12 months. To the extent that we
grow more rapidly than expected in the future, we may need additional cash to
finance our operating and investing needs. Our management intends to invest the
cash received from this offering in excess of current operating requirements in
short-term, interest-bearing, investment-grade securities.
27
<PAGE> 29
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Sensitivity. We maintain an investment portfolio consisting
mainly of fixed income securities with an average maturity of less than one
year. Because all of the securities in our portfolio have original maturities of
three months or less at April 1, 2000, the balances have been recorded as cash
equivalents. These securities are subject to interest rate risk and will fall in
value if market interest rates increase. We have the ability to hold our fixed
income investment until maturity, and therefore we do not expect our operating
results or cash flows to be affected to any significant degree by the effect of
a sudden change in market interest rates. We do not hedge any interest rate
exposures.
Foreign Currency Exchange Risk. Expenses of our international operations
are denominated in each country's local currency, and therefore are subject to
foreign currency exchange risk. To date, the effect of changes in foreign
currency exchange rates on operating expenses have not been material. All of our
revenue is currently earned in U.S. dollars, and we did not have any significant
balances that were due or payable in foreign currencies at April 1, 2000. We
currently do not hedge our foreign currency exposure. We intend to assess the
need to utilize financial instruments to hedge currency exposures on an ongoing
basis.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivatives and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative investments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In July
1999, the FASB issued SFAS No. 137, Accounting for Derivative and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133. SFAS No.
137 deferred the effective date of SFAS No. 133 until fiscal years beginning
after June 15, 2000. We will adopt SFAS No. 133 during fiscal 2001. To date, we
have not engaged in derivative or hedging activities.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements. SAB 101 provides guidance for revenue recognition under certain
circumstances. SAB 101 is effective for our fiscal year beginning July 2, 2000.
Implementation of SAB 101 is not expected to require us to change existing
revenue recognition policies and therefore is not expected to have a material
effect on our financial position or results of operations.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 ("FIN 44") Accounting for Certain Transactions Involving
Stock Compensation an Interpretation of APB Opinion No. 25. FIN 44 clarifies the
application of Opinion No. 25 for (a) the definition of employee for purposes of
applying Opinion No. 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, but certain conclusions cover
specific events that occur after either December 15, 1998, or January 12, 2000.
We believe that the impact of FIN 44 will not have a material effect on our
financial position or results of operations.
IMPACT OF THE YEAR 2000
We have not experienced any year 2000-related disruption in the operation
of our systems. Although most year 2000 problems should have become evident on
January 1, 2000 or on the so-called "century leap year" algorithm, additional
year 2000-related problems may become evident after these dates. We are not
aware of any material problems with our customers or vendors. Accordingly, we do
not anticipate incurring material expenses or experiencing any material
operational disruptions as a result of any year 2000 issues.
28
<PAGE> 30
BUSINESS
OVERVIEW
We are a leading provider of handheld computers. Our first product, the
Visor handheld computer, is a personal organizer that is enhanced by our
Springboard platform, an open expansion slot. Since the Visor's introduction in
October 1999, more than 2,500 developers have registered with Handspring's
developer program to receive support in developing modules. Examples of modules
commercially available or in development include a digital camera, an MP3
player, a two-way pager, a global positioning system and content such as books
and games. We will continue to design innovative expandable handheld devices
enabling new mobile computing and communications applications.
INDUSTRY OVERVIEW
Users' increasing reliance on the electronic management of personal and
business information, Internet-based information resources and mobile voice and
data communications has led to a proliferation of handheld devices. While some
handheld devices focus on handheld computing functions including calendar and
contact management, others focus on communications applications, such as voice,
data, paging, email and Internet access. Despite rapidly growing demand for such
devices, we believe that this industry sector is still in its early stages.
International Data Corporation estimates that worldwide shipments of smart
handheld devices will grow from approximately 8.2 million units in 1999 to
approximately 35.5 million units in 2003. We believe that the emergence of more
powerful, flexible devices enabling broad consumer applications will further
expand the potential handheld computing and communications device market. Key
factors driving widespread consumer adoption of handheld computing and
communications devices include:
DEMANDS OF A MOBILE SOCIETY. As our society becomes ever more mobile,
consumers are demanding the same productivity and communications capability on
the road as they get at their desks. This demand is at the heart of a powerful
cycle: new devices enable new applications, which in turn enable greater
mobility, which only increases the demand for more functional devices.
Reductions in device size and cost and improvements in functionality, storage
capacity and reliability are all fostering these trends. Each turn of the cycle
drives increased volume, with the result that a product category once targeted
at upscale "mobile professionals" is increasingly becoming a mass consumer
product sector.
NEED FOR MOBILE INTERNET AND INTRANET ACCESS. The growing prominence of the
Internet and corporate intranets in users' everyday lives is increasing demand
for access "anywhere, anytime". Demand for mobile data Internet applications
such as email, stock quotes and trading, news, content and location-based
services continues to increase. In addition, workers and their employers are
demanding mobile access to corporate intranets to obtain critical business
information such as inventory levels and customer profiles.
IMPROVEMENT IN WIRELESS COMMUNICATIONS ENABLE COMPELLING
APPLICATIONS. Digital wireless communications have become widely adopted due to
declining consumer costs, expanding network coverage and the availability of
extended service features such as voice and text messaging. Digital wireless
technologies, which are currently designed for voice transmission and allow only
limited data transmission capabilities, are evolving toward more advanced
technologies enabling higher data transmission rates at lower costs. Widespread
deployment of these technologies in wireless networks will increasingly enable
the delivery of higher bandwidth applications such as streaming video and audio
to handheld communications devices. Dataquest estimates that the number of
wireless data subscribers worldwide will grow from approximately 14 million at
the end of 1998 to approximately 102 million at the end of 2003.
29
<PAGE> 31
PROLIFERATION OF DIGITAL CONSUMER APPLICATIONS. The development of
applications for the digital delivery of consumer products and services, such as
photographs, music, video games, news, books, driving directions, weather and
stock quotes and trading, has accelerated as physical products and services are
increasingly being replaced with bytes of data. This trend has contributed to
the success of new consumer products such as MP3 players and digital cameras.
GROWING, INNOVATIVE DEVELOPER COMMUNITY. As the handheld computing and
communications device market has grown to millions of units, a large and growing
community of independent developers is driving new applications and
functionality. Developers are creating software applications and complementary
hardware peripherals and accessories that address new markets. This innovation
is in turn creating new market opportunities and is stimulating increased demand
for handheld devices.
These trends are accelerating toward the emergence of a device that
integrates handheld computing applications and a broad range of communications
functions. Current handheld products provide consumers with limited choices,
typically between a simple device without expandability or a complex,
multi-function device that is expensive, heavy and difficult to use. We believe
the key challenge is one of design. The handheld device must be small, elegant
and easy to use, yet flexible enough to support a wide variety of personal
preferences and professional requirements.
THE HANDSPRING SOLUTION
Our product design team has extensive experience in handheld computing
design. Our Visor handheld computer combines the functionality of a handheld
organizer with the flexibility of our Springboard expansion slot. The result is
a flexible, open platform that enables users to customize their handheld device
to deliver a broad range of computing and communications applications. Key
elements of our solution include:
EASY TO USE PRODUCTS. Our Visor handheld computers are designed to delight
our customers by providing a simple, intuitive solution for their computing,
communications, information and entertainment needs. Our products need little
technical knowledge to operate effectively. For example, users can simply insert
modules into our Springboard expansion slot without the need to separately
install or delete software. In addition, our customers can easily synchronize
their Visors' data with their desktop computers by pressing one button.
FLEXIBLE PLATFORM. The Springboard expansion slot allows users to add and
remove modules to customize the functions of their Visor computers. To encourage
widespread module development, the Springboard expansion slot was designed to
provide developers with great flexibility in the size, form and functionality of
the modules they create. The Springboard modules commercially available or in
development address a wide range of applications including:
- content, such as books and games;
- consumer applications, such as MP3 players, digital cameras and global
positioning system receiver modules;
- Internet and intranet connectivity; and
- communications capabilities, such as pager and modem modules.
OPEN DEVELOPMENT ENVIRONMENT. Our Springboard technology provides an open
platform to developers, with all documentation available on our Web site,
allowing developers to create modules without paying royalties or license fees.
We offer a wide variety of marketing and support programs to help our developers
build successful businesses based on Springboard modules. To enable broad module
production and distribution, we assist developers in relationships with
suppliers and manufacturers and in marketing their modules.
30
<PAGE> 32
VALUE LEADERSHIP. Our products are designed to combine superior
functionality with competitive pricing in order to drive widespread adoption
within the broad consumer market. Our Springboard platform allows users to
achieve optimal price performance, by enabling users to pay only for the
features and functionality they will actually use.
COMPATIBILITY. The compatibility of our products with the Palm OS operating
system, which we have licensed from Palm, allows our Visor handheld computers to
run thousands of applications developed for the Palm OS operating system. These
applications can be installed through the docking cradle, over the Internet or
through infrared transmission from another device. In addition, our products can
be synchronized with many of the widely used desktop organizer software
packages, including Microsoft Outlook, and can easily import personal data from
another Palm OS operating system device.
BUSINESS STRATEGY
Our objective is to become a global market leader in the handheld computing
and communications marketplace. We will continue to be an innovator in designing
expandable handheld devices that enable new mobile computing and communications
applications. Key elements of our strategy include:
DEVELOP PRODUCTS BASED ON CUSTOMER FOCUSED DESIGN AND INNOVATION. Our
business is founded on the notion that we must constantly innovate in order to
design simple, yet powerful, products that delight our customers. Key members of
our management and product development teams have a history of innovation and
technology leadership in the handheld computing markets, having founded and led
the Palm Computing business from its inception until the founding of Handspring
in mid-1998. Handspring's first product, the Visor handheld computer, builds on
this experience. We intend to continue to develop innovative handheld computing
products.
PENETRATE LARGE AND GROWING HANDHELD COMPUTING AND COMMUNICATIONS
MARKET. Our Visor handheld computer's Springboard expandability, organizer
functionality and competitive pricing provide us with immediate access to the
large and growing handheld computing and communications market. Our initial
strategy was to enter the market quickly by selling exclusively through our Web
site. To further expand our distribution, we began shipping our products to
selected retailers in March 2000. We also plan to expand our available market by
entering international markets as well as the enterprise, education and
government markets.
ESTABLISH MULTIPLE REVENUE SOURCES. Currently, almost all of our revenues
come from the sale of our Visor handheld computers. We intend to derive
additional sources of revenue from internally developed Springboard modules,
distribution of Springboard modules developed by third parties and product
accessories. We are developing new products to address the wireless and Internet
access markets. In addition, we intend to license our Springboard technology to
other companies.
ESTABLISH A STRONG BRAND IDENTITY. Our goal is to establish Handspring as
the premier brand in the consumer handheld computing market by creating an image
that is innovative, fun, smart, approachable, compelling and personal. We will
build on our brand awareness through innovative products, advertising, strategic
promotional relationships and creative marketing. In addition, we believe that
our promotion of the Springboard platform, along with our support of the module
developer community, will broaden consumer awareness of our products and enhance
our brand identity.
ADDRESS ADDITIONAL MARKETS BY ATTRACTING AND SUPPORTING THE DEVELOPMENT
COMMUNITY. Our goal is to develop a competitive advantage from a large and
innovative developer community focused on our Springboard platform. These
developers will enable Handspring to sell into new and broader areas, such as
the education and medical device markets. For example, the development of the
sensor
31
<PAGE> 33
modules for education and science by Imagiworks facilitates our access to the
education market. We encourage developers through open, royalty-free developer
tools, access to our technical developer support and to manufacturing partners
and module distribution through the handspring.com Web site.
LEVERAGE OUTSOURCE MODEL. Our strategy is to focus on what we do best,
creating innovative products. We believe that by outsourcing many other
functions, including manufacturing, order fulfillment and repair, we will keep
the number of employees small relative to our scale. This strategy will allow us
to be more creative, flexible, aggressive and competitive. In addition, our
outsource model lets us scale quickly, reduce fixed costs and select best of
breed outsource partners.
PRODUCTS
Our Visor is a sleek, compact and lightweight handheld computer, with
dimensions of 4.8" x 3.0" x 0.7", and a weight of 5.4 ounces. Each Visor
includes a Springboard expansion slot, stylus writing utensil, infrared
transceiver, backlight display and a hard cover. A microphone is included in
each Visor, which allows developers to create communications modules based on
this feature. Our Visor is compatible with thousands of software applications
developed for the Palm OS operating system. The Visor contains Microsoft Windows
and Macintosh desktop synchronization software, including the ability to
synchronize with Microsoft Outlook.
Our Visor handheld also runs organizer applications, including an address
book, date book, to-do list, memo pad, calculator, expense system, email
compatibility and a world clock. The Visor's docking cradle, together with the
bundled HotSync software, allows customers to easily and quickly synchronize, or
exchange, data between the Visor and their desktop or laptop computer.
Our Visor handheld computer is attractively priced and is currently
available in two different models: Visor and Visor Deluxe. The Visor features
two megabytes of RAM memory and a Universal Serial Bus (USB) docking cradle with
desktop software for a retail price of $179. Two megabytes of RAM memory stores
approximately 6,000 addresses, five years of appointments, 1,500 to do items,
1,500 memos and 200 email messages. The Visor Deluxe sells for $249 and includes
eight megabytes of RAM memory, a USB docking cradle with desktop software and a
case. The Visor Deluxe is available in five colors: ice, green, blue, orange and
graphite. In addition, we sell the Visor Solo, a Visor packaged without a
docking cradle and desktop software for an entry price of $149. Starting in May
2000, our Visor handheld computer became available in Europe, both in English
and in German language versions.
Our Visor handheld computer's Springboard platform consists of an expansion
slot that offers an easy and elegant way to add hardware and software
applications. While other handheld computers can support a limited number of
peripheral devices attachable through cables or a docking cradle, the
Springboard expansion slot offers smooth integration and "plug and play"
operation:
- the "open face" design of the slot provides an intuitive and robust
mechanism for effortless insertion and removal of modules;
- the software required to run a module is contained within the module
itself, and can install and run automatically, relieving the user from
the burden of installing special software in order to use a module; and
- in most module designs, the software is automatically uninstalled when
the module is removed, which reduces the opportunity for conflict with
other software and frees up memory for other purposes.
SPRINGBOARD MODULES. To offer customers a broad range of functionality and
content, we and third-party developers have developed and continue to develop
modules that snap into our Springboard expansion slot. Beginning in October 1999
when we launched our Visor handheld
32
<PAGE> 34
computer, we made tools and documentation widely available for module
developers. Since that time more than 2,000 developers have registered with
Handspring.
Third party developers may sell their modules through their own marketing
and sales efforts and through our handspring.com Web site. We test modules
offered on our Web site and certify them as "Springboard compatible."
The following table shows Springboard modules that are currently available.
COMMERCIALLY AVAILABLE SPRINGBOARD MODULES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRODUCT NAME DESCRIPTION DEVELOPER
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Backup Module Backs up data on the Visor handheld computer Handspring
without connecting to a desktop computer
- -----------------------------------------------------------------------------------------------------------
Modem Module Module that enables users to connect to Handspring
their desktops via standard phone lines and
synchronize their data from a remote
location. With third party software, users
can also check their email, surf the web and
send faxes
- -----------------------------------------------------------------------------------------------------------
8MB Flash Module Storage module for user applications and Handspring
data
- -----------------------------------------------------------------------------------------------------------
EASports Tiger Woods Golf game Electronic Arts;
PGA Tour Golf Distributed by Handspring
- -----------------------------------------------------------------------------------------------------------
eyemodule Digital Camera Enables users to capture color or black and IDEO Product Development
white digital images and beam them from Inc.
Visor's infrared port to another Visor or
synchronize them with a personal computer
- -----------------------------------------------------------------------------------------------------------
Physician's Desk Reference Medical reference guide Franklin Electronic
Publishers
- -----------------------------------------------------------------------------------------------------------
IntelliGolf Tracks and analyzes golf performance Karrier Communications
- -----------------------------------------------------------------------------------------------------------
InnoPak/2V A 2MB memory expansion with a vibrating Innogear
alarm
- -----------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 35
The following table shows selected Springboard modules that have been
announced by developers as being under development.
ANNOUNCED SPRINGBOARD MODULES IN DEVELOPMENT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRODUCT NAME DESCRIPTION DEVELOPER
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
@ctiveLink two-way wireless Wireless access to the Internet and email Glenayre Technologies Inc.
communications module
- -----------------------------------------------------------------------------------------------------------
Blue-connect Bluetooth A wireless communications module designed to Widcomm, Inc.
communication module allow the Visor handheld computer to
communicate with other Bluetooth-enabled
devices, such as laptops or cell phones
- -----------------------------------------------------------------------------------------------------------
FM Radio module Allows users to listen to music over the CUE Corporation
radio and receive traffic alerts and
personal messages
- -----------------------------------------------------------------------------------------------------------
HandyGPS module Global positioning system receiver Navicom Co., Ltd. and
MarcoSoft, Inc.
- -----------------------------------------------------------------------------------------------------------
InfoMitt one way pager Receives alphanumeric pages, email and Innogear
electronic magazines
- -----------------------------------------------------------------------------------------------------------
Lonely Planet City Sync City guides Concept Kitchen
Travel Guides
- -----------------------------------------------------------------------------------------------------------
Merriam-Webster Dictionary Dictionary LandWare, Inc.
- -----------------------------------------------------------------------------------------------------------
MiniJam MP3 Player An MP3 player and a voice recorder, with Innogear
memory and a headphone jack
- -----------------------------------------------------------------------------------------------------------
Sensor Modules for Education Sensors for data collection, including ImagiWorks
and Science temperature and light measurements, and
heart rate monitoring
- -----------------------------------------------------------------------------------------------------------
SixPak Combo Card Combination of LED and vibrating alarm, Innogear
wireline modem, cellular capable modem,
expanded memory and voice recorder
- -----------------------------------------------------------------------------------------------------------
SpringPort Modem 56 56Kbps modem Xircom, Inc.
GlobalACCESS
- -----------------------------------------------------------------------------------------------------------
SpringPort Wired Ethernet Ethernet module for connecting to corporate Xircom, Inc.
networks
- -----------------------------------------------------------------------------------------------------------
SpringPort Wireless Data Wireless data communications using GSM and Xircom, Inc.
PDC network standards
- -----------------------------------------------------------------------------------------------------------
SpringPort Wireless Ethernet Wireless module for connecting to corporate Xircom, Inc.
networks using the 802.11b standard
- -----------------------------------------------------------------------------------------------------------
Targus Recorder 1850 Voice recorder and playback module Digital 5
- -----------------------------------------------------------------------------------------------------------
Wave Communicator Cordless telephone and remote control Zilog, Inc.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Accessories. We offer a full line of accessories through our handspring.com
Web site. To address a broad range of customer preferences, we offer a variety
of stylus packs, a selection of over 150 cases, including leather, and a line of
clothing and travel bags displaying the Handspring name and logo. In addition,
third parties have also announced and are shipping accessories for the Visor
handheld computer, including the GoType! keyboard from Landware and the Stowaway
portable keyboard from Targus.
34
<PAGE> 36
DEVELOPERS
Our Springboard platform was designed to foster a large community of third
party developers. We seek to encourage developers to create new high value
modules with integrated applications for use with the Visor handheld computer,
which we believe will create new markets and expand existing ones for Handspring
devices.
For developers, the Springboard expansion slot provides a well defined and
flexible power management structure for ease of designing and using modules. The
slot is open faced on two sides, which allows developers great freedom in
designing a module's form factor. This feature also provides a secure mechanism
for attaching the module to the Visor handheld computer so that the two devices
look cosmetically and physically integrated. Each Visor handheld computer also
includes a built-in microphone that developers can use for voice input products.
We have a growing team of employees dedicated to serving the developer
community, both in technical support and co-marketing opportunities. Our
developer support program provides developers open access to underlying
technical information regarding our products and the Springboard platform,
including a thoroughly documented Handspring Development Kit available at our
handspring.com Web site. We offer our Handspring Development Kit and a license
to our Springboard-related intellectual property on a royalty-free,
non-exclusive basis. We also offer an optional, paid support program to those
developers that require a more detailed level of support.
To assist developers in the production of modules, we provide them with
access to our manufacturing partners and materials suppliers. We facilitate
distribution of modules over the handspring.com Web site that we created in
partnership with PalmGear. We also provide introductions for our developers to
our retail channel partners. In the future we expect to host developers
conferences to further promote our developer community.
As of March 31, 2000, more than 2,500 developers have registered in our
developer program.
SALES AND MARKETING
Our initial distribution strategy was to sell exclusively through our
handspring.com Web site. This strategy enabled us to get to market quickly, and
provided us with detailed information about our initial purchasers. We intend to
continue to promote our handspring.com Web site as a major site to buy our
products on the Internet. With this in mind, we have expanded our offerings at
our site to include software links and links to various third party module
vendors, including a Web store run by PalmGear H.Q., where Handspring customers
can purchase Springboard expansion modules and Visor accessories. We have
provided customers the ability to register for ongoing communications with us
via an e-newsletter, and we enable customers to register their product purchases
on our site. We also offer a broad array of accessories and cases on our site to
continue to drive traffic back to the site for incremental purchases.
To expand our market presence, we extended our distribution strategy in
March 2000 to include initially three national retailers, Best Buy, CompUSA and
Staples. These retailers serve three major segments of buyers -- consumer
electronics purchasers, computer purchasers and office supply purchasers -- with
retail locations across the United States. We have expanded our distribution
into international markets, and we expect to add additional retail and Internet
sales partners within the United States throughout 2000. We plan to work closely
with these partners to provide an outstanding retail presence, and to enable an
efficient channel for broad consumer availability of our products.
We have introduced Visor handheld computers in English and German in the
European markets. We expect to introduce the Japanese version of the Visor in
summer 2000. We plan to engage local value-added distributors in all the major
markets in Western Europe and Asia where our localized
35
<PAGE> 37
language versions meet market needs. We also plan to develop partnerships to
establish a local e-commerce presence for international customers interested in
purchasing Handspring products online.
We believe there is an opportunity to expand our market presence through
strategic promotional efforts and through OEM or private label partnerships. We
have broad interest from major brand marketers, who supply our target customers
with various products or services, to co-promote the Visor handheld computers
along with their products or services. An example is a recent promotion in which
Virgin Atlantic Airlines provided first class and business class passengers with
a free Visor. In addition, there is strong interest from potential partners that
serve other computing markets to partner with us to provide a handheld computing
solution to their customers. For example, with the availability of a Global
Positioning System receiver Springboard module, a partner that serves the
traditional GPS market could bundle together a Visor handheld computer and the
GPS receiver module to deliver a complete solution to customers. We will
actively seek these opportunities to extend our market reach outside our
traditional target categories.
We believe building brand awareness is important to our success. We use a
variety of marketing programs to build awareness of our products through
mass-media advertising, targeted advertising, end user promotions, public
relations campaigns, strategic promotional efforts and in-store retail
merchandising. We will work with our third party developers to promote their
Springboard modules as they are introduced to the market. This strategy should
provide us with several opportunities to build product and brand awareness.
CUSTOMER SERVICE AND SUPPORT
We provide telephone-based customer support and technical support to our
customers through outsource partners. We also provide customer support and
technical support information to our customers through our handspring.com Web
site. Our retail and reseller partners provide first-line customer and technical
support to their customers. We provide escalation service and support and
technical training for our outsource providers and reseller partners. We sell
our products with a one-year limited warranty.
We currently outsource our repair services to Jabil's Louisville, Kentucky
facility. Jabil receives products from customers that need repair, provides
replacement or repaired units to customers and refurbishes devices for ongoing
service repair stock. We depend on Jabil to perform these services in a timely
fashion and at satisfactory quality levels.
PRODUCT DEVELOPMENT AND TECHNOLOGY
Our products are conceived, designed and implemented through the
collaboration of our internal engineering, marketing and manufacturing
organizations. Our product design efforts are focused on improving our existing
products as well as developing new products. We intend to continue to employ a
customer focused design approach by providing innovative products that respond
to and anticipate customer needs for functionality, mobility, simplicity, style
and ease of use.
Technologies required to support product development are either created
internally or licensed from outside providers. Our internal staff includes
engineers of many disciplines including software architects, electrical
engineers, mechanical engineers, quality engineers, manufacturing process
engineers and user interface design specialists. Once a project is initiated and
approved, a multi-disciplinary team is created to complete the design of the
product and transition it into manufacturing. In order to achieve our objective
of being a leader in innovation for handheld computing and communications, we
have parallel development teams working on multiple projects.
We have a formal product release process in which products must pass
established quality benchmarks and manufacturing guidelines before they are
released into production. We use a quality
36
<PAGE> 38
assurance process that provides feedback to our manufacturing and engineering
organizations, as well as our outsource manufacturing and materials partners,
allowing them to take corrective actions if defects are reported after a product
has been released into production.
We expect to continue to invest aggressively to develop new products. To
this end, we expect to make material expenditures on research and development
during at least the next 12 months. Our research and development expenditures
totaled approximately $2.7 million in fiscal 1999 and approximately $6.7 million
for the nine months ended April 1, 2000. As of April 1, 2000, we had 32 people
engaged in research and development activities.
MANUFACTURERS AND SUPPLIERS
All of our Visor handheld computers are currently manufactured by
Flextronics at its facilities in Malaysia on a purchase order basis. Flextronics
procures components and other supplies, manufactures, assembles and tests our
products. By outsourcing the entire manufacturing process, we are able to focus
on our strengths, including product development and design, minimize capital
expenditures, conserve working capital necessary to fund inventory, rely on a
third party with more manufacturing expertise than ourselves and avoid the need
to find and maintain facilities for manufacturing operations. However, if one of
our manufacturers were to stop manufacturing our devices, it could take up to
six months to qualify an alternative manufacturer and our results of operations
could be harmed.
In April 2000, we selected Solectron as a second manufacturing partner for
Visor handheld computers. We expect to be operational at its Guadalajara, Mexico
site by the end of summer 2000. We currently outsource the manufacturing of our
Handspring labeled Springboard modules to Smart Modular of Fremont, California.
We outsource the design and production of our accessory products to several
outside partners.
We purchase the components that make up our products from various vendors,
including key suppliers such as Motorola, which supplies microprocessors, Acura
Tech Ltd., which supplies connector systems, and Picvue, which supplies display
assemblies. Some of our components are currently supplied by single source
suppliers for which alternative sources are not readily available in sufficient
quantities or at an attractive cost. Displays, power supply integrated circuits,
microprocessors and some discrete components are examples of key components that
we obtain from a sole source.
We and our partners follow a formal manufacturing quality process that
includes qualification of material supplier sources, product-specific process
definition and qualification, daily measurement of key manufacturing processes
and test metrics, a closed-loop corrective action process and an outgoing
sampling audit of finished product. In addition, we have placed a supplier
quality manager in each manufacturing region and conduct periodic on-site audits
of our manufacturing partners and key component suppliers.
Manufactured devices are sent to Logistix. Some end-user customers place
orders on our handspring.com Web site, or over the telephone to our third party
customer support partner. Retail sales orders are placed in our internal order
processing system. All orders are transmitted to Logistix, which completes the
pack-out process by assembling a finished goods box consisting of the Visor
handheld computer, a docking cradle, a CD of desktop software and other assorted
materials. They then match the product to the order and confirm shipment, which
initiates a credit card charge or invoice.
COMPETITION
The market for handheld computer products is highly competitive and we
expect competition to increase in the future. Some of our competitors or
potential competitors have significantly greater financial, technical and
marketing resources than we do. These competitors may be able to respond more
37
<PAGE> 39
rapidly than we can to new or emerging technologies or changes in customer
requirements. They may also devote greater resources to the development,
promotion and sale of their products than we do.
We believe that the principal competitive factors impacting the market for
our handheld computers are design, features, performance, price, brand and
availability. We believe that we compete favorably compared to many of our
current competitors with respect to some or all of these factors.
Our handheld computers compete with a variety of handheld devices,
including keyboard-based devices, sub-notebook computers, smart phones and
two-way pagers. Our principal competitors include:
- Palm, from whom we license our operating system;
- licensees of the Microsoft Windows CE operating system for devices such
as the PocketPC, including Casio, Compaq and Hewlett-Packard;
- members of the Symbian consortium, including Psion, Ericsson and
Motorola; and
- other Palm OS operating system licensees, including Nokia, Sony and
QUALCOMM.
We expect our competitors to continue to improve the performance of their
current products and to introduce new products, services and technologies. For
example, in April 2000, Microsoft and its partners introduced the PocketPC
handheld computer based on Microsoft's Windows CE operating system. Successful
new product introductions or enhancements by our competitors could reduce the
sales and market acceptance of our products, cause intense price competition or
make our products obsolete. To be competitive, we must continue to invest
significant resources in research and development, sales and marketing and
customer support. We cannot be sure that we will have sufficient resources to
make these investments or that we will be able to make the technological
advances necessary to be competitive. Increased competition could result in
price reductions, fewer customer orders, reduced margins and loss of market
share. Our failure to compete successfully against current or future competitors
could seriously harm our business.
INTELLECTUAL PROPERTY
Our success depends upon our ability to maintain the proprietary aspects of
our technology and operate without infringing the proprietary rights of others.
We rely on a combination of patent, trademark, copyright and trade secret laws
and contractual restrictions on disclosure to protect our intellectual property
rights. We do not have any issued U.S. or foreign patents, but we have applied
for three U.S. patents and have filed foreign patent applications based on our
U.S. patent applications. We own a number of trademarks, including Handspring,
the Handspring logo, Springboard and Visor.
It is possible that patents we have applied for, if issued, or our
potential future patents may be successfully challenged or that no patents will
be issued from our patent applications. It is also possible that we may not
develop proprietary products or technologies that are patentable, that any
patent issued to us may not provide us with any competitive advantages, or that
the patents of others will harm our ability to do business. Legal protections
afford only limited protection for our technology. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy aspects
of our products or to obtain and use information that we regard as proprietary.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Any resulting litigation could result in substantial costs and
diversion of resources. Our means of protecting our proprietary rights may not
be adequate and our competitors may independently develop technology that is
similar to ours.
38
<PAGE> 40
We license various technologies from third parties that have been
integrated into our products. We believe that licensing complementary
technologies improves our products in an efficient manner, allowing us to focus
on our core competencies. Our most significant license is of the Palm OS
operating system from Palm. We also license conduit software from Chapura, Inc.
that allows for synchronization with Microsoft Outlook and CDMA technology from
QUALCOMM. Our Palm OS operating system license requires the payment of royalties
and maintenance and support fees to Palm. The license is non-exclusive, and Palm
has previously licensed and could continue to license the Palm OS operating
system to others, including our competitors. The license agreement extends until
September 2003 and may be renewed for successive one-year terms if both parties
agree. We have a close working relationship with Palm. We have collaborated and
continue to collaborate with Palm in advancing the Palm OS operating system
technology.
It is possible that Palm will choose not to renew the license at the end of
its term for competitive or other reasons. Upon expiration or termination of the
Palm OS operating system license agreement, other than due to our breach, we may
choose to keep the license granted under this agreement for two years following
the expiration or termination. However, the license during this two-year period
is limited and does not entitle us to upgrades to the Palm OS operating system.
If we were not a licensee of the Palm OS operating system, we would be required
to license a substitute operating system, which could be less desirable and
could be costly in terms of cash and other resources. In the alternative, we
could develop our own operating system, which would take considerable time,
resources and expense, would divert our engineers' attention from product
innovations and would not have the advantage of Palm OS operating system
application compatability. In addition, we may not assign that license agreement
to a third party without the written consent of Palm unless it is to a purchaser
of substantially all of our assets who is not a competitor of Palm. The
existence of these license provisions may have an anti-takeover effect in that
it could discourage competitors of Palm from making a bid to acquire us.
PLAN OF OPERATION
We believe that the net proceeds of this offering, together with our
current cash and cash equivalents, will be sufficient to meet our working
capital needs for at least the next 12 months. Our current cash position
includes the proceeds from the sale of our preferred stock in July 1999 and the
exercise of a preferred stock purchase right in May 2000. During the remainder
of fiscal year 2000 and the first half of fiscal year 2001, we expect to
increase our capital expenditures and expand operations in new markets
internationally. In addition, we expect our selling, general and administrative
expenses to increase as we promote and maintain our brand and market our
products. We also expect to increase our spending on research and development.
The amount of these expenditures depends on the amount of our future revenues
and the pace of our expansion. Our expansion plans may also be affected by the
availability and cost of capital. We expect to materially increase our number of
employees as we expand our operations internationally and to add personnel
engaged in sales and marketing and research and development.
EMPLOYEES
As of April 1, 2000, we had a total of 132 employees, of which 32 were in
research and development, 23 were in manufacturing services, 47 were in
marketing and sales and 30 were in general and administrative. We plan to hire
substantial numbers of additional personnel in all areas of our business,
particularly in sales and marketing. We consider our relationships with
employees to be good. None of our employees is covered by collective bargaining
agreements. Competition for qualified personnel in our industry and geographical
location is intense, and we cannot assure you that we will be successful in
attracting, integrating, retaining and motivating a sufficient number of
qualified personnel to conduct our business in the future.
39
<PAGE> 41
FACILITIES
Our headquarters are located in approximately 58,400 square feet of leased
office space in Mountain View, California. The lease term extends to August
2004. We recently entered into another lease for approximately 28,000 square
feet of additional office space in Mountain View which extends to June 2008. In
addition, we currently lease office space in Singapore, Japan, the United
Kingdom and Switzerland. We believe our current office space is adequate for our
current operations and that additional office space, if required, can be readily
obtained.
Handspring U.K. Ltd., located in the United Kingdom, and Handspring B.V.,
located in the Netherlands, are engaged in customer service, support and
marketing activities of Handspring. Handspring International Ltd., located in
Switzerland, and Handspring K.K., located in Japan, are engaged in sales as well
as customer service, support and marketing activities. Handspring Singapore Pte.
Ltd., located in Singapore, is engaged in quality assurance and manufacturing
support services.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to claims
arising out of our operations. As of the date of this prospectus, we are not
subject to any material legal proceedings.
40
<PAGE> 42
MANAGEMENT
The following table shows information concerning our executive officers,
directors and other key employees. Ages are as of March 31, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Donna L. Dubinsky.............. 44 President and Chief Executive Officer and a Director
Jeffrey C. Hawkins............. 42 Chief Product Officer and a Director
Edward T. Colligan............. 39 Senior Vice President, Marketing and Sales
Bernard J. Whitney............. 43 Chief Financial Officer and Secretary
Michael Gallucci............... 43 Vice President, Worldwide Manufacturing
Celeste Baranski............... 42 Vice President, Engineering
David G. Pine.................. 41 Vice President and General Counsel
William Holtzman............... 47 Vice President, International
John Hartnett.................. 37 Vice President, Service and Support
Patricia A. Tomlinson.......... 42 Vice President, Human Resources
Kim B. Clark(1)................ 51 Director
L. John Doerr(2)............... 48 Director
Bruce W. Dunlevie(1)(2)........ 43 Director
Mitchell E. Kertzman(1)........ 51 Director
</TABLE>
- -------------------------
(1) Member of audit committee
(2) Member of compensation committee
Ms. Dubinsky is a co-founder of Handspring. She has been the President and
Chief Executive Officer and a director since July 1998. She served as President
and Chief Executive Officer of Palm Computing, Inc. from June 1992 to July 1998.
From 1982 to 1991, she was with Claris Corporation, a subsidiary of Apple
Computer, Inc., and with Apple Computer, Inc., where she served in a number of
logistics, sales and marketing positions, most recently as Vice President
International of Claris from 1987 to January 1991. Ms. Dubinsky is also a
director of Intuit Inc. She holds a B.A. degree in history from Yale University
and an M.B.A. from the Harvard Graduate School of Business Administration.
Mr. Hawkins is a co-founder of Handspring. He has been the Chief Product
Officer and a director since July 1998. He was a founder of Palm and served as
its Product Architect and one of its directors from 1992 to June 1998. From 1982
to 1992, Mr. Hawkins was Vice President of Research at GRiD Systems Corporation,
a laptop computer company. He holds a B.S. degree in electrical engineering from
Cornell University.
Mr. Colligan is a co-founder of Handspring. He has served as Senior Vice
President, Marketing and Sales, of Handspring since October 1998. Before he
joined Handspring, he served as Vice President of Marketing of Palm Computing
from January 1993 to September 1998. From 1986 to 1993, Mr. Colligan was at
Radius Corporation, a provider of displays and graphics cards, most recently
serving as Vice President of Strategic and Product Marketing. He holds a B.A.
degree in political science from the University of Oregon.
Mr. Whitney has served as Chief Financial Officer and Secretary of
Handspring since June 1999. From August 1997 to June 1999, he served as
Executive Vice President and Chief Financial Officer of Sanmina, Inc., an
electronics manufacturing company. From June 1995 to August 1997, Mr. Whitney
served as Vice President of Finance for Network General Corporation, a network
fault tolerance and performance management solutions company. From 1987 to June
1995, Mr. Whitney held a variety of corporate finance positions at Conner
Peripherals, a storage device manufacturer. He
41
<PAGE> 43
holds a B.S. degree in finance from California State University at Chico and an
M.B.A. from San Jose State University.
Mr. Gallucci has served as Vice President, Worldwide Manufacturing, for
Handspring since November 1998. From November 1996 to November 1998, he served
as Director, Worldwide Manufacturing and Logistics at Palm. From February 1992
to November 1996, Mr. Gallucci served as Director of Materials at Bay Networks
(now Nortel), a computer networking company. He holds a B.S. degree in marketing
and an M.B.A. from Arizona State University.
Ms. Baranski has served as Vice President, Engineering, of Handspring since
September 1999. From January 1999 to August 1999, she served as a Product
Development Manager at Set Engineering, Inc., a product development consulting
company. She served as a Research and Development Manager for the Mobile
Computing Division at Hewlett Packard Company from March 1996 to November 1998.
Before that she served as Director of Product Development at Norand Corporation,
a supplier of handheld computers to vertical markets, from June 1994 to February
1996, and as Vice President of Engineering at EO, Inc., a start-up PDA company,
from 1990 to 1994. She holds B.S. and M.S. degrees in electrical engineering
from Stanford University.
Mr. Pine has served as Vice President and General Counsel since May 2000.
From April 1996 to May 2000, Mr. Pine served with At Home Corporation, most
recently as Senior Vice President and General Counsel and Secretary. From 1990
to March 1996, he was Vice President, General Counsel and Secretary of Radius
Inc., a manufacturer of Macintosh computer peripherals. Mr. Pine also has served
as a state legislator in the New Hampshire House of Representatives. Mr. Pine
holds an A.B. degree in government from Dartmouth College and a J.D. degree from
the University of Michigan Law School.
Mr. Holtzman has served as Vice President, International, of Handspring
since November 1999. From January 1998 to August 1999, he served as Vice
President of Strategic Channels and International at Beyond.com, an e-commerce
company. From July 1997 to January 1998, he served as an independent consultant
for companies including Netscape, Palm and NetObjects. Mr. Holtzman served as
Vice President of Asia - Latin America at Macromedia, Inc., a multimedia
software company, from March 1995 to July 1997. He holds a B.S. in journalism
from Boston University.
Mr. Hartnett has served as Vice President, Distribution, Service and
Support, of Handspring since February 2000. From July 1999 to February 2000, he
served as Senior Vice President of Marketing, Support and Operations of
MetaCreations, a creative web software company. Mr. Hartnett also served as Vice
President of Worldwide Support and Operations for MetaCreations from December
1997 to July 1999 and Vice President of International Operations for
MetaCreations from July 1996 to December 1997. Prior to joining MetaCreations,
Mr. Hartnett was with Claris Corporation from 1992 to July 1996 where he most
recently held the position of Director of International Operations. He holds a
degree in marketing from the Marketing Institute of Ireland and a Post Graduate
degree in finance through the ACCA and the University of Limerick.
Ms. Tomlinson has served as Vice President, Human Resources, of Handspring
since January 2000. From April 1996 to November 1999, she was Vice President of
Human Resources at Edify Corporation, a self-service software company. From
March 1995 to April 1996, she was Vice President of Human Resources for the
Desktop Document Systems Division of Xerox Corporation. Ms. Tomlinson also
served as Director of Human Resources at Synopsys, Inc., an electronic design
automation software company, from June 1992 to March 1995. From July 1983 to
June 1992, she held human resources management positions with Apple Computer,
Inc. Ms. Tomlinson holds a B.A. degree in sociology from Pomona College.
42
<PAGE> 44
Dr. Clark has served as a director of Handspring since April 2000. Dr.
Clark is Dean of the Faculty and George F. Baker Professor of Administration at
Harvard Business School, where he has been a member of the faculty since 1978.
His current research focuses on modularity in design and the integration of
technology and competition in industry evolution, with a particular focus on the
computer industry. Earlier research has focused on the areas of technology,
productivity, product development and operations strategy. He serves as a
director of Guidant Corporation and Tower Automotive, Inc. Dr. Clark received
his B.A., M.A. and Ph.D. degrees in economics from Harvard University.
Mr. Doerr has served as a director of Handspring since October 1998. He has
been a general partner of Kleiner Perkins Caufield & Byers since September 1980.
Before his tenure at Kleiner Perkins, Mr. Doerr was employed by Intel
Corporation for five years. He serves on the board of directors of Amazon.com,
Inc., At Home Corporation, Drugstore.com, Epicore, Healtheon/WebMD,
Homestore.com, Intuit Inc., Martha Stewart Living Omnimedia and Sun
Microsystems, Inc. Mr. Doerr holds B.S.E.E. and M.E.E. degrees from Rice
University and an M.B.A. from the Harvard Graduate School of Business
Administration.
Mr. Dunlevie has served as a director of Handspring since October 1998. Mr.
Dunlevie has been a Managing Member of Benchmark Capital, a venture capital
firm, since its founding in May 1995. From 1989 to 1995, Mr. Dunlevie was a
general partner at Merrill, Pickard, Anderson & Eyre, a venture capital firm.
Mr. Dunlevie has also served as Vice President and General Manager of the
Personal Computer Division of Everex Systems, Inc., a personal computer
manufacturer, and as an investment banker with Goldman, Sachs & Co. He is also a
director of Wink Communications and Rambus, Inc. as well as several privately
held companies. Mr. Dunlevie holds a B.A. degree from Rice University and an
M.B.A. from the Stanford School of Business.
Mr. Kertzman has served as a director of Handspring since April 2000. He
has been President, Chief Executive Officer and a director of Liberate
Technologies, an interactive TV software company, since November 1998. Prior to
joining Liberate, Mr. Kertzman was a member of the board of directors of Sybase,
Inc., a database company, from February 1995 to November 1998. He served as
Chairman of Sybase's board of directors from July 1997 to November 1998. Between
February 1998 and August 1998, he also served as Co-Chief Executive Officer of
Sybase. From July 1996 until February 1997, Mr. Kertzman served as Chief
Executive Officer of Sybase and, from July 1996 until July 1997, he also served
as President of Sybase. Between February 1995 and July 1996 he served as an
Executive Vice President of Sybase. In February 1995, Sybase merged with
Powersoft Corporation, a provider of application development tools. Mr. Kertzman
had served as Chief Executive Officer and a director of Powersoft since he
founded it in 1974. He also served as President of Powersoft from April 1974 to
June 1992. Mr. Kertzman also serves as a director of Chordiant Software, Inc.,
CNET Networks, Inc. and Extensity, Inc.
COMPOSITION OF BOARD OF DIRECTORS
Our board of directors currently consists of six directors. Upon completion
of this offering, our board of directors will be divided into three classes that
serve staggered three-year terms. The class I directors, initially Bruce W.
Dunlevie and Kim B. Clark, will stand for reelection at the 2001 meeting of
stockholders. The class II directors, initially Jeffrey C. Hawkins and L. John
Doerr, will stand for reelection at the 2002 meeting of stockholders. The class
III directors, initially Donna L. Dubinsky and Mitchell E. Kertzman, will stand
for reelection at the 2003 meeting of stockholders. As a result, only one class
of directors will be elected each year, while the directors in the other classes
continue on the board for the remainder of their terms. This classification of
our board could make it more difficult for a third party to acquire, or could
discourage a third party from acquiring, control of Handspring.
43
<PAGE> 45
COMMITTEES OF BOARD OF DIRECTORS
Our board of directors has a compensation committee and an audit committee.
Our compensation committee consists of Mr. Doerr and Mr. Dunlevie. The
compensation committee reviews and makes recommendations to our board of
directors concerning the salaries and incentive compensation of our officers and
employees. Although the board of directors currently administers the issuance of
stock options and other awards under our 1998 Equity Incentive Plan and 1999
Executive Equity Incentive Plan, the compensation committee will administer our
2000 Equity Incentive Plan and our 2000 Employee Stock Purchase Plan.
The members of the audit committee are Dr. Clark, Mr. Dunlevie and Mr.
Kertzman. The audit committee reviews and monitors our financial statements and
accounting practices, makes recommendations to our board regarding the selection
of independent auditors and reviews the results and scope of the audit and other
services provided by our independent auditors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the board of directors
or compensation committee of any entity that has one or more executive officers
serving as a member of our board of directors or compensation committee.
DIRECTOR COMPENSATION
None of the board members receives a fee for attending board or committee
meetings. In April 2000, we granted an option for 37,500 shares of our common
stock to each of Dr. Clark and Mr. Kertzman under our 1999 Executive Equity
Incentive Plan.
Each member of the board, who is not our employee, or an employee of a
parent, subsidiary or affiliate of ours, will be considered an outside director
and will be eligible to participate in our 2000 Equity Incentive Plan, which
will become effective immediately upon the completion of this offering. Under
this plan, the option grants to outside directors are automatic and
nondiscretionary. Each outside director who first becomes a member of our board
of directors on or after the date of this offering will automatically be granted
an option to purchase 37,500 shares of our common stock on the date the outside
director joins the board of directors. Immediately after each annual meeting of
our stockholders, each director who is an outside director at that time will
automatically be granted an additional option to purchase 11,250 shares if the
director has served continuously as a member of our board since the date of the
director's initial grant and for a period of at least one year before the annual
meeting.
The options granted to Dr. Clark and Mr. Kertzman and options granted in
the future to outside directors under the 2000 Equity Incentive Plan have or
will have an exercise price equal to the fair market value of our common stock
on the date of grant. The options have or will have ten-year terms and will
terminate three months after the date the director ceases to be a director or 12
months if the termination is due to death or disability. All options granted to
outside directors vest over a four year period at a rate of 25% of the total
shares granted on the first anniversary of the date of grant, and ratably over
the next 36 months, so long as the outside director continuously remains our
director or consultant. In the event of our dissolution or liquidation or a
"change in control" transaction, options granted to our outside directors will
become 100% vested and exercisable in full.
44
<PAGE> 46
EXECUTIVE COMPENSATION
The following table shows the total compensation received for services
rendered to us during the fiscal year ended June 30, 1999 by our Chief Executive
Officer and each of our other most highly compensated executive officers whose
compensation in fiscal 1999 was more than $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL -------------------
COMPENSATION SHARES OF COMMON
----------------- STOCK UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
--------------------------- -------- ----- -------------------
<S> <C> <C> <C>
Donna L. Dubinsky................................ $111,442 $-- --
President and Chief Executive Officer
Jeffrey C. Hawkins............................... 111,442 -- --
Chief Product Officer
Edward T. Colligan............................... 109,712 -- 6,057,693
Senior Vice President, Marketing and Sales
</TABLE>
For fiscal 2000, Donna L. Dubinsky, Jeffrey C. Hawkins, Edward Colligan,
Michael Gallucci and Celeste Baranski have an annual base salary of $150,000 and
Bernard J. Whitney has an annual base salary of $180,000.
OPTION GRANTS IN FISCAL 1999
The following table shows information about grants of stock options to
those executive officers listed in the Summary Compensation Table above for the
fiscal year ended June 30, 1999.
The potential realizable value is calculated based on the ten-year term of
the option and the market value at the time of grant. Stock price appreciation
of 5% and 10% is assumed under rules of the Securities and Exchange Commission
and does not represent our prediction of our stock price performance. The
potential realizable values at 5% and 10% appreciation are calculated by
- Multiplying the number of shares of common stock subject to the option by
the assumed initial public offering price of $20.50 per share;
- Assuming that the total stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the options; and
- Subtracting from that result the total option exercise price.
The option listed in the following table is immediately exercisable. The
option vested as to 25% of the total shares on October 8, 1999 and vests ratably
over the next 36 months. The option has a ten-year term, subject to earlier
termination if the option holder's service with us ceases.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------- ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SHARES OF TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL 1999 PER SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Donna L. Dubinsky......... -- --% $ -- -- $ -- $ --
Jeffrey C. Hawkins........ -- -- -- -- -- --
Edward T. Colligan........ 6,057,693 33.6 0.05 10/11/08 201,997,659 321,795,074
</TABLE>
45
<PAGE> 47
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
The table below shows information regarding shares acquired upon exercise
of options in fiscal 1999 and about options held as of June 30, 1999 by the
officers indicated below. There was no public trading market for our common
stock as of June 30, 1999. Accordingly, the values in the table have been
calculated on the basis of an assumed initial public offering price of $20.50
per share less the applicable exercise price.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT JUNE 30, 1999 AT JUNE 30, 1999
ON VALUE ---------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Donna L. Dubinsky..... -- $ -- -- -- $ -- $--
Jeffrey C. Hawkins.... -- -- -- -- -- --
Edward T. Colligan.... 900,000 18,405,000 5,157,693 -- 105,474,822 --
</TABLE>
CHANGE OF CONTROL ARRANGEMENTS
In August 1998, we entered into founder's restricted stock purchase
agreements with Donna L. Dubinsky and Jeffrey C. Hawkins. Ms. Dubinsky purchased
22,050,000 shares of our common stock subject to our right to repurchase 80% of
the shares upon termination of her employment. Mr. Hawkins purchased 40,950,000
shares of our common stock subject to our right to repurchase 80% of the shares
upon termination of his employment. Under these agreements, our right of
repurchase lapsed as to an additional 20% of the shares in July 1999 and lapses
as to the remainder in equal monthly installments until July 2002. If we are
acquired by or sell all or substantially all of our assets to another entity,
the vesting on the shares held by Ms. Dubinsky and Mr. Hawkins will accelerate
so that our right of repurchase will lapse on an additional 25% of the shares.
In October 1998, we issued an option to Edward T. Colligan, our Vice
President, Marketing and Sales, to purchase 6,057,693 shares of our common
stock. The option was immediately exercisable in full. The option vested as to
25% of the shares in October 1999. The remaining shares vest in equal monthly
installments until October 2002. Unvested shares issued upon exercise of the
option are subject to our right of repurchase upon termination of Mr. Colligan's
employment. Under the option agreement, if we are acquired by or sell all or
substantially all of our assets to another entity, the vesting on the shares
held by Mr. Colligan will accelerate so that our right of repurchase will lapse
on an additional 25% of the shares.
In June 1999, we issued an option to Bernard J. Whitney, our Chief
Financial Officer, to purchase 1,350,000 shares of our common stock. The option
becomes exercisable over three years. In August 1999, we issued an option to Mr.
Whitney to purchase 46,516 shares of our common stock. The option was
immediately exercisable in full. Both of these options vest as to 25% of the
shares on the first anniversary of the grant date. The remaining shares vest in
equal monthly installments over a period of three years. Unvested shares issued
upon exercise of the option are subject to our right of repurchase upon
termination of Mr. Whitney's employment. Under the option agreement, if we are
acquired by or sell all or substantially all of our assets to another entity,
the vesting on the shares held by Mr. Whitney will accelerate in full, so that
both options will be immediately exercisable in full and our right of repurchase
will lapse on all of the shares.
EMPLOYEE BENEFIT PLANS
1998 Equity Incentive Plan. As of April 1, 2000, options to purchase
15,801,356 shares of our common stock were outstanding under our 1998 Equity
Incentive Plan, 9,002,078 shares had been issued upon exercise of options and
3,904,259 shares of our common stock remained available for
46
<PAGE> 48
issuance upon the exercise of options that may be granted in the future. The
options outstanding as of April 1, 2000 had a weighted average exercise price of
$0.71 per share. Our 2000 Equity Incentive Plan will be effective upon the
effectiveness of this offering. As a result, no options will be granted under
our 1998 Equity Incentive Plan after this offering. However, any outstanding
options under our 1998 Equity Incentive Plan will remain outstanding and subject
to our 1998 Equity Incentive Plan and stock option agreement until exercise or
until they terminate or expire by their terms. Options granted under our 1998
Equity Incentive Plan are subject to terms substantially similar to those
described below with respect to options granted under our 2000 Equity Incentive
Plan.
1999 Executive Equity Incentive Plan. As of April 1, 2000, options to
purchase 4,883,643 shares of our common stock were outstanding under our 1999
Executive Equity Incentive Plan, 1,719,373 shares had been issued upon exercise
of options and 3,746,984 shares of our common stock remained available for
issuance upon the exercise of options that may be granted in the future. The
options outstanding as of April 1, 2000 had a weighted average exercise price of
$1.91 per share. Our 2000 Equity Incentive Plan will be effective upon the
effectiveness of this offering. As a result, no options will be granted under
our 1999 Executive Equity Incentive Plan after this offering. However, any
outstanding options under our 1999 Executive Equity Incentive Plan will remain
outstanding and subject to our 1999 Executive Equity Incentive Plan and stock
option agreement until exercise or until they terminate or expire by their
terms. Options granted under our 1999 Executive Equity Incentive Plan are
subject to terms substantially similar to those described below with respect to
options granted under our 2000 Equity Incentive Plan.
2000 Equity Incentive Plan. In April 2000, our board of directors adopted
and in May 2000 our stockholders approved the 2000 Equity Incentive Plan subject
to stockholder approval. The 2000 Equity Incentive Plan will become effective on
the date of this prospectus and will serve as the successor to our 1998 Equity
Incentive Plan and 1999 Executive Equity Incentive Plan. The 2000 Equity
Incentive Plan authorizes the award of options, restricted stock and stock
bonuses.
The 2000 Equity Incentive Plan will be administered by the compensation
committee of our board of directors, which consists of Mr. Doerr and Mr.
Dunlevie, each of whom is an outside director as defined under applicable
federal tax laws. The compensation committee will have the authority to
interpret this plan and any agreement entered into under the plan, grant awards
and make all other determinations for the administration of the plan.
Our 2000 Equity Incentive Plan will provide for the grant of both incentive
stock options that qualify under Section 422 of the Internal Revenue Code and
nonqualified stock options. The incentive stock options may be granted only to
our employees or employees of any of our subsidiaries. The nonqualified stock
options, and all awards other than incentive stock options, may be granted to
our employees, officers, directors, consultants, independent contractors and
advisors and those of any of our subsidiaries. However, consultants, independent
contractors and advisors are only eligible to receive awards if they render bona
fide services not in connection with the offer and sale of securities in a
capital-raising transaction. The exercise price of incentive stock options must
be at least equal to the fair market value of our common stock on the date of
grant. The exercise price of incentive stock options granted to 10% stockholders
must be at least equal to 110% of the fair market value of our common stock on
the date of grant. The exercise price of nonqualified stock options must be at
least equal to 85% of the fair market value of our common stock on the date of
grant.
The maximum term of the options granted under our 2000 Equity Incentive
Plan is ten years. The awards granted under this plan may not be transferred in
any manner other than by will or by the laws of descent and distribution and
options may be exercised during the lifetime of the option holder only by the
option holder. The compensation committee may allow exceptions to this
47
<PAGE> 49
restriction for awards that are not incentive stock options. Options granted
under our 2000 Equity Incentive Plan generally expire three months after the
termination of the option holder's service to us or to a parent or subsidiary of
ours, or 12 months if the termination is due to death or disability. If an
option holder is terminated for cause, then options granted to that holder will
expire immediately on the date of termination. In the event of a liquidation,
dissolution or "change in control" transaction, except for options granted to
non-employee directors, all outstanding options may be assumed or substituted by
the successor company. If, within one year after a change in control, an option
holder is terminated without cause, then the vesting of that option holder's
option will accelerate so that an additional 25% of the option holder's shares
become vested. The vesting of options granted to non-employee directors will
accelerate in full upon a change in control transaction.
We have reserved 15,000,000 shares of our common stock for issuance under
the 2000 Equity Incentive Plan. The number of shares reserved for issuance under
this plan will be increased to include:
- any shares of our common stock reserved under our 1998 Equity Incentive
Plan and 1999 Executive Equity Incentive Plan that are not issued or
subject to outstanding grants on the date of this prospectus;
- any shares of our common stock issued under our 1998 Equity Incentive
Plan and 1999 Executive Equity Incentive Plan that are repurchased by us
at the original purchase price; and
- any shares of our common stock issuable upon exercise of options granted
under our 1998 Equity Incentive Plan and 1999 Executive Equity Incentive
Plan that expire or become unexercisable without having been exercised in
full at any time after this offering.
In addition, under the terms of the 2000 Equity Incentive Plan, the number
of shares of our common stock reserved for issuance under the plan will increase
automatically on January 1 of each year by an amount equal to 5% of our total
outstanding shares of common stock as of the immediately preceding December 31.
Shares available for grant and issuance under our 2000 Equity Incentive
Plan include:
- shares of our common stock issuable upon exercise of an option granted
under this plan that is terminated or cancelled before the option is
exercised;
- shares of our common stock issued upon exercise of any option granted
under this plan that we repurchase at the original purchase price;
- shares of our common stock subject to awards granted under this plan that
are forfeited or repurchased by us at the original issue price; and
- shares of our common stock subject to stock bonuses granted under this
plan that otherwise terminate without shares being issued.
During any calendar year, no person will be eligible to receive more than
3,000,000 shares, or 4,500,000 shares in the case of a new employee, under the
2000 Equity Incentive Plan. The 2000 Equity Incentive Plan will terminate in
March 2010, unless it is terminated earlier by our board of directors.
2000 Employee Stock Purchase Plan. In April 2000, our board of directors
adopted and in May 2000 our stockholders approved the 2000 Employee Stock
Purchase Plan. The 2000 Employee Stock Purchase Plan will become effective on
the first day on which price quotations are available for our common stock on
The Nasdaq National Market. The employee stock purchase plan is designed to
enable eligible employees to purchase shares of our common stock at a discount
on a periodic basis through payroll deductions.
48
<PAGE> 50
Our compensation committee will administer the 2000 Employee Stock Purchase
Plan. Our employees generally will be eligible to participate in this plan if
they are employed by us, or a subsidiary of ours that we designate, for more
than 20 hours per week and more than five months in a calendar year. Our
employees are not eligible to participate in our 2000 Employee Stock Purchase
Plan if they are 5% stockholders or would become 5% stockholders as a result of
their participation in the plan. Under the 2000 Employee Stock Purchase Plan,
eligible employees may acquire shares of our common stock through payroll
deductions. Our eligible employees may select a rate of payroll deduction
between 1% and 10% of their cash compensation. An employee's participation in
this plan will end automatically upon termination of employment for any reason.
No participant will be able to purchase shares having a fair market value
of more than $25,000, determined as of the first day of the applicable offering
period, for each calendar year in which the employee participates in the 2000
Employee Stock Purchase Plan. Except for the first offering period, each
offering period will be for two years and will consist of four six-month
purchase periods. The first offering period is expected to begin on the first
business day on which price quotations for our common stock are available on The
Nasdaq National Market. The first purchase period may be more or less than six
months long. After that, the offering periods will begin on January 31 and July
31. The purchase price for shares of our common stock purchased under the 2000
Employee Stock Purchase Plan will be 85% of the lesser of the fair market value
of our common stock on the first day of the applicable offering period or the
last day of each purchase period. Our compensation committee will have the power
to change the starting date of any later offering period, the purchase date of a
purchase period and the duration of any offering period or purchase period
without stockholder approval if this change is announced before the relevant
offering period or purchase period. Our 2000 Employee Stock Purchase Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code.
We have initially reserved 750,000 shares of our common stock for issuance
under the 2000 Employee Stock Purchase Plan. The number of shares reserved for
issuance under the plan will increase automatically on January 1 of each year by
an amount equal to 1% of our total outstanding shares as of the immediately
preceding December 31. Our board of directors or compensation committee may
reduce the amount of the increase in any particular year. The 2000 Employee
Stock Purchase Plan will terminate in March 2010, unless it is terminated
earlier by our board of directors.
401(k) Plan. We sponsor a defined contribution plan intended to qualify
under Section 401 of the Internal Revenue Code, or a 401(k) plan. Employees are
generally eligible to participate and may enter the plan on the first day of the
plan year in which the employee met the eligibility requirements. Participants
may make pre-tax contributions to the plan of a percentage of their eligible
compensation, not to exceed the limits allowable under the Internal Revenue
Code. Each participant is fully vested in his or her contributions and the
investment earnings. The plan does not provide for any matching contributions by
us. Contributions by the participants to the plan, and the income earned on
these contributions, are generally not taxable to the participants until
withdrawn. Participant contributions are held in trust as required by law.
Individual participants may direct the trustee to invest their accounts in
authorized investment alternatives.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION ON LIABILITY
Our certificate of incorporation provides that our directors shall not be
liable to us or our stockholders for monetary damages for any breach of
fiduciary duty, except to the extent otherwise required by the Delaware General
Corporation Law. This provision will not prevent our stockholders
49
<PAGE> 51
from obtaining injunctive or other relief against our directors nor does it
shield our directors from liability under federal or state securities laws.
Our bylaws require us to indemnify our directors and officers to the
fullest extent permitted by the Delaware General Corporation Law, subject to
certain very limited exceptions where indemnification is not permitted by
applicable law. Our bylaws also require us to advance expenses, as incurred, to
our directors and executive officers in connection with any legal proceeding to
the fullest extent permitted by the Delaware General Corporation Law. These
rights are not exclusive.
In addition to the indemnification provisions contained in our bylaws,
before the completion of this offering, we intend to enter into indemnity
agreements with each of our current directors and executive officers. These
agreements will provide for the indemnification of our executive officers and
directors for all expenses and liabilities incurred in connection with any
action or proceeding brought against them by reason of the fact that they are or
were agents of Handspring. We also intend to obtain directors' and officers'
insurance to cover our directors, executive officers and some of our employees
for specific liabilities, including public securities matters. We believe that
these indemnification provisions and agreements and this insurance are necessary
to attract and retain qualified directors and officers.
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against our directors for breach of their fiduciary duty.
They may also reduce the likelihood of derivative litigation against directors
and officers, even though an action, if successful, might benefit us and other
stockholders. Furthermore, your investment may be adversely affected to the
extent we pay the costs of settlement and damage awards against directors and
officers as required by these indemnification provisions. At present, there is
no pending litigation or proceeding involving any of our directors, officers or
employees for which indemnification by Handspring is sought, nor are we aware of
any threatened litigation that may result in claims for indemnification.
50
<PAGE> 52
RELATED PARTY TRANSACTIONS
Other than the transactions described in "Management" and the transactions
described below, since our inception there has not been nor is there currently
proposed any transaction or series of similar transactions to which we were or
will be a party in which the amount involved exceeded or will exceed $60,000 and
in which any director, executive officer, holder of more than 5% of our common
stock or any member of his or her immediate family had or will have a direct or
indirect material interest.
TRANSACTIONS WITH PROMOTERS
In August 1998, we sold 40,950,000 shares of common stock to Jeffrey C.
Hawkins and 22,050,000 shares of common stock to Donna L. Dubinsky at a price
per share of $0.00111 under restricted stock purchase agreements. On the same
day that they purchased their shares, Mr. Hawkins and Ms. Dubinsky transferred
their shares to trusts of which they are trustees. At the time of issuance, 80%
of the shares held by Mr. Hawkins and Ms. Dubinsky were unvested and subject to
our right of repurchase upon termination of their employment. On July 13, 1999,
this right of repurchase expired as to an additional 20% of the shares, and
continues to expire as to an additional 1.667% of the shares each following
month so long as we continue to employ Mr. Hawkins and Ms. Dubinsky, as
applicable. If we are acquired by, or sell all or substantially all of our
assets to, another entity, then our right of repurchase with respect to the
shares held by Mr. Hawkins and Ms. Dubinsky will expire as to an additional 25%
of the shares. On or before July 13, 2002, the right of repurchase will expire
in full.
Jeffrey C. Hawkins loaned us $300,000 under a three-month unsecured
promissory note dated October 1, 1998 bearing interest at a rate of 5.6%
annually. We repaid this loan in full, with interest, on October 26, 1998.
ISSUANCE OF SERIES A PREFERRED STOCK
In October 1998, we sold a total of 8,076,924 shares of Series A preferred
stock at a price per share of $2.23 to the following investors:
- entities affiliated with Kleiner Perkins Caufield & Byers VIII, L.P.,
which purchased a total of 4,038,462 shares of Series A preferred stock,
which is convertible into 18,173,079 shares of common stock, for a total
purchase price of $9.0 million. These entities hold more than 5% of our
capital stock and L. John Doerr, one of our directors, is a general
partner of KPCB VIII Associates, L.P., which is a general partner of
Kleiner Perkins Caufield & Byers VIII, L.P.; and
- Benchmark Capital Partners II, L.P., which purchased a total of 4,038,462
shares of Series A preferred stock, which is convertible into 18,173,079
shares of common stock, for a total purchase price of $9.0 million as
nominee for several affiliated entities. These entities hold more than 5%
of our capital stock and Bruce W. Dunlevie, one of our directors, is a
managing member of Benchmark Capital Management Co. II, L.L.C., which is
a general partner of Benchmark Capital Partners II, L.P.
ISSUANCE OF SERIES B PREFERRED STOCK
In July 1999, we sold a total of 928,506 shares of Series B preferred stock
at a price per share of $10.77 to the following investors:
- QUALCOMM Incorporated, which purchased a total of 649,954 shares of
Series B preferred stock, which is convertible into 2,924,793 shares of
common stock, for a total purchase price of $7.0 million. QUALCOMM
licenses CDMA technology to us;
51
<PAGE> 53
- entities affiliated with Kleiner Perkins Caufield & Byers VIII, L.P.,
which purchased a total of 139,276 shares of Series B preferred stock,
which is convertible into 626,742 shares of common stock, for a total
purchase price of $1.5 million; and
- Benchmark Capital Partners II, L.P., which purchased a total of 139,276
shares of Series B preferred stock, which is convertible into 626,742
shares of common stock, for a total purchase price of $1.5 million as
nominee for several affiliated entities.
INVESTORS RIGHTS AGREEMENT
In connection with our issuances of Series A preferred stock and Series B
preferred stock, we have entered into an investors rights agreement granting the
holders of the preferred stock registration rights with respect to the common
stock issuable upon conversion of their preferred stock. Their registration
rights are described in more detail under "Description of Capital
Stock -- Registration Rights."
52
<PAGE> 54
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of April 1, 2000, and as adjusted to reflect
the sale of the shares in this offering for:
- each person known by us to own beneficially more than 5% of our of common
stock;
- each of our directors;
- each executive officer listed in the Summary Compensation Table above;
and
- all directors and executive officers as a group.
The percentage of beneficial ownership for the following table is based on
115,253,728 shares of common stock outstanding on April 1, 2000, assuming the
conversion of all outstanding shares of preferred stock into common stock, and
125,253,728 shares of common stock outstanding after the completion of this
offering, including the exercise of right to purchase 895,342 shares of common
stock in May 2000, and assuming no exercise of the underwriters' over-allotment
option.
Unless otherwise indicated below, to our knowledge, all persons and
entities listed below have sole voting and investment power over their shares of
common stock, except to the extent that individuals share authority with spouses
under applicable law. Unless otherwise indicated, each entity or person listed
below maintains a mailing address of c/o Handspring, Inc., 189 Bernardo Avenue,
Mountain View, California 94043.
The number of shares beneficially owned by each stockholder is determined
in accordance with the rules of the Securities and Exchange Commission and does
not necessarily indicate beneficial ownership for any other purpose. Under these
rules, beneficial ownership includes those shares of common stock over which the
stockholder exercises sole or shared voting or investment power. It also
includes shares of common stock that the stockholder has a right to acquire
within 60 days after January 1, 2000 through the exercise of any option. The
percentage ownership of the outstanding common stock, however, is based on the
assumption, expressly required by the rules of the Securities and Exchange
Commission, that only the person or entity whose ownership is being reported has
converted options into shares of common stock.
<TABLE>
<CAPTION>
NUMBER OF PERCENT BENEFICIALLY OWNED
SHARES BENEFICIALLY ---------------------------------
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING AFTER OFFERING
------------------------ ------------------- --------------- --------------
<S> <C> <C> <C>
Jeffrey C. Hawkins(1)..................... 40,932,000 35.5% 32.7%
Donna L. Dubinsky(2)...................... 22,032,000 19.1 17.6
L. John Doerr(3).......................... 18,799,821 16.3 15.0
Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, California 94205
Bruce W. Dunlevie(4)...................... 18,799,821 16.3 15.0
Benchmark Capital Partners II, L.P.
2480 Sand Hill Road
Menlo Park, California 94205
Edward T. Colligan(5)..................... 6,012,693 5.0 4.6
Kim B. Clark(6)........................... -- --
Mitchell E. Kertzman(6)................... -- --
Executive officers and directors as a
group (11 persons)(7)................... 110,218,004 90.0 83.2
</TABLE>
53
<PAGE> 55
- -------------------------
(1) Includes 40,684,500 shares held of record by Mr. Hawkins and his spouse as
trustees under the Strauss-Hawkins Trust Agreement dated April 17, 1991 of
which 19,108,908 shares are subject to a lapsing repurchase right. Also
includes 247,500 shares held of record by various charitable trusts for
which Mr. Hawkins is the trustee.
(2) Represents shares held of record by Ms. Dubinsky as trustee under the
Amended and Restated Dubinsky Trust Agreement dated May 23, 1995, of which
10,289,412 shares are subject to a lapsing repurchase right.
(3) Represents 17,325,915 shares held by Kleiner Perkins Caufield & Byers VIII,
L.P., 1,003,911 shares held by KPCB VIII Founders Fund, L.P. and 469,995
shares held by KPCB Information Sciences Zaibatsu Fund II, L.P. Mr. Doerr is
a general partner of KPCB VIII Associates, L.P., which is a general partner
of Kleiner Perkins Caulfield & Byers VIII, L.P.
(4) Represents 18,799,821 shares held by Benchmark Capital Partners II, L.P. as
nominee for Benchmark Capital Partners II, L.P., Benchmark Founders' Fund
II, L.P., Benchmark Founders' Fund II-A, L.P. and Benchmark Members' Fund
II, L.P. Mr. Dunlevie is a Managing Member of Benchmark Capital Management
Co. II, LLC, the general partner of Benchmark Capital Partners II, L.P.,
Benchmark Founders' Fund II, L.P., Benchmark Founders' Fund II-A, L.P. and
Benchmark Members' Fund II, L.P. Mr. Dunlevie disclaims beneficial ownership
of these shares, except to the extent of his pecuniary interest in the
Benchmark funds.
(5) Represents 855,000 shares held by Mr. Colligan and his spouse and 5,157,693
shares subject to fully exercisable options held by Mr. Colligan.
(6) Dr. Clark and Mr. Kertzman were appointed to the board of directors in April
2000.
(7) Includes 1,561,500 shares held by our executive officers who were not
individually listed in this table, of which 1,272,116 shares are subject to
a lapsing repurchase right, and 7,237,862 shares subject to exercisable
options held by Mr. Colligan and the other executive officers who were not
individually listed in this table.
54
<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
Immediately after the closing of this offering, our authorized capital
stock will consist of 1,000,000,000 shares of common stock, par value $0.001 per
share, and 10,000,000 shares of preferred stock, par value $0.001 per share. As
of April 1, 2000, including the exercise of a right to purchase 895,342 shares
of common stock in April 2000, and assuming the conversion of all outstanding
shares of preferred stock into common stock immediately prior to the closing of
this offering there were outstanding 115,253,728 shares of common stock, held of
record by approximately 116 stockholders. We also had outstanding options to
purchase 20,684,999 shares of common stock.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the stockholders. There are no cumulative voting
rights. Subject to preferences to which holders of preferred stock issued after
the sale of the common stock in this offering may be entitled, holders of common
stock will be entitled to receive ratably any dividends that may be declared
from time to time by the board of directors out of funds legally available for
that purpose. In the event of our liquidation, dissolution or winding up,
holders of common stock will be entitled to share in our assets remaining after
the payment of liabilities and the satisfaction of any liquidation preference
granted to the holders of any shares of preferred stock that may be outstanding.
Holders of common stock have no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions that
apply to the common stock. All shares of common stock outstanding are, and the
shares of common stock offered in this offering, when they are issued and paid
for will be, fully paid and nonassessable. The rights, preferences and
privileges of the holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred
stock that we may designate in the future.
PREFERRED STOCK
Upon the closing of this offering, the board of directors will be
authorized, subject to any limitations imposed by law, without stockholder
approval, from time to time to issue up to a total of 10,000,000 shares of
preferred stock, par value $0.001 per share, in one or more series, each series
to have rights and preferences, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as the
board of directors may determine. 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, or of discouraging a third party from attempting to
acquire, a majority of our voting stock outstanding. We have no present plans to
issue any shares of preferred stock.
REGISTRATION RIGHTS
We entered into an Investors' Rights Agreement with our preferred
stockholders that grants rights for registration under the Securities Act to the
holders of 40,524,435 shares of our common stock upon the completion of this
offering.
At any time after six months after the effective date of this offering, the
holders of a majority of the shares that have registration rights can request
that we register all or a portion of their shares as long as the total offering
price of the shares to the public in that offering is at least $20.0 million. We
are required to file up to two registration statements under this right. The
holders of shares that have registration rights can request that we register
their shares if we are eligible to file a registration statement on Form S-3 and
if the total price of the shares offered to the public is at least $2.0 million.
We could be required to file one Form S-3 registration statement in any period
of 12 months.
55
<PAGE> 57
In addition, the stockholders with registration rights have the right to
include their shares in any registration statement that we file, except for
registration statements that cover an employee benefit plan or a corporate
reorganization. These stockholders have waived their rights with respect to this
offering. If marketing reasons dictate, the managing underwriter of any
underwritten offering will have the right to limit the number of shares
registered for these holders in the registration to 25% of the total shares
covered by the registration statement.
We will pay all expenses incurred in connection with these registration
statements, except for underwriters' and brokers' discounts and commissions,
which the selling stockholders will pay. The registration rights expire for any
particular stockholder if the stockholder can sell all of its shares in one
period of three months under Rule 144 under the Securities Act. The registration
rights expire for all stockholders five years after completion of this offering.
ANTI-TAKEOVER EFFECTS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND
DELAWARE LAW
Provisions of our restated certificate of incorporation and bylaws that
will be in effect after this offering may have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of us. These provisions could limit the price
that investors might be willing to pay in the future for shares of our common
stock. These provisions:
- divide our board of directors into three classes serving staggered
three-year terms;
- eliminate the right of stockholders to act by written consent without a
meeting;
- eliminate the right of stockholders to call special meetings of
stockholders;
- eliminate cumulative voting in the election of directors;
- allow us to issue preferred stock without any vote or further action by
the stockholders; and
- require approval of at least two-thirds of the outstanding shares of
common stock to remove a director.
The classification system of electing directors may tend to discourage a
third party from making a tender offer or otherwise attempting to obtain control
of us and may maintain the incumbency of our board of directors, as the
classification of the board of directors increases the difficulty of replacing a
majority of the directors. These provisions may have the effect of deterring
hostile takeovers, or delaying changes in our control or management, or may make
it more difficult for stockholders to take certain corporate actions. The
amendment of any of these provisions would require approval by holders of at
least two-thirds of the outstanding common stock.
In addition, we are subject to Section 203 of the Delaware General
Corporation Law, which, subject to some exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder unless specified conditions are met.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe Trust
Company, N.A.
LISTING
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the trading symbol "HAND."
56
<PAGE> 58
SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial amount of our common stock, including shares
issued upon exercise of outstanding options, in the public market after this
offering could cause a decline in the prevailing market price of our common
stock. Furthermore, because no shares will be available for sale shortly after
this offering due to the contractual restrictions on resale described in the
section entitled "Underwriting" and the legal restrictions on resale described
below, the sale of a substantial amount of common stock in the public market
after these restrictions lapse could adversely affect the prevailing market
price of our common stock and our ability to raise equity capital in the future.
Upon completion of this offering, we will have 125,253,728 shares of common
stock outstanding, based on shares of common stock outstanding as of April 1,
2000, including the exercise of a right to purchase 895,342 shares of common
stock in May 2000, and assuming no exercise of the underwriters' over-allotment
option. Of these shares, all of the 10,000,000 shares of our common stock sold
in this offering will be freely tradable without restriction or further
registration under the Securities Act, unless the shares are purchased by
"affiliates" as that term is defined in Rule 144 under the Securities Act. Any
shares purchased by an affiliate may not be resold except under an effective
registration statement or an exemption from registration, including an exemption
under Rule 144 of the Securities Act. The remaining 115,253,728 shares of common
stock held by existing stockholders are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. Of these shares, 102,980,142
shares are held by our directors, executive officers and other affiliates, and
are subject to volume limitations under Rule 144 and various vesting agreements.
These 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. These rules are summarized below. All of
the remaining shares of common stock that constitute restricted securities held
by existing stockholders are subject to contractual restrictions on resale as
described more fully in the section entitled "Underwriting."
Upon the expiration of the contractual restrictions on resale described in
the section entitled "Underwriting" and subject to various vesting agreements
and the provisions of Rule 144 and Rule 701, 115,253,728 restricted shares of
common stock will be available for sale in the public market beginning 180 days
after the date of this prospectus. The sale of these restricted securities is
subject, in the case of shares held by affiliates, to the volume restrictions
contained in Rule 144.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year from the later of the date those shares of
common stock were acquired from us or from an affiliate of ours would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
(1) one percent of the number of shares of common stock then
outstanding, which will equal approximately 1,252,537 shares immediately
after this offering; or
(2) the average weekly trading volume of the common stock on the
Nasdaq National Market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to the sale of any shares of common
stock.
Sales of shares under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of current public
information about us. Affiliates may sell shares not constituting restricted
securities in accordance with the volume limitations and other restrictions, but
without regard to the one-year holding period.
57
<PAGE> 59
RULE 144(k)
In addition, under Rule 144(k), a person who is not one of our affiliates
at any time during the three months before a sale, and who has beneficially
owned the shares proposed to be sold for at least two years from the later of
the date the shares were acquired from us or from an affiliate of ours,
including the holding period of any previous owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
RULE 701
In general, under Rule 701 under the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell those shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with some of the restrictions,
including the holding period, contained in Rule 144.
58
<PAGE> 60
UNDERWRITING
Under the terms and subject to the conditions contained in the underwriting
agreement dated , 2000, we have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston Corporation,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and U.S. Bancorp Piper Jaffray Inc. are acting as
representatives, the following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERWRITER ----------
<S> <C>
Credit Suisse First Boston Corporation......................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Donaldson, Lufkin & Jenrette Securities Corporation.........
U.S. Bancorp Piper Jaffray Inc. ............................
----------
Total............................................. 10,000,000
==========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 1,500,000 additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
------------------------------- -------------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions paid by us............ $ $ $ $
Expenses payable by us.............. $ $ $ $
</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 have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, 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
59
<PAGE> 61
case of issuances pursuant to the exercise of employee stock options outstanding
on the date of this prospectus.
Our officers and directors and the holders of substantially all our common
stock have agreed that they will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of our
common stock, enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our common stock, whether
any such aforementioned transaction is to be settled by delivery of our common
stock or such other securities, in cash or otherwise, or publicly disclose the
intention to make any such offer, sale, pledge or disposition, or to enter into
any such transaction, swap, hedge or other arrangement, without, in each case,
the prior written consent of Credit Suisse First Boston Corporation for a period
of 180 days after the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to 300,000 shares of common stock for business partners, such as
suppliers, developers and consultants, who have expressed an interest in
purchasing common stock in the offering. The number of shares available for sale
to the general public in the offering will be reduced to the extent 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 liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "HAND."
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 offing 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 may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act.
- 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 is purchased in a syndicate covering transaction to
cover syndicate short positions.
60
<PAGE> 62
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 National Market or otherwise and, if commenced, may be discontinued at
any time.
A prospectus in electronic format may be made available on the Web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make Internet distributions on the same
basis as other allocations.
61
<PAGE> 63
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) the purchaser has reviewed the text above under "Resale
Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or 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 such 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 the purchaser in this offering. Such 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.
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.
62
<PAGE> 64
LEGAL MATTERS
Fenwick & West LLP, Palo Alto, California, will pass upon the validity of
the common stock that we are selling in this offering. Davis Polk & Wardwell,
Menlo Park, California, is representing the underwriters.
EXPERTS
The financial statements as of June 30, 1999 and April 1, 2000 and for the
period from July 29, 1998 (date of inception) to June 30, 1999 and the nine
month period ended April 1, 2000 have been so included in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
WHERE YOU MAY FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, including exhibits and schedule, under the Securities Act
with respect to the common stock to be sold in this offering. This prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information that is in the Registration Statement or the exhibits and
schedule. Any statements made in this prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With respect
to each contract, agreement or other document filed as an exhibit to the
Registration Statement, we refer you to the exhibit for a more complete
description of the matter involved, and each statement in this prospectus is
qualified in its entirety by this reference. You may read and copy all or any
portion of the Registration Statement or any reports, statements or other
information at the following public reference facilities of the Securities and
Exchange Commission:
<TABLE>
<S> <C> <C>
Washington, D.C. New York, New York Chicago, Illinois
Room 1024, Judiciary Plaza Seven World Trade Center 500 West Madison Street
450 Fifth Street, N.W. Suite 1300 Suite 1400
Washington, D.C., 20549 New York, New York 10048 Chicago, Illinois 60661
</TABLE>
You can request copies of these documents upon payment of a duplicating fee
by writing to the Commission. You may call the Commission at 1-800-SEC-0330 for
further information on the operation of its public reference rooms. Our filings,
including the Registration Statement, will also be available to you on the Web
site maintained by the Commission at sec.gov.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent auditors, and make available to
our stockholders quarterly reports for the first three quarters of each year
containing unaudited interim financial statements.
63
<PAGE> 65
HANDSPRING, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Deficit and
Comprehensive Loss........................................ F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 66
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Handspring, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' deficit and comprehensive loss and of cash flows
present fairly, in all material respects, the financial position of Handspring,
Inc. at June 30, 1999 and April 1, 2000 and the results of its operations and
its cash flows for the period from July 29, 1998 (date of inception) to June 30,
1999 and for the nine months ended April 1, 2000, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
San Jose, California
May 16, 2000
F-2
<PAGE> 67
HANDSPRING, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
JUNE 30, 1999 APRIL 1, 2000 APRIL 1, 2000
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 7,533 $ 17,407 $ 18,907
Short-term investments................................. 6,234 -- --
Accounts receivable, net............................... -- 13,736 13,736
Prepaid expenses and other current assets.............. 616 1,688 1,688
------- -------- --------
Total current assets................................ 14,383 32,831 34,331
Property and equipment, net.............................. 1,034 5,033 5,033
Other assets............................................. 214 787 787
------- -------- --------
Total assets........................................ $15,631 $ 38,651 $ 40,151
======= ======== ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 1,208 $ 17,007 $ 17,007
Accrued liabilities.................................... 67 9,527 9,527
------- -------- --------
Total current liabilities........................... 1,275 26,534 26,534
Long-term liabilities.................................... -- 64 64
Redeemable convertible preferred stock, $0.001 par value
per share, 9,300,000 shares authorized actual and pro
forma, 8,076,924 and 9,005,430 shares issued and
outstanding at June 30, 1999 and April 1, 2000,
respectively; no shares issued or outstanding pro
forma; (aggregate liquidation preference of $17,972 and
$27,962 at June 30, 1999 and April 1, 2000,
respectively; pro forma, nil).......................... 17,972 27,962 --
Commitments and contingencies (Note 7)
Stockholders' equity (deficit):
Common stock, $0.001 par value per share, 105,000,000
shares authorized actual and pro forma; 69,365,078
and 73,833,951 shares issued and outstanding at June
30, 1999 and April 1, 2000 respectively; 115,253,728
shares issued and outstanding pro forma............. 69 74 115
Additional paid-in capital............................. 14,455 96,580 126,001
Deferred stock compensation............................ (9,745) (63,458) (63,458)
Accumulated other comprehensive income (loss).......... (6) 48 48
Accumulated deficit.................................... (8,389) (49,153) (49,153)
------- -------- --------
Total stockholders' equity (deficit)................ (3,616) (15,909) 13,553
------- -------- --------
Total liabilities, redeemable convertible preferred
stock and stockholders' equity (deficit).......... $15,631 $ 38,651 $ 40,151
======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 68
HANDSPRING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 29, 1998 JULY 29, 1998 NINE MONTHS
(DATE OF INCEPTION) (DATE OF INCEPTION) ENDED
TO JUNE 30, 1999 TO MARCH 31, 1999 APRIL 1, 2000
------------------- ------------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Revenue.................................... $ -- $ -- $ 50,111
------- ------- --------
Costs and operating expenses:
Cost of revenue.......................... -- -- 34,171
Research and development................. 2,738 1,137 6,733
Selling, general and administrative...... 2,451 898 23,888
Amortization of deferred stock
compensation(*)....................... 3,646 2,425 26,420
------- ------- --------
Total costs and operating expenses.... 8,835 4,460 91,212
------- ------- --------
Loss from operations....................... (8,835) (4,460) (41,101)
Interest and other income, net............. 446 301 337
------- ------- --------
Net loss................................... $(8,389) $(4,159) $(40,764)
======= ======= ========
Basic and diluted net loss per share....... $ (0.71) $ (0.36) $ (1.34)
======= ======= ========
Shares used in calculating basic and
diluted net loss per share............... 11,772 11,451 30,403
======= ======= ========
Pro forma basic and diluted net loss per
share (Note 2)........................... $ (0.22) $ (0.57)
======= ========
Shares used in calculating pro forma basic
and diluted net loss per share (Note
2)....................................... 38,976 71,731
======= ========
(*)Amortization of deferred stock
compensation:
Cost of revenue.......................... $ 526 $ 236 $ 4,131
Research and development................. 1,217 907 6,789
Selling, general and administrative...... 1,903 1,282 15,500
------- ------- --------
$ 3,646 $ 2,425 $ 26,420
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 69
HANDSPRING, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT AND
COMPREHENSIVE LOSS
PERIOD FROM JULY 29, 1998 (DATE OF INCEPTION) TO JUNE 30, 1999 AND FOR THE NINE
MONTHS ENDED APRIL 1, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL DEFERRED OTHER
--------------- PAID-IN STOCK COMPREHENSIVE ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION INCOME (LOSS) DEFICIT TOTAL
------ ------ ---------- ------------ ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock................... 63,000 $ 63 $ 7 $ -- $ -- $ -- $ 70
Issuance of common stock for services...... 90 -- 15 -- -- -- 15
Issuance of common stock on exercise of
stock options............................ 6,275 6 443 -- -- -- 449
Issuance of right to purchase Series A
convertible preferred stock in connection
with financing agreement................. -- -- 599 -- -- -- 599
Deferred stock compensation................ -- -- 13,391 (13,391) -- -- --
Amortization of deferred stock
compensation............................. -- -- -- 3,646 -- -- 3,646
Unrealized loss on securities.............. -- -- -- -- (6) -- (6)
Net loss................................... -- -- -- -- -- (8,389) (8,389)
------ ------ -------- --------- ---- -------- --------
Balances, June 30, 1999.................... 69,365 69 14,455 (9,745) (6) (8,389) (3,616)
Issuance of common stock for services...... 23 -- 15 -- -- -- 15
Issuance of common stock on exercise of
stock options............................ 4,446 5 1,977 -- -- -- 1,982
Deferred stock compensation................ -- -- 80,133 (80,133) -- -- --
Amortization of deferred stock
compensation............................. -- -- -- 26,420 -- -- 26,420
Unrealized gain on securities.............. -- -- -- -- 40 -- 40
Foreign currency translation adjustments... -- -- -- -- 14 -- 14
Net loss................................... -- -- -- -- -- (40,764) (40,764)
------ ------ -------- --------- ---- -------- --------
Balances, April 1, 2000.................... 73,834 $ 74 $ 96,580 $ (63,458) $ 48 $(49,153) $(15,909)
====== ====== ======== ========= ==== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 70
HANDSPRING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 29, 1998 JULY 29, 1998 NINE MONTHS
(DATE OF INCEPTION) (DATE OF INCEPTION) ENDED
TO JUNE 30, 1999 TO MARCH 31, 1999 APRIL 1, 2000
------------------- ---------------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................... $ (8,389) $(4,159) $(40,764)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization............... 70 34 1,456
Amortization of deferred stock
compensation.............................. 3,646 2,425 26,420
Amortization of costs associated with
financing agreement....................... 31 -- 453
Amortization of premium or discount on
short-term investments.................... (108) (45) (100)
Stock compensation to non-employees......... 15 -- 15
Changes in assets and liabilities:
Accounts receivable....................... -- -- (13,736)
Prepaid expenses and other current
assets................................. (48) (33) (1,491)
Other assets.............................. (214) (204) (573)
Accounts payable.......................... 884 242 15,799
Accrued liabilities....................... 67 29 9,435
-------- ------- --------
Net cash used in operating
activities........................... (4,046) (1,711) (3,086)
-------- ------- --------
Cash flows from investing activities:
Purchases of short-term investments........... (10,965) (9,499) (1,968)
Proceeds from maturities or sales of
short-term investments...................... 4,833 982 8,308
Purchases of property and equipment........... (780) (577) (5,359)
-------- ------- --------
Net cash provided by (used in)
investing activities................. (6,912) (9,094) 981
-------- ------- --------
Cash flows from financing activities:
Principal payments on equipment financing
obligations................................. -- -- (7)
Issuance of Series A redeemable convertible
preferred stock, net........................ 17,972 17,972 --
Issuance of Series B redeemable convertible
preferred stock, net........................ -- -- 9,990
Proceeds from issuance of common stock........ 519 70 1,982
-------- ------- --------
Net cash provided by financing
activities........................... 18,491 18,042 11,965
-------- ------- --------
Effect of exchange rate changes on
cash................................. -- -- 14
-------- ------- --------
Net increase in cash and cash equivalents....... 7,533 7,237 9,874
Cash and cash equivalents:
Beginning of period........................... -- -- 7,533
-------- ------- --------
End of period................................. $ 7,533 $ 7,237 $ 17,407
======== ======= ========
Supplemental disclosures of non-cash investing
and financing activities:
Accounts payable incurred upon acquisition of
property and equipment...................... $ 324 $ -- $ --
-------- ------- --------
Purchase of property and equipment under
financing agreement......................... $ -- $ -- $ 96
-------- ------- --------
Unrealized gain (loss) on securities.......... $ (6) $ (2) $ 40
-------- ------- --------
Deferred stock compensation................... $ 13,391 $ 7,347 $ 80,133
-------- ------- --------
Issuance of right to purchase Series A
redeemable convertible preferred stock in
connection with financing agreement......... $ 599 $ -- $ --
-------- ------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 71
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of business -- Handspring, Inc. (the "Company") was
incorporated in California on July 29, 1998 under the name of JD Technology,
Inc. to develop innovative handheld computer devices and related accessories. In
November 1998, the Company changed its name to Handspring, Inc. During fiscal
year 2000 the Company completed the development of its first handheld computer
device, which was named "the Visor." Shipments of the Visor began in October
1999 via the Company's Web site. In March 2000, the Company began shipping its
products to selected retailers.
Principles of consolidation and basis of presentation -- The consolidated
financial statements of Handspring, Inc. include the accounts of its
wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Stock Split -- On March 16, 2000, the Board of Directors authorized a
three-for-one stock split of the outstanding shares of common stock and on May
12, 2000, the Board of Directors authorized a three-for-two stock split of the
outstanding shares of common stock. All common share and per share information
included in these financial statements has been retroactively adjusted to
reflect this stock split.
Reincorporation -- In May 2000, the Company reincorporated in the State of
Delaware. As a result of the reincorporation, the Company is authorized to issue
105,000,000 shares of $0.001 par value common stock and 9,300,000 shares of
$0.001 par value preferred stock. The accompanying financial statements reflect
the reincorporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal year -- During fiscal 1999 our fiscal months coincided with calendar
month ends. Effective July 1, 1999, we changed our fiscal year to a 52-53 week
fiscal year ending on the Saturday nearest to June 30. Unless otherwise stated,
all years and dates refer to our fiscal year and fiscal periods.
Interim financial information -- The consolidated financial statements for
the period from inception to March 31, 1999 are unaudited and should be read in
conjunction with the Company's financial statements for the period from July 29,
1998 (date of inception) to June 30, 1999 and for the nine months ended April 1,
2000. Such interim financial statements have been prepared in conformity with
the rules and regulations of the Securities and Exchange Commission. Certain
disclosures normally included in the financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations pertaining to
interim financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for the fair presentation
have been included.
Cash and cash equivalents -- The Company considers all highly liquid debt
or equity instruments purchased with an original maturity at the date of
purchase of 90 days or less to be cash equivalents.
Fair value of financial instruments -- Amounts reported for cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities are
considered to approximate fair value primarily due to their short maturities.
Short-term investments -- Short-term investments consist primarily of
highly liquid debt securities and commercial paper purchased with an original
maturity at the date of purchase of greater than 90 days. Short-term investments
are classified as available-for-sale securities and are stated at market value
with any temporary difference between an investment's amortized cost and its
market value
F-7
<PAGE> 72
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
recorded as a separate component of stockholders' equity (deficit) until such
gains or losses are realized. Gains or losses on the sales of securities are
determined on a specific identification basis.
Concentration of credit risk -- Financial instruments that potentially
subject the Company to concentrations of credit risk consist of cash and cash
equivalents, short-term investments and accounts receivable. Risks associated
with cash are mitigated by banking and creditworthy institutions.
The objective of the Company's investment policy is the preservation of
capital, the maximization of pre-tax return, and the maintenance of liquidity
until funds are needed for use in business operations. Funds are diversified to
minimize risk and the inappropriate concentrations of investments. Under policy
guidelines, the following are considered eligible investments: obligations of
the U.S. government agencies, certain financial institutions and corporations,
as well as investment in money market funds. All investments are limited to
those highly rated by outside organizations.
The Company's accounts receivable are derived from revenue earned from
customers located primarily in the United States. The Company performs periodic
credit evaluations of its open account customers' financial condition and,
generally, requires no collateral. The Company maintains an allowance for
doubtful accounts receivable based upon the expected collectibility of accounts
receivable. At April 1, 2000, three customers accounted for 32%, 31%, and 30% of
net receivables. There was no customer which accounted for more than 10% of
revenue during the nine months ended April 1, 2000.
Property and equipment -- Property and equipment, including leasehold
improvements, are stated at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets, generally one to five years. Leasehold improvements and assets held
under capital leases are amortized over the term of the lease or estimated
useful lives, whichever is shorter. Assets acquired under capital leases are
recorded at the present value of the related lease obligation.
Long-Lived Assets -- The Company evaluates the recoverability of its
long-lived assets in accordance with Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of. SFAS No. 121 requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the future
undiscounted cash flows attributable to such assets. The Company assesses the
impairment of its long-lived assets when events or changes in circumstances
indicate that the carrying value of the assets may not be recoverable.
Foreign currency translation -- The majority of the Company's operations
are denominated in U.S. dollars. For foreign operations with the local currency
as the functional currency, assets and liabilities are translated at year-end
exchange rates, and statements of operations are translated at the average
exchange rates during the year. Gains or losses resulting from foreign currency
translation are included as a component of other comprehensive income (loss).
Income taxes -- The Company accounts for income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes. This statement prescribes the use of
the liability method whereby deferred tax assets and liabilities are determined
based on the differences between financial reporting and tax bases of assets and
liabilities and measured at tax rates that will be in effect when the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets where it is more likely than not that
the deferred tax asset will not be realized.
F-8
<PAGE> 73
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock-based compensation -- The Company accounts for stock compensation
arrangements in accordance with provisions of Accounting Principles Board
Opinion ("APB") No. 25, Accounting for Stock Issued to Employees, and complies
with the disclosure provisions of SFAS No. 123, Accounting for Stock-Based
Compensation. Under APB No. 25, unearned stock compensation is based on the
difference, if any, on the date of the grant, between the fair value of the
Company's common stock and the exercise price. Unearned stock compensation is
amortized and expensed in accordance with FASB Interpretation No. 28. The
Company accounts for stock issued to non-employees in accordance with the
provisions of SFAS No. 123 and Emerging Issues Task Force No. 96-18, Accounting
for Equity Instruments that are Issued to Other than Employees for Acquiring, or
in Conjunction with Selling Goods and Services.
Segment reporting -- The FASB issued SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information, which establishes annual and
interim reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographic areas and major customers.
During each of the periods presented, the Company operated in one operating
segment with sales primarily in the United States.
Comprehensive loss -- The FASB issued SFAS No. 130, Reporting Comprehensive
Income, which requires an enterprise to report by major components and as a
single total, the change in its net assets during the period from
non-stockholder sources. Statements of comprehensive loss have been included
within the statements of stockholders' deficit.
Net loss per share -- Basic net loss per share is computed by dividing net
loss applicable to common stockholders by the weighted average number of common
shares outstanding for the period (excluding shares subject to repurchase).
Diluted net loss per common share was the same as basic net loss per common
share for all periods presented since the effect of any potentially dilutive
securities is excluded as they are anti-dilutive because of the Company's net
losses.
Unaudited pro forma information -- As discussed in Note 6 to the
consolidated financial statements, there was an outstanding right to purchase
198,965 shares of Series A redeemable convertible preferred stock at $7.539 per
share at April 1, 2000. This right was exercised on May 1, 2000. In addition,
upon the closing of the initial public offering, each of the outstanding shares
of redeemable convertible preferred stock will convert into three shares of
common stock. The pro forma balance sheet presents the Company's balance sheet
as if both of these events had occurred at April 1, 2000.
Pro forma net loss per share -- Pro forma basic and diluted net loss per
share is computed by dividing net loss applicable to common stockholders by the
weighted average number of common shares outstanding for the period (excluding
shares subject to repurchase) and the weighted average number of common shares
resulting from the assumed conversion of outstanding shares of redeemable
convertible preferred stock, including those redeemable convertible preferred
shares assumed to have been purchased under the outstanding right as discussed
in the previous paragraph.
Revenue recognition -- Revenue from sales is recognized when a purchase
order has been received, the product has been shipped, the sales price is fixed
and determinable and collection of the resulting receivable is probable.
Provisions are made at the time the related revenue is recognized for estimated
product returns and warranty.
Shipping and handling fees and costs -- The Company classifies amounts
billed to customers for shipping and handling as revenue. Costs incurred by the
Company for shipping and handling have been classified as cost of revenue.
F-9
<PAGE> 74
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Advertising costs -- The cost of advertising is expensed as incurred. For
the period from July 29, 1998 (date of inception) to June 30, 1999 and for the
nine months ended April 1, 2000 advertising costs totaled $114,000 and
$2,727,000, respectively.
Recently issued accounting pronouncements -- In June 1998, the FASB issued
SFAS No. 133, Accounting for Derivatives and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative investments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. In July 1999, the FASB issued SFAS No. 137, Accounting for
Derivative and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133. SFAS No. 137 deferred the effective date of SFAS No. 133
until fiscal years beginning after June 15, 2000. The Company will adopt SFAS
No. 133 during fiscal 2001. To date, the Company has not engaged in derivative
or hedging activities.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements. SAB 101 provides guidance for revenue recognition under certain
circumstances. SAB 101 is effective for our fiscal year beginning July 2, 2000.
Implementation of SAB 101 is not expected to require us to change existing
revenue recognition policies and therefore is not expected to have a material
effect on the Company's financial position or results of operations.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 ("FIN 44") Accounting for Certain Transactions Involving
Stock Compensation an Interpretation of APB Opinion No. 25. FIN 44 clarifies the
application of Opinion 25 for (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting consequences of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, but certain conclusions cover
specific events that occur after either December 15, 1998, or January 12, 2000.
We believe that the impact of FIN 44 will not have a material affect on our
financial position or results of operations.
Use of estimates -- The preparation of 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 financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
3. SHORT-TERM INVESTMENTS
The fair value and the amortized cost of investments at June 30, 1999 are
presented below. There were no short-term investments at April 1, 2000. Fair
values are based on quoted market prices obtained from the Company's brokers.
All of the Company's investments are classified as available-
F-10
<PAGE> 75
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
for-sale, since the Company intends to sell them as needed for operations. The
following table presents the unrealized holding gains and losses related to each
category of investment securities:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED MARKET HOLDING HOLDING
COST VALUE GAINS LOSSES
--------- ------ ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
JUNE 30, 1999
Corporate obligations....................... $5,248 $5,245 $-- $(3)
Government obligations...................... 992 989 -- (3)
------ ------ --- ---
$6,240 $6,234 $-- $(6)
====== ====== === ===
</TABLE>
The Company realized no gains or losses on the sale of securities during
the period from July 29, 1998 (date of inception) to June 30, 1999. There were
no sales of available-for-sale investments during the nine months ended April 1,
2000.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30, 1999 APRIL 1, 2000
------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Tooling..................................... $ 633 $ 2,136
Computer and office equipment............... 304 2,090
Furniture and fixtures...................... 89 1,407
Software.................................... 78 332
Leasehold improvements...................... -- 561
------ -------
Total property and equipment.............. 1,104 6,526
Less: Accumulated depreciation and
amortization.............................. (70) (1,493)
------ -------
Property and equipment, net............... $1,034 $ 5,033
====== =======
</TABLE>
There were no assets acquired under capital leases during fiscal 1999. At
April 1, 2000 property, plant and equipment includes $96,000 of computer and
office equipment acquired under capital leases. Accumulated amortization of
assets under capital leases totaled $14,000 at April 1, 2000.
5. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1999 APRIL 1, 2000
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Accrued product warranty...................... $-- $3,948
Accrued royalty expense....................... -- 1,867
Accrued compensation and related benefits..... 31 225
Other......................................... 36 3,487
--- ------
$67 $9,527
=== ======
</TABLE>
F-11
<PAGE> 76
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SUBORDINATED DEBT AND EQUIPMENT LEASE FACILITY
In June 1999, the Company obtained a subordinated debt facility of
$6,000,000, which is available until June 2000. Borrowings under this facility
bear interest at 10.0% per annum, and are collateralized by the Company's assets
and subordinated to senior indebtedness. Without the lender's consent the
Company may not incur any other indebtedness in excess of $1,000,000. The
lender, at its sole discretion, has the right to purchase 198,965 shares of
Series A redeemable convertible preferred stock at $7.539 per share. The Company
valued this right using the Black-Scholes option pricing model, applying an
actual life of 11 months, a weighted average risk-free rate of 4.78%, an
expected dividend yield of zero percent, an expected volatility of 70% and a
deemed fair value of common stock of $1.96 per share. The fair value of the
right of $599,000 is being amortized over the period of the agreement. The
Company has reserved 198,965 shares of Series A redeemable convertible preferred
stock for exercise which shares will automatically convert into common stock in
accordance with the terms described in Note 8. Only monthly interest is payable
until the earlier of the completion of an initial public offering of the
Company's stock or 18 months from the date of any advance under the loan
followed by 18 monthly payments of principal and interest. There were no
outstanding borrowings at June 30, 1999 or April 1, 2000. The subordinated debt
facility prohibits declaration or payment of any cash dividend without the prior
consent of the lender.
In connection with the above agreement, the Company also obtained an
equipment and software lease facility of $1,000,000, which is available until
September 2000. Equipment leases up to $600,000 under this facility have a 42
month term. Leases for software, tooling, tenant improvements and other costs up
to $400,000 under this facility have a 36 month term. All borrowings under this
agreement bear interest at 7.5% per annum. There were no outstanding borrowings
at June 30, 1999 and $89,000 was outstanding as of April 1, 2000.
7. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities under operating leases which expire
through August 2004. Under the terms of the leases, the Company is responsible
for its share of common area and operating expenses. Collateral for lease
payments consists of a payment bond certificate of $150,000, expiring July 7,
2002 and a $400,000 standby letter of credit established on August 3, 1999, and
required until the expiration of the lease in August 2004. The payment bond
certificate was included in the other assets balance at June 30, 1999. Both the
bond certificate and the letter of credit are included in other assets at April
1, 2000.
F-12
<PAGE> 77
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of April 1, 2000, the future minimum lease commitments under all leases
were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
PERIODS ENDING JUNE 30, LEASES LEASES
----------------------- ------- ---------
(IN THOUSANDS)
<S> <C> <C>
2000 (three months).................................... $ 8 $ 463
2001................................................... 31 1,781
2002................................................... 31 1,746
2003................................................... 30 1,661
2004................................................... -- 1,719
2005................................................... -- 288
---- ------
Total minimum lease payments........................... 100 $7,658
======
Less: Amounts representing interest.................... (11)
----
Present value of minimum lease payments................ $ 89
====
</TABLE>
Rent expense under operating leases, net of sublease income, for the period
from July 29, 1998 (date of inception) to June 30, 1999 and for the nine months
ended April 1, 2000 was $283,000 and $1,026,000, respectively.
The Company has entered into a purchase agreement with a manufacturer in
Malaysia. The contract provides for the manufacturer to supply certain levels of
handheld computer products according to rolling forecasts and purchase orders
provided by Handspring, Inc. The Company guarantees a minimum production
commitment based on this rolling forecast. However, the Company may cancel
orders with scheduled delivery greater than 90 days from the date of
cancellation without liability. The Company is liable for orders cancelled
within 30 days of scheduled delivery. The handheld computer products are to be
purchased by a third-party subcontractor. Handspring, Inc. has guaranteed prompt
payment of all invoices and charges in the event of default related to said
charges by the third-party subcontractor.
The Company has also entered into an agreement with an outsource provider
for telephone-based customer support and technical support. The contract
provides for the outsource provider to supply certain levels of support
according to a rolling 90-day forecast provided by the Company. The Company may
revise the forecast within fifteen days of each subsequent month. The Company is
liable for 80% of a given months forecast.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK
At April 1, 2000, the amounts, terms and liquidation values of Series A and
Series B redeemable convertible preferred stock are as follows:
<TABLE>
<CAPTION>
SHARES OF COMMON AGGREGATE
SHARES ISSUED AND AMOUNT, NET OF STOCK RESERVED LIQUIDATION
SERIES DESIGNATED OUTSTANDING ISSUANCE COSTS FOR CONVERSION PREFERENCE
------ ---------- ----------------- -------------- ---------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
A..................... 8,300 8,077 $17,972 36,346 $17,972
B..................... 1,000 928 9,990 4,178 9,990
----- ----- ------- ------ -------
9,300 9,005 $27,962 40,524 $27,962
===== ===== ======= ====== =======
</TABLE>
F-13
<PAGE> 78
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At June 30, 1999 only shares of Series A redeemable convertible preferred
stock were outstanding.
Significant terms of the outstanding redeemable convertible preferred stock
are as follows:
- Each share of redeemable convertible preferred stock is convertible into
4.5 shares of common stock, subject to certain adjustments. Such shares
will be converted automatically immediately into common stock prior to
the closing of a firm commitment underwritten public offering of at least
$20 million and at least $2.39 per share, or upon the written consent of
a majority of the shares of preferred stock outstanding at the time of
such vote. The stockholders have certain registration rights, and the
right to participate in future issuances of the Company's securities.
- Each share of redeemable convertible preferred stock has voting rights
equivalent to the number of shares of common stock into which it is
convertible. So long as at least 2,000,000 shares of Series A redeemable
convertible preferred stock are outstanding, the holders of the
redeemable convertible preferred stock, voting together as a separate
class, are entitled to elect two directors of the Company. The holders of
common stock, voting together as a separate class, are also entitled to
elect two directors of the Company. Remaining directors are elected
jointly by all stockholders. So long as any shares of redeemable
convertible preferred stock are outstanding, the Company shall not,
without the approval of a majority of the then outstanding redeemable
convertible preferred stock, (i) amend its articles of incorporation or
bylaws in any manner that would change or affect the rights, preferences,
privileges or restrictions of the redeemable convertible preferred stock,
(ii) authorize any other equity security having rights or preferences
senior to or on a parity with the redeemable convertible preferred stock
as to dividend rights, liquidation preferences, redemption or voting,
(iii) effect any merger or other transaction that would result in a
change in the majority voting control of the Company, (iv) sell all or
substantially all of the assets in a single transaction or series of
transactions, liquidate or dissolve or (v) declare or pay any dividends,
other than dividends payable solely in shares of the Company's own common
stock. So long as any shares of a particular series of redeemable
convertible preferred stock remain outstanding, the Company shall not,
without the approval of a majority of the then outstanding shares of the
particular series of redeemable convertible preferred stock, authorize
additional shares of such series of redeemable convertible preferred
stock.
- Stockholders are entitled to receive noncumulative dividends at the per
annum rate of $0.0892 per share for Series A redeemable convertible
preferred stock and $0.4308 per share for Series B redeemable convertible
preferred stock, when and if declared by the Board of Directors. If after
dividends have been fully paid or declared and set apart for the
redeemable convertible preferred stock, the Company declares additional
dividends in the same year, then the holders of redeemable convertible
preferred stock will also be entitled to participate in the additional
dividends on common stock based on the number of shares of common stock
held on an as-if converted basis. No dividends have been declared in the
period from inception to April 1, 2000.
- In the event of liquidation, dissolution or winding up of the Company,
holders of Series A and Series B redeemable convertible preferred stock
are entitled to receive the original issue price ($2.23 per share and
$10.77 per share, respectively), plus any declared and unpaid dividends
with respect to such shares. If the assets and funds to be distributed
are insufficient to permit
F-14
<PAGE> 79
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
full payment of the preferential amount, then the funds shall be
distributed on an equal priority, pro rata basis to the redeemable
convertible preferred stockholders. Upon completion of the distribution
to the redeemable convertible preferred stockholders, the holders of the
common stock will receive all remaining assets of the corporation. A
reorganization, consolidation or merger of the Company with another
company or a sale of all or substantially all of the assets of the
Company is deemed to be a liquidation, dissolution or winding up of the
Company.
9. COMMON STOCK
Common stock issued to the founders is subject to repurchase agreements
whereby the Company has the option to repurchase unvested shares upon
termination of employment at the original issue price. These shares vest 20% at
the date of the agreements, an additional 20% on July 13, 1999, 1.667% per month
thereafter and an additional 25% in the event of an acquisition or merger of the
Company. There were 50,400,000 and 29,398,320 shares of the founders' common
stock subject to repurchase by the Company at June 30, 1999 and April 1, 2000,
respectively. The Company has the right of first refusal should any common
stockholder decide to sell shares. In addition, if the Company does not exercise
its first refusal right with respect to common stock proposed to be sold by the
founders, the preferred stockholders have the right to participate in the sale
of stock by the founders.
The Company issued 90,000 and 22,500 shares of common stock for services
during fiscal 1999 and the nine months ended April 1, 2000, respectively. The
per share price of these shares was equal to the fair value of the common stock,
as determined by the Board of Directors, on the date the Board of Directors
approved the stock issuances.
Common Stock Reserved for Issuance
The Company has 105,000,000 shares of common stock authorized, of which
69,365,078 and 73,833,951 were issued and outstanding as of June 30, 1999 and
April 1, 2000, respectively. Common stock reserved for future issuances is as
follows:
<TABLE>
<CAPTION>
JUNE 30, 1999 APRIL 1, 2000
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Issuance under stock options.................. 15,533 28,336
Conversion of redeemable convertible preferred
stock....................................... 36,346 40,524
Exercise of right to purchase redeemable
convertible preferred stock................. 895 895
------ ------
Total shares reserved....................... 52,774 69,755
====== ======
</TABLE>
Stock Option Plans
Under the 1998 Equity Incentive Plan (the "1998 Plan"), the Company may
grant options to purchase up to 28,707,693 shares of common stock to employees,
officers, directors and consultants. Options granted under the 1998 Plan may be
either incentive stock options or nonqualified stock options. Incentive stock
options ("ISO") may be granted only to Company employees (including officers and
directors who are also employees). Nonqualified stock options ("NSO") may be
granted to Company employees, officers, directors, and consultants. Options
under the 1998 Plan may be
F-15
<PAGE> 80
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
granted at prices no less than 85% of the estimated fair value of the shares at
the date of grant, provided, however, that (i) the exercise price of an ISO
shall not be less than 100% of the fair value of the shares on the date of
grant, and (ii) the exercise price of any option granted to a 10% shareholder
shall not be less than 110% of the fair value of the shares on the date of
grant, respectively. Options generally vest 25% one year from the vest start
date and ratably over the next 36 months and expire 10 years (five years in
certain instances) from the date of grant. Options granted prior to December
1999 are immediately exercisable, and options granted on or after December 1999
are generally exercisable only as the shares underlying the option become
vested. Shares issued upon exercise of options that are unvested are subject to
repurchase by the Company upon termination of that option recipient's services
to the Company. The Company is not obligated to repurchase such unvested shares.
The repurchase price is the original exercise price, proportionately adjusted
for any stock split or similar change in the capital structure of the Company. A
stockholder who holds unvested shares is entitled to vote those shares and is
entitled to receive dividends declared on those shares, but may not freely sell
the shares until they become vested. There were 6,275,078 and 5,463,268 shares
issued under the 1998 Plan outstanding at June 30, 1999 and April 1, 2000 that
were subject to repurchase, respectively.
The 1999 Executive Equity Incentive Plan was adopted by the Company during
August 1999. A total of 10,350,000 shares of common stock has been reserved for
issuance under the 1999 Executive Equity Incentive Plan. The terms of options
issued under the 1999 Executive Equity Incentive Plan are generally the same as
those that may be issued under the 1998 Equity Incentive Plan. There were
1,719,373 shares issued under the 1999 Executive Equity Incentive Plan that were
subject to repurchase at April 1, 2000.
In March 2000, the Board of Directors approved the Company's 2000 Equity
Incentive Plan and the 2000 Employee Stock Purchase Plan ("ESPP"), subject to
stockholder approval. The Plans become effective on the effective date of the
Company's initial public offering. Options granted under the 2000 Equity
Incentive Plan may be either incentive stock options or nonqualified stock
options. ISOs may be granted only to Company employees (including officers and
directors who are also employees). NSOs may be granted to Company employees,
officers, directors, consultants, independent contractors and advisors of the
Company. All other terms of options issued are generally the same as those that
may be issued under the 1999 Executive Equity Incentive Plan. Under the ESPP,
eligible employees may purchase common stock through payroll deductions, which
may not exceed 10% of any employee's compensation. A total of 750,000 and
15,000,000 shares of common stock have been reserved for issuance under the ESPP
and 2000 Equity Incentive Plan, respectively.
F-16
<PAGE> 81
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Option activity under the 1998 Equity Incentive Plan and 1999 Executive
Equity Incentive Plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------
OPTIONS WEIGHTED
AVAILABLE AVERAGE
FOR GRANT SHARES EXERCISE PRICE
----------- ---------- --------------
<S> <C> <C> <C>
Authorized............................ 21,807,693 --
Options granted....................... (18,050,884) 18,050,884 $0.08
Options exercised..................... -- (6,275,078) 0.07
----------- ----------
Balance at June 30, 1999................ 3,756,809 11,775,806 0.08
Authorized............................ 17,250,000 --
Options granted....................... (13,355,566) 13,355,566 1.61
Options exercised..................... -- (4,446,373) 0.45
----------- ----------
Balance at April 1, 2000................ 7,651,243 20,684,999 $0.99
=========== ==========
</TABLE>
The following table summarizes information concerning options outstanding
and exercisable at April 1, 2000:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------
WEIGHTED OPTIONS EXERCISABLE
AVERAGE ----------------------------
RANGE OF REMAINING WEIGHTED WEIGHTED
EXERCISE NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
-------- ----------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.05.............. 7,707,806 8.54 $ 0.05 7,707,806 $0.05
$0.11 - $ 0.17.............. 2,149,875 9.12 0.15 2,149,875 0.15
$0.22 - $ 0.44.............. 2,789,266 9.41 0.40 2,789,266 0.40
$0.67 - $ 0.89.............. 4,023,752 9.70 0.81 2,502,752 0.75
$ 1.33.............. 1,224,000 9.80 1.33 -- --
$1.56 - $ 2.11.............. 2,029,950 9.90 1.80 -- --
$13.33.............. 760,350 9.99 13.33 -- --
---------- ----------
$0.05 - $13.33.............. 20,684,999 9.20 $ 0.99 15,149,699 $0.25
========== ==========
</TABLE>
DEFERRED STOCK COMPENSATION
During the period ended June 30, 1999 and nine months ended April 1, 2000
the Company issued stock options under the 1998 Equity Incentive Equity Plan and
the 1999 Executive Equity Incentive Plan at exercise prices deemed by the Board
of Directors at the date of grant to be the fair value. For financial statement
purposes, the Company has recorded deferred compensation for the difference
between the purchase price of the stock issued to employees under stock options
and the fair value of the Company's stock at the date of grant. This deferred
compensation is amortized to expense over the period during which the Company's
right to repurchase the stock lapses or options become exercisable, generally
four years. At June 30, 1999 and April 1, 2000, the Company had recorded
deferred stock compensation related to these options of $13,391,000 and
$93,524,000, respectively, of which $3,646,000 and $26,420,000 has been
amortized to expense during the period ended June 30, 1999 and nine months ended
April 1, 2000, respectively.
As discussed in Note 2, the Company accounts for its stock-based
compensation using the method prescribed by APB No. 25, Accounting for Stock
Issued to Employees. Had the Company
F-17
<PAGE> 82
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
determined its stock-based compensation cost based on the fair value at the
grant dates for the awards under the method prescribed by SFAS No. 123, the
Company's net loss would have been increased to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 29, 1998 NINE MONTHS
(DATE OF INCEPTION) ENDED
TO JUNE 30, 1999 APRIL 1, 2000
------------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Net loss:
As reported.................................. $(8,389) $(40,764)
Pro forma.................................... (8,483) (41,917)
Basic and diluted net loss per share:
As reported.................................. $ (0.71) $ (1.34)
Pro forma.................................... (0.72) (1.38)
</TABLE>
The Company calculated the fair value of each option grant on the date of
grant using the Black-Scholes option pricing model and the following
assumptions: weighted average expected option term of four years; risk free
interest rates of 4.18% to 6.66%; expected dividend yield of zero percent, and a
volatility of 70% for the periods above. The weighted average fair value of
options granted during the period from July 29, 1998 (date of inception) to June
30, 1999 and the nine months ended April 1, 2000 was $0.76 and $6.65,
respectively.
10. INCOME TAXES
At April 1, 2000, the Company had net operating loss carryforwards of
approximately $12,000,000 available to reduce future federal and state taxable
income. The carryforwards expire beginning in 2020 for federal and 2007 for
state tax purposes unless utilized.
For federal and state tax purposes, the Company's net operating loss
carryforwards may be subject to an annual limitation in the case of a greater
than 50% change in stock ownership, as defined by federal and state tax law.
Temporary differences which gave rise to significant portions of deferred
tax assets are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999 APRIL 1, 2000
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Net operating losses.......................... $ 1,716 $ 4,797
Capitalized assets............................ 78 326
Tax credit carryforwards...................... 223 670
Reserves and other............................ 12 2,209
------- -------
2,029 8,002
Valuation allowance........................... (2,029) (8,002)
------- -------
Net deferred tax asset........................ $ -- $ --
======= =======
</TABLE>
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Company has
established a 100% valuation allowance to the extent of its net deferred tax
assets as no immediate benefit is expected to be received due to the uncertainty
of realizing future tax benefits from its net operating loss carryforwards and
other deferred tax assets.
F-18
<PAGE> 83
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The extent to which the loss carryforwards can be used to offset future
taxable income may be limited depending on the extent of ownership changes
within any three-year period as provided in the Tax Reform Act of 1986 and the
California Conformity Act of 1987.
11. EMPLOYEE BENEFIT PLAN
Effective January 1, 1999, the Company adopted a 401(k) tax-deferred
savings plan (the "Plan") for essentially all of its employees. Eligible
employees may make voluntary contributions to the Plan up to 15% of their annual
eligible compensation. The Company does not make any matching contributions to
the Plan.
F-19
<PAGE> 84
HANDSPRING LOGO
<PAGE> 85
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission Registration Fee and the National
Association of Securities Dealers, Inc. Filing Fee.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 79,200
National Association of Securities Dealers Filing Fee....... 30,500
Nasdaq National Market Listing Fee.......................... 90,000
Blue Sky Fees and Expenses.................................. 5,000
Transfer Agent and Registrar Fees........................... 15,000
Accounting Fees and Expenses................................ 450,000
Legal Fees and Expenses..................................... 500,000
Printing Expenses........................................... 250,000
Miscellaneous............................................... 80,300
----------
Total............................................. $1,500,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation authorizes a court to
award, or the board of directors of a corporation to grant, indemnity to
directors and officers in terms sufficiently broad to permit indemnification
under certain circumstances for liabilities, including reimbursement for
expenses incurred, arising under the Securities Act of 1933.
As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation provides that its directors shall not be liable to
the Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that the exculpation from liabilities
is not permitted under the Delaware General Corporation Law as in effect at the
time such liability is determined. As permitted by the Delaware General
Corporation Law, the Bylaws of the Registrant provide that the Registrant shall
indemnify its directors to the full extent permitted by the laws of the State of
Delaware.
The Registrant has also entered into indemnification agreements with its
directors and officers obligating the Registrant to indemnify such directors and
officers against losses incurred in connection with certain claims in their
capacities as agents of the Registrant. The Underwriting Agreement provides for
the indemnification of officers and directors of the Registrant by the
Underwriters against certain liabilities.
The Registrant is in the process of obtaining directors and officers
liability insurance.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since our inception in July 1998 to the effective date of this Registration
Statement, we have issued and sold the following unregistered securities, all of
which reflect the two-for-one stock split effected in October 1998 and the
three-for-one stock split effected in March 2000:
1. On August 20, 1998, we issued and sold 40,950,000 shares of common
stock to Jeffrey C. Hawkins for a purchase price of $45,500 in cash.
II-1
<PAGE> 86
2. On August 21, 1998, we issued and sold 22,050,000 shares of common
stock to Donna L. Dubinsky for a purchase price of $24,500 in cash.
3. On October 22, 1998, we issued and sold 8,076,924 shares of Series
A preferred stock, which are convertible into 36,346,158 shares of common
stock, to four venture capital funds for a total purchase price of
$18,011,541 in cash.
4. On May 25, 1999, we issued and sold 90,000 shares of common stock
to Pimlico Software, Inc. in consideration of consulting services rendered.
5. On June 10, 1999, we granted Comdisco, Inc. a right to purchase
198,965 shares of Series A preferred stock at a price of $7.539 per share,
under a Subordinated Loan and Security Agreement dated June 10, 1999. On
May 1, 2000, Comdisco exercised this right. These shares of Series A
preferred stock are convertible into 895,342 shares of common stock.
6. On July 7, 1999, we issued and sold 928,506 shares of Series B
preferred stock, which are convertible into 4,178,277 shares of common
stock, to four venture capital funds and one corporate investor for a total
purchase price of $10,000,010 in cash.
7. On November 23, 1999, we issued and sold 11,250 shares of common
stock to a consultant in consideration for consulting services rendered in
connection with establishing our customer support call center.
8. On November 24, 1999, we issued and sold 11,250 shares of common
stock to a consultant in consideration for consulting services rendered in
connection with establishing our customer support call center.
9. As of April 30, 2000, we had issued 9,022,328 shares of common
stock to employees upon exercise of options under our 1998 Equity Incentive
Plan, with exercise prices ranging from $0.05 to $0.89 per share. As of
April 30, 2000, there were 15,781,106 shares of common stock issuable upon
exercise of outstanding options under our 1998 Equity Incentive Plan, with
exercise prices ranging from $0.05 to $13.33 per share.
10. As of April 30, 2000, we had issued 1,719,373 shares of common
stock to employees upon exercise of options under our 1999 Executive Equity
Incentive Plan, with exercise prices ranging from $0.44 to $0.89 per share.
As of April 30, 2000, there were 4,958,643 shares of common stock issuable
upon exercise of outstanding options under our 1999 Executive Equity
Incentive Plan, with exercise prices ranging from $0.22 to $13.33 per
share.
All of the 8,275,889 outstanding shares of Series A preferred stock and all
of the 928,506 outstanding shares of Series B preferred stock will automatically
convert on a nine-for-two basis into shares of common stock upon the
consummation of this offering.
The sales and issuances of securities listed above, other than the sales
and issuances in Item 9, were deemed to be exempt from registration under
Section 4(2) of the Securities Act or Regulation D thereunder as transactions
not involving a public offering. The sales and issuances of securities listed
above in Item 9 were deemed to be exempt from registration under the Securities
Act by virtue of Rule 701 promulgated under Section 3(b) of the Securities Act
of 1933 as transactions pursuant to compensation benefit plans and contracts
relating to compensation. All of the foregoing securities are deemed restricted
securities for purposes of the Securities Act.
II-2
<PAGE> 87
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation as filed March 27, 2000*
3.2 Form of First Amended and Restated Certificate of
Incorporation to be effective before closing of the offering
3.3 Form of Second Amended and Restated Certificate of
Incorporation to be effective upon the closing of the
offering*
3.4 Bylaws*
3.5 Restated Bylaws
4.1 Specimen Common Stock Certificate
4.2 Amended and Restated Investors' Rights Agreement dated July
7, 1999
5.1 Opinion of Fenwick & West LLP
10.1 Form of Indemnity Agreement entered into between the
Registrant and all executive officers and directors
10.2 1998 Equity Incentive Plan
10.3 1999 Executive Equity Incentive Plan
10.4 Form of 2000 Equity Incentive Plan
10.5 Form of 2000 Employee Stock Purchase Plan
10.6 Single Tenant Absolute Net Lease between Registrant and
Chan-Paul Partnership dated June 22, 1999*
10.7 Software License Agreement between Palm Computing, Inc. and
Registrant dated September 24, 1998, as amended+*
10.8 Subordinated Loan and Security Agreement between Registrant
and Comdisco, Inc. dated June 10, 1999*
10.9 International Manufacturing Contract between Registrant and
Flextronics (Malaysia) SDN.BHD dated June 29, 1999+*
10.10 Founder's Restricted Stock Purchase Agreement between
Registrant and Donna Dubinsky dated August 21, 1998*
10.11 Founder's Restricted Stock Purchase Agreement between
Registrant and Jeff Hawkins dated August 20, 1998*
10.12 Offer Letter of Employment between Registrant and Bernard
Whitney dated May 31, 1999*
10.13 Stock Option Agreement between Registrant and Edward
Colligan dated October 12, 1998*
10.14 Lease between Registrant and Spieker Properties, L.P. dated
April 24, 2000
21.1 List of Subsidiaries of Registrant
23.1 Consent of Fenwick & West LLP (See Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Dataquest
23.4 Consent of International Data Corporation
24.1 Power of Attorney (see page II-5 of this Registration
Statement as filed on March 31, 2000)*
24.2 Power of Attorney for Kim B. Clark
</TABLE>
II-3
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <S>
24.3 Power of Attorney for Mitchell E. Kertzman
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* Previously filed
+ Confidential treatment has been requested for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission. Such portions are omitted from this
filing and filed separately with the Securities and Exchange Commission.
(b) The following financial statement schedule is filed herewith:
Schedule II -- Valuation and Qualifying Accounts
Report of Independent Accountants on Schedule
Other financial statement schedules are omitted because the information
called for is not required or is shown either in the financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14 --
Indemnification of Directors and Officers" above, 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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
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 the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
II-4
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Mountain
View, State of California, on the 16th day of May, 2000.
HANDSPRING, INC.
By: /s/ BERNARD J. WHITNEY
------------------------------------
Bernard J. Whitney
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ DONNA L. DUBINSKY* President, Chief Executive May 16, 2000
- ----------------------------------------------------- Officer and a Director
Donna L. Dubinsky
PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING
OFFICER:
/s/ BERNARD J. WHITNEY Chief Financial Officer May 16, 2000
- -----------------------------------------------------
Bernard J. Whitney
ADDITIONAL DIRECTORS:
/s/ JEFFREY C. HAWKINS* Director May 16, 2000
- -----------------------------------------------------
Jeffrey C. Hawkins
/s/ L. JOHN DOERR* Director May 16, 2000
- -----------------------------------------------------
L. John Doerr
/s/ BRUCE W. DUNLEVIE* Director May 16, 2000
- -----------------------------------------------------
Bruce W. Dunlevie
/s/ KIM B. CLARK Director May 16, 2000
- -----------------------------------------------------
Kim B. Clark
/s/ MITCHELL E. KERTZMAN Director May 16, 2000
- -----------------------------------------------------
Mitchell E. Kertzman
*By: /s/ BERNARD J. WHITNEY
---------------------------------------------------
Bernard J. Whitney
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 90
SCHEDULE II
HANDSPRING, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO COSTS BALANCE AT
JUNE 30, 1999 AND EXPENSES DEDUCTIONS APRIL 1, 2000
------------- ---------------- ---------- -------------
<S> <C> <C> <C> <C>
Allowance for Bad Debt........... $ -- $131,147 $(81,147) $50,000
</TABLE>
S-1
<PAGE> 91
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation as filed March 27, 2000*
3.2 Form of First Amended and Restated Certificate of
Incorporation to be effective before closing of the offering
3.3 Form of Second Amended and Restated Certificate of
Incorporation to be effective upon the closing of the
offering*
3.4 Bylaws*
3.5 Restated Bylaws
4.1 Specimen Common Stock Certificate
4.2 Amended and Restated Investors' Rights Agreement dated July
7, 1999
5.1 Opinion of Fenwick & West LLP
10.1 Form of Indemnity Agreement entered into between the
Registrant and all executive officers and directors
10.2 1998 Equity Incentive Plan
10.3 1999 Executive Equity Incentive Plan
10.4 Form of 2000 Equity Incentive Plan
10.5 Form of 2000 Employee Stock Purchase Plan
10.6 Single Tenant Absolute Net Lease between Registrant and
Chan-Paul Partnership dated June 22, 1999*
10.7 Software License Agreement between Palm Computing, Inc. and
Registrant dated September 24, 1998, as amended+*
10.8 Subordinated Loan and Security Agreement between Registrant
and Comdisco, Inc. dated June 10, 1999*
10.9 International Manufacturing Contract between Registrant and
Flextronics (Malaysia) SDN.BHD dated June 29, 1999+*
10.10 Founder's Restricted Stock Purchase Agreement between
Registrant and Donna Dubinsky dated August 21, 1998*
10.11 Founder's Restricted Stock Purchase Agreement between
Registrant and Jeff Hawkins dated August 20, 1998*
10.12 Offer Letter of Employment between Registrant and Bernard
Whitney dated May 31, 1999*
10.13 Stock Option Agreement between Registrant and Edward
Colligan dated October 12, 1998*
10.14 Lease between Registrant and Spieker Properties, L.P. dated
April 24, 2000
21.1 List of Subsidiaries of Registrant
23.1 Consent of Fenwick & West LLP (See Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Dataquest
23.4 Consent of International Data Corporation
24.1 Power of Attorney (see page II-5 of this Registration
Statement as filed on March 31, 2000)*
24.2 Power of Attorney for Kim B. Clark
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <S>
24.3 Power of Attorney for Mitchell E. Kertzman
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* Previously filed
+ Confidential treatment has been requested for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission. Such portions are omitted from this
filing and filed separately with the Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 1.1
____ SHARES
HANDSPRING, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
____, 2000
CREDIT SUISSE FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
U.S. BANCORP PIPER JAFFRAY INC.,
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Handspring, Inc., a Delaware corporation ("COMPANY"),
proposes to issue and sell ____ shares ("FIRM SECURITIES") of its Common Stock,
$0.001 par value ("SECURITIES") and also proposes to issue and sell to the
Underwriters, at the option of the Underwriters, an aggregate of not more than
____ additional shares ("OPTIONAL SECURITIES") of its Securities as set forth
below. The Firm Securities and the Optional Securities are herein collectively
called the "OFFERED SECURITIES". As part of the offering contemplated by this
Agreement, Credit-Suisse First-Boston Corporation (the "DESIGNATED UNDERWRITER")
has agreed to reserve out of the Firm Securities purchased by it under this
Agreement, up to ____ shares, for sale to the Company's directors, officers,
employees and other parties associated with the Company (collectively,
"PARTICIPANTS"), as set forth in the Prospectus (as defined herein) under the
heading "Underwriting" (the "DIRECTED SHARE PROGRAM"). The Firm Securities to be
sold by the Designated Underwriter pursuant to the Directed Share Program (the
"DIRECTED SHARES") will be sold by the Designated Underwriter pursuant to this
Agreement at the public offering price. Any Directed Shares not subscribed for
by the end of the business day on which this Agreement is executed will be
offered to the public by the Underwriters as set forth in the Prospectus. The
Company hereby agrees with the several Underwriters named in Schedule A hereto
("UNDERWRITERS") as follows:
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333-33666) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission ("COMMISSION") and either (i) has
been declared effective under the Securities Act of 1933 ("ACT") and is
not proposed to be amended or (ii) is proposed to be amended by
amendment or post-effective amendment. If such registration statement
("INITIAL REGISTRATION STATEMENT") has been declared effective, either
(i) an additional registration statement ("ADDITIONAL REGISTRATION
STATEMENT") relating to the Offered Securities may have been filed with
the Commission pursuant to Rule 462(b) ("RULE 462(b)") under the Act
and, if so filed, has become effective upon filing pursuant to such Rule
and the Offered Securities all have been duly registered under the Act
pursuant to the initial registration statement and, if applicable, the
additional registration statement or (ii) such an additional
registration statement is proposed to be filed with the Commission
pursuant to Rule 462(b) and will become effective upon filing pursuant
to such Rule and upon such filing the Offered Securities will all have
been duly
<PAGE> 2
registered under the Act pursuant to the initial registration statement
and such additional registration statement. If the Company does not
propose to amend the initial registration statement or if an additional
registration statement has been filed and the Company does not propose
to amend it, and if any post-effective amendment to either such
registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent amendment (if
any) to each such registration statement has been declared effective by
the Commission or has become effective upon filing pursuant to Rule
462(c) ("RULE 462(c)") under the Act or, in the case of the additional
registration statement, Rule 462(b). For purposes of this Agreement,
"EFFECTIVE TIME" with respect to the initial registration statement or,
if filed prior to the execution and delivery of this Agreement, the
additional registration statement means (i) if the Company has advised
the Representatives that it does not propose to amend such registration
statement, the date and time as of which such registration statement, or
the most recent post-effective amendment thereto (if any) filed prior to
the execution and delivery of this Agreement, was declared effective by
the Commission or has become effective upon filing pursuant to Rule
462(c), or (ii) if the Company has advised the Representatives that it
proposes to file an amendment or post-effective amendment to such
registration statement, the date and time as of which such registration
statement, as amended by such amendment or post-effective amendment, as
the case may be, is declared effective by the Commission. If an
additional registration statement has not been filed prior to the
execution and delivery of this Agreement but the Company has advised the
Representatives that it proposes to file one, "EFFECTIVE TIME" with
respect to such additional registration statement means the date and
time as of which such registration statement is filed and becomes
effective pursuant to Rule 462(b). "EFFECTIVE DATE" with respect to the
initial registration statement or the additional registration statement
(if any) means the date of the Effective Time thereof. The initial
registration statement, as amended at its Effective Time, including all
information contained in the additional registration statement (if any)
and deemed to be a part of the initial registration statement as of the
Effective Time of the additional registration statement pursuant to the
General Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("RULE
430A(b)") under the Act, is hereinafter referred to as the "INITIAL
REGISTRATION STATEMENT". The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "ADDITIONAL REGISTRATION
STATEMENT". The Initial Registration Statement and the Additional
Registration Statement are herein referred to collectively as the
"REGISTRATION STATEMENTS" and individually as a "REGISTRATION
STATEMENT". The form of prospectus relating to the Offered Securities,
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("RULE 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter
referred to as the "PROSPECTUS". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement: (i) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the requirements of
the Act and the rules and regulations of the Commission ("RULES AND
REGULATIONS") and did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed, or will conform, in all respects to
the requirements of the Act and the Rules and Regulations and did not
include, or will not include, any untrue statement of a material fact
and did not omit, or will not omit, to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading and (iii) on the date of this Agreement, the Initial
Registration Statement and, if the Effective Time of the Additional
Registration Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each conforms, and at
the time of filing of the Prospectus pursuant to Rule 424(b) or (if no
such filing is required) at the Effective Date of the Additional
Registration Statement
2
<PAGE> 3
in which the Prospectus is included, each Registration Statement and the
Prospectus will conform, in all respects to the requirements of the Act
and the Rules and Regulations, and neither of such documents includes,
or will include, any untrue statement of a material fact or omits, or
will omit, to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. If the
Effective Time of the Initial Registration Statement is subsequent to
the execution and delivery of this Agreement: on the Effective Date of
the Initial Registration Statement, the Initial Registration Statement
and the Prospectus will conform in all respects to the requirements of
the Act and the Rules and Regulations, neither of such documents will
include any untrue statement of a material fact or will omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do not
apply to statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to the Company by
any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
is that described as such in Section 7(b) hereof.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus; and the Company is
duly qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which its ownership or lease of property
or the conduct of its business requires such qualification, except where
the failure to be so qualified would not individually or in the
aggregate have a material adverse effect on the condition (financial or
otherwise), business, properties or results of operations of the Company
and its subsidiaries taken as a whole (hereinafter, a "MATERIAL ADVERSE
EFFECT").
(d) Each subsidiary of the Company has been duly incorporated
and is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Prospectus; and each subsidiary of the Company is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct
of its business requires such qualification except where the failure to
be so qualified would not individually or in the aggregate have a
Material Adverse Effect; all of the issued and outstanding capital stock
of each subsidiary of the Company has been duly authorized and validly
issued and is fully paid and nonassessable; and the capital stock of
each subsidiary owned by the Company, directly or through subsidiaries,
is owned free from liens, encumbrances and defects.
(e) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized; all outstanding
shares of capital stock of the Company are, and, when the Offered
Securities have been delivered and paid for in accordance with this
Agreement on each Closing Date (as defined below), such Offered
Securities will have been, validly issued, fully paid and nonassessable
and will conform in all material respects to the description thereof
contained in the Prospectus; and the stockholders of the Company have no
preemptive rights with respect to the Securities.
(f) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any
Underwriter for a brokerage commission, finder's fee or other like
payment in connection with this offering.
(g) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered pursuant
to a Registration Statement or in any securities being registered
pursuant
3
<PAGE> 4
to any other registration statement filed by the Company under the Act,
except for contracts or understandings, the requirements of which have
been validly satisfied or waived.
(h) The Offered Securities have been approved for listing on The
Nasdaq Stock Market's National Market subject to notice of issuance.
(i) No consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance and sale of the Offered Securities by the
Company, except such as have been obtained and made under the Act and
such as may be required under state securities laws.
(j) The execution, delivery and performance of this Agreement,
and the issuance and sale of the Offered Securities will not result in a
breach or violation of any of the terms and provisions of, or constitute
a default under, any statute, any rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any subsidiary of the Company or any of
their properties, or any material agreement or instrument to which the
Company or any such subsidiary is a party or by which the Company or any
such subsidiary is bound or to which any of the properties of the
Company or any such subsidiary is subject, or the charter or by-laws of
the Company or any such subsidiary (the "ORGANIZATIONAL DOCUMENTS"), and
the Company has full power and authority to authorize, issue and sell
the Offered Securities as contemplated by this Agreement.
(k) This Agreement has been duly authorized, executed and
delivered by the Company.
(l) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from
liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made thereof
by them; and except as disclosed in the Prospectus, the Company and its
subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere
with the use made or to be made thereof by them.
(m) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by
them and have not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a Material Adverse Effect.
(n) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a Material Adverse Effect.
(o) The Company and its subsidiaries own, possess, license or
can acquire on reasonable terms, adequate trademarks, trade names and
other rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively, "INTELLECTUAL
PROPERTY RIGHTS") necessary to conduct the business now operated by
them, or presently employed by them, and have not received any notice of
infringement of or conflict with asserted rights of others with respect
to any intellectual property rights that, if determined adversely to the
Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect.
(p) Except as disclosed in the Prospectus, neither the Company
nor any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to
4
<PAGE> 5
hazardous or toxic substances (collectively, "ENVIRONMENTAL LAWS"), owns
or operates any real property contaminated with any substance that is
subject to any environmental laws, is liable for any off-site disposal
or contamination pursuant to any environmental laws, or is subject to
any claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the aggregate
have a Material Adverse Effect; and the Company is not aware of any
pending investigation which might lead to such a claim.
(q) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company, any of
its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or
would materially and adversely affect the ability of the Company to
perform its obligations under this Agreement, or which are otherwise
material in the context of the sale of the Offered Securities; and no
such actions, suits or proceedings are threatened or, to the Company's
knowledge, contemplated.
(r) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of
the Company as of the dates shown and its results of operations and cash
flows for the periods shown, and such financial statements have been
prepared in conformity with the generally accepted accounting principles
in the United States applied on a consistent basis; and the schedules
included in each Registration Statement present fairly the information
required to be stated therein.
(s) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements included in the Prospectus there has
been no material adverse change, nor any development or event involving
a prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company and
its subsidiaries taken as a whole, and, except as disclosed in or
contemplated by the Prospectus, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(t) The Company is not and, after giving effect to the offering
and sale of the Offered Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as defined in the Investment Company Act of 1940.
(u) Furthermore, the Company represents and warrants to the
Underwriters that (i) the Registration Statement, the Prospectus and any
preliminary prospectus comply, and any further amendments or supplements
thereto will comply, with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus or any preliminary prospectus, as
amended or supplemented, if applicable, are distributed in connection
with the Directed Share Program, and that (ii) no authorization,
approval, consent, license, order, registration or qualification of or
with any government, governmental instrumentality or court, other than
such as have been obtained, is necessary under the securities law and
regulations of foreign jurisdictions in which the Directed Shares are
offered outside the United States.
(v) The Company has not offered, or caused the Underwriters to
offer, any Offered Securities to any person pursuant to the Directed
Share Program with the specific intent to unlawfully influence (i) a
customer or supplier of the Company to alter the customer's or
supplier's level or type of business with the Company or (ii) a trade
journalist or publication to write or publish favorable information
about the Company or its products.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
5
<PAGE> 6
from the Company, at a purchase price of $o per share, the respective numbers of
shares of Firm Securities set forth opposite the names of the Underwriters in
Schedule A hereto.
The Company will deliver the Firm Securities to the Representatives for
the accounts of the Underwriters, at the office of Davis Polk & Wardwell, 1600
El Camino Real, Menlo Park, CA 94025, against payment of the purchase price in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC")
drawn to the order of Handspring, Inc. at the above office of Davis Polk &
Wardwell at 10:00 A.M., New York time, on o, 2000 or at such other time not
later than seven full business days thereafter as CSFBC and the Company
determine, such time being herein referred to as the "FIRST CLOSING DATE". For
purposes of Rule 15c6-1 under the Securities Exchange Act of 1934, the First
Closing Date (if later than the otherwise applicable settlement date) shall be
the settlement date for payment of funds and delivery of securities for all the
Offered Securities sold pursuant to the offering. The certificates for the Firm
Securities so to be delivered will be in definitive form, in such denominations
and registered in such names as CSFBC requests and will be made available for
checking and packaging at the office of CSFBC, Eleven Madison Avenue, New York,
New York, at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price to be paid for the Firm Securities. The Company agrees to sell to
the Underwriters the number of shares of Optional Securities specified in such
notice and the Underwriters agree, severally and not jointly, to purchase such
Optional Securities. Such Optional Securities shall be purchased for the account
of each Underwriter in the same proportion as the number of shares of Firm
Securities set forth opposite such Underwriter's name bears to the total number
of shares of Firm Securities (subject to adjustment by CSFBC to eliminate
fractions) and may be purchased by the Underwriters only for the purpose of
covering over-allotments made in connection with the sale of the Firm
Securities. No Optional Securities shall be sold or delivered unless the Firm
Securities previously have been, or simultaneously are, sold and delivered. The
right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Option Closing Date, if any, being
sometimes referred to as a "Closing Date"), shall be determined by CSFBC but
shall be not later than five full business days after written notice of election
to purchase Optional Securities is given. The Company will deliver the Optional
Securities being purchased on each Optional Closing Date to the Representatives
for the accounts of the several Underwriters, at the office of Davis Polk &
Wardwell, against payment of the purchase price therefor in Federal (same day)
funds by official bank check or checks or wire transfer to an account at a bank
acceptable to CSFBC drawn to the order of Handspring, Inc., at the above office
of Davis Polk & Wardwell. The certificates for the Optional Securities being
purchased on each Optional Closing Date will be in definitive form, in such
denominations and registered in such names as CSFBC requests upon reasonable
notice prior to such Optional Closing Date and will be made available for
checking and packaging at the above office of CSFBC, Eleven Madison Avenue, New
York, New York, at a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement, the Company
will file the Prospectus with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if consented to
by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier of
(A) the second business day following
6
<PAGE> 7
the execution and delivery of this Agreement or (B) the fifteenth
business day after the Effective Date of the Initial Registration
Statement.
The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement and an
additional registration statement is necessary to register a portion of
the Offered Securities under the Act but the Effective Time thereof has
not occurred as of such execution and delivery, the Company will file
the additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and in
accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on
the date of this Agreement or, if earlier, on or prior to the time the
Prospectus is printed and distributed to any Underwriter, or will make
such filing at such later date as shall have been consented to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration statement
as filed or the related prospectus or the Initial Registration
Statement, the Additional Registration Statement (if any) or the
Prospectus and will not effect such amendment or supplementation without
CSFBC's consent; and the Company will also advise CSFBC promptly of the
effectiveness of each Registration Statement (if its Effective Time is
subsequent to the execution and delivery of this Agreement) and of any
amendment or supplementation of a Registration Statement or the
Prospectus and of the institution by the Commission of any stop order
proceedings in respect of a Registration Statement and will use its best
efforts to prevent the issuance of any such stop order and to obtain as
soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's consent to,
nor the Underwriters' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section
6.
(d) As soon as practicable, but not later than the Availability
Date (as defined below), the Company will make generally available to
its securityholders an earnings statement covering a period of at least
12 months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional
Registration Statement) which will satisfy the provisions of Section
11(a) of the Act. For the purpose of the preceding sentence,
"AVAILABILITY DATE" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes such Effective
Date, except that, if such fourth fiscal quarter is the last quarter of
the Company's fiscal year, "AVAILABILITY DATE" means the 90th day after
the end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement five of which will be signed and will
include all exhibits), each related preliminary prospectus, and, so long
as a prospectus relating to the Offered Securities is required to be
delivered under the Act in connection with sales by any Underwriter or
dealer, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The
Prospectus shall be so furnished on or prior to 3:00 P.M., New York
time, on the business day following the later of the execution and
delivery of this Agreement or the Effective Time of the Initial
Registration Statement. All other documents shall be so furnished as
soon as available. The Company will pay the expenses of printing and
distributing to the Underwriters all such documents.
7
<PAGE> 8
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBC designates and will continue such qualifications in effect so long
as required for the distribution.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year,
a copy of its annual report to stockholders for such year; and the
Company will furnish to the Representatives (i) as soon as available, a
copy of each report and any definitive proxy statement of the Company
filed with the Commission under the Securities Exchange Act of 1934 or
mailed to stockholders, and (ii) from time to time, such other
information concerning the Company as CSFBC may reasonably request.
(h) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, for any filing fees
and other expenses (including fees and disbursements of counsel)
incurred in connection with qualification of the Offered Securities for
sale under the laws of such jurisdictions as CSFBC designates and the
printing of memoranda relating thereto, for the filing fee incident to,
and the reasonable fees and disbursements of counsel to the Underwriters
in connection with, the review by the National Association of Securities
Dealers, Inc. of the Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses of the Company
in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities and for expenses incurred in
distributing preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto) to the Underwriters.
(i) For a period of 180 days after the date of the initial
public offering of the Offered Securities, the Company will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make any
such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC, except issuances of Securities pursuant to the
conversion or exchange of convertible or exchangeable securities or the
exercise of rights to purchase securities or options, in each case
outstanding on the date hereof, grants of employee stock options
pursuant to the Company's 2000 Equity Incentive Plan or 2000 Employee
Stock Purchase Plan, issuances of Securities pursuant to the exercise of
such options or issuances of Securities pursuant to the Company's
dividend reinvestment plan.
(j) In connection with the Directed Share Program, the Company
will ensure that the Directed Shares will be restricted to the extent
required by the National Association of Securities Dealers, Inc. (the
"NASD") or the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of the
effectiveness of the Registration Statement. The Designated Underwriter
will notify the Company as to which Participants will need to be so
restricted. The Company will direct the transfer agent to place stop
transfer restrictions upon such securities for such period of time.
(k) The Company will pay all fees and disbursements of counsel
incurred by the Underwriters in connection with the Directed Share
Program and stamp duties, similar taxes or duties or other taxes, if
any, incurred by the underwriters in connection with the Directed Share
Program.
Furthermore, the Company covenants with the Underwriters that
the Company will comply with all applicable securities and other
applicable laws, rules and regulations in each foreign jurisdiction in
which the Directed Shares are offered in connection with the Directed
Share Program.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties
8
<PAGE> 9
on the part of the Company herein, to the accuracy of the statements of Company
officers made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions
precedent:
(a) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if the
Effective Time of the Initial Registration Statement is subsequent to
the execution and delivery of this Agreement, shall be prior to the
filing of the amendment or post-effective amendment to the registration
statement to be filed shortly prior to such Effective Time), of
PricewaterhouseCoopers LLP confirming that they are independent public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and stating to the effect that:
(i) in their opinion the financial statements and
schedules examined by them and included in the Registration
Statements comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review
of interim financial information as described in Statement of
Auditing Standards No. 71, Interim Financial Information, on the
unaudited financial statements included in the Registration
Statements;
(iii) on the basis of the review referred to in clause
(ii) above, a reading of the latest available interim financial
statements of the Company, inquiries of officials of the Company
who have responsibility for financial and accounting matters and
other specified procedures, nothing came to their attention that
caused them to believe that:
(A) the unaudited financial statements included
in the Registration Statements do not comply as to form
in all material respects with the applicable accounting
requirements of the Act and the related published Rules
and Regulations or any material modifications should be
made to such unaudited financial statements for them to
be in conformity with generally accepted accounting
principles;
(B) at the date of the latest available balance
sheet read by such accountants, or at a subsequent
specified date not more than three business days prior
to the date of this Agreement, there was any change in
the capital stock or any increase in short-term
indebtedness or long-term debt of the Company and its
consolidated subsidiaries or, at the date of the latest
available balance sheet read by such accountants, there
was any decrease in consolidated net current assets or,
as compared with amounts shown on the latest balance
sheet included in the Prospectus; or
(C) for the period from the closing date of the
latest income statement included in the Prospectus to
the closing date of the latest available income
statement read by such accountants there were any
decreases, as compared with the corresponding period of
the previous year and with the period of corresponding
length ended the date of the latest income statement
included in the Prospectus, in consolidated net sales in
the total or per share amounts of income before
extraordinary items or of net income,
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which are described in such
letter; and
9
<PAGE> 10
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statements
(in each case to the extent that such dollar amounts,
percentages and other financial information are derived from the
general accounting records of the Company and its subsidiaries
subject to the internal controls of the Company's accounting
system or are derived directly from such records by analysis or
computation) with the results obtained from inquiries, a reading
of such general accounting records and other procedures
specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement
with such results, except as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, "REGISTRATION STATEMENTS" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement but
the Effective Time of the Additional Registration is subsequent to such
execution and delivery, "REGISTRATION STATEMENTS" shall mean the Initial
Registration Statement and the additional registration statement as
proposed to be filed or as proposed to be amended by the post-effective
amendment to be filed shortly prior to its Effective Time, and (iii)
"PROSPECTUS" shall mean the prospectus included in the Registration
Statements.
(b) If the Effective Time of the Initial Registration Statement
is not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 P.M., New York
time, on the date of this Agreement or such later date as shall have
been consented to by CSFBC. If the Effective Time of the Additional
Registration Statement (if any) is not prior to the execution and
delivery of this Agreement, such Effective Time shall have occurred not
later than 10:00 P.M., New York time, on the date of this Agreement or,
if earlier, the time the Prospectus is printed and distributed to any
Underwriter, or shall have occurred at such later date as shall have
been consented to by CSFBC. If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, the Prospectus shall have been filed with the Commission in
accordance with the Rules and Regulations and Section 5(a) of this
Agreement. Prior to such Closing Date, no stop order suspending the
effectiveness of a Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the
knowledge of the Company or the Representatives, shall be contemplated
by the Commission.
(c) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development or
event involving a prospective change, in the condition (financial or
other), business, properties or results of operations of the Company and
its subsidiaries taken as one enterprise which, in the judgment of a
majority in interest of the Underwriters including the Representatives,
is material and adverse and makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and
payment for the Offered Securities; (ii) any downgrading in the rating
of any debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g)
under the Act), or any public announcement that any such organization
has under surveillance or review its rating of any debt securities of
the Company (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of
such rating); (iii) any material suspension or material limitation of
trading in securities generally on the New York Stock Exchange, or any
setting of minimum prices for trading on such exchange, or any
suspension of trading of any securities of the Company on any exchange
or in the over-the-counter market; (iv) any banking moratorium declared
by U.S. Federal or New York authorities; or (v) any outbreak or
escalation of major hostilities in which the United States is involved,
any declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of a majority in
interest
10
<PAGE> 11
of the Underwriters including the Representatives, the effect of any
such outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(d) The Representatives shall have received an opinion, dated
such Closing Date, of Fenwick & West LLP, counsel for the Company, to
the effect that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus; and the Company is duly qualified to do business as
a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification (except
where the failure to so qualify would not have a Material
Adverse Effect);
(ii) The Offered Securities delivered on such Closing
Date and all other outstanding shares of the Common Stock of the
Company have been duly authorized and validly issued, and, to
our knowledge, are fully paid and nonassessable and conform to
the description thereof contained in the Prospectus, insofar as
such descriptions purport to summarize certain provisions of the
outstanding shares of the capital stock of the Company; and the
stockholders of the Company have (A) no statutory preemptive
rights (B) no preemptive rights pursuant to the Organizational
Documents or (C) to such counsel's knowledge, any similar rights
with respect to the Securities;
(iii) Except as disclosed in the Prospectus, there are
no contracts, agreements or understandings known to such counsel
between the Company and any person granting such person the
right to require the Company to file a registration statement
under the Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to
include such securities in the securities registered pursuant to
the Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the
Company under the Act;
(iv) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is
required for the consummation of the transactions contemplated
by this Agreement in connection with the issuance or sale of the
Offered Securities by the Company (other than as may be required
by the securities and Blue Sky laws of the various states and
other jurisdictions as to which such counsel need not express
any opinion), except such as have been obtained and made under
the Act and such as may be required under state securities laws;
(v) The execution, delivery and performance of this
Agreement and the issuance and sale of the Offered Securities
will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any
rule, regulation or, to such counsel's knowledge, order of any
governmental agency or body or any court having jurisdiction
over the Company or any subsidiary of the Company or any of
their properties (except that such counsel need not express any
opinion with regard to foreign or state securities or Blue Sky
laws or regulations), or any agreement or instrument that is
filed as an exhibit to the Registration Statement to which the
Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject, or
the charter or by-laws of the Company or any such subsidiary,
and the Company has full power and authority to authorize, issue
and sell the Offered Securities as contemplated by this
Agreement;
11
<PAGE> 12
(vi) The Initial Registration Statement was declared effective
under the Act as of the date and time specified in such opinion, the
Additional Registration Statement (if any) was filed and became
effective under the Act as of the date and time (if determinable)
specified in such opinion, the Prospectus either was filed with the
Commission pursuant to the subparagraph of Rule 424(b) specified in such
opinion on the date specified therein or was included in the Initial
Registration Statement or the Additional Registration Statement (as the
case may be), and, to the best of the knowledge of such counsel, no stop
order suspending the effectiveness of a Registration Statement or any
part thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Act, and each
Registration Statement and the Prospectus, and each amendment or
supplement thereto, as of their respective effective or issue dates,
complied as to form in all material respects with the requirements of
the Act and the Rules and Regulations (except that such counsel need not
express any opinion as to the financial statements and schedules,
related notes and other financial information included therein); such
counsel have no reason to believe that any part of a Registration
Statement or any amendment thereto, as of its effective date or as of
such Closing Date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto, as of its issue date
or as of such Closing Date, contained any untrue statement of a material
fact or omitted to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading (except that such counsel need not
express any opinion as to the financial statements and schedules,
related notes and other financial information included therein); the
descriptions in the Registration Statements and the Prospectus of
statutes, legal and governmental proceedings and contracts and other
documents are accurate and fairly present the information required to be
shown; and such counsel do not know of any legal or governmental
proceedings required to be described in a Registration Statement or the
Prospectus which are not described as required or of any contracts or
documents of a character required to be described in a Registration
Statement or the Prospectus or to be filed as exhibits to a Registration
Statement which are not described and filed as required; and
(vii) This Agreement has been duly authorized, executed and
delivered by the Company.
(e) The Representatives shall have received from Davis Polk &
Wardwell, counsel for the Underwriters, such opinion or opinions, dated
such Closing Date, with respect to the incorporation of the Company, the
validity of the Offered Securities delivered on such Closing Date, the
Registration Statements, the Prospectus and other related matters as the
Representatives may require, and the Company shall have furnished to
such counsel such documents as they request for the purpose of enabling
them to pass upon such matters.
(f) The Representatives shall have received a certificate, dated
such Closing Date, of Donna Dubinsky and Bernard Whitney, as Chief
Executive Officer and Chief Financial Officer, respectively, of the
Company in which such officers, to the best of their knowledge after
reasonable investigation, shall state that: the representations and
warranties of the Company in this Agreement are true and correct; the
Company has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied hereunder at or prior to such
Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission; the
Additional Registration Statement (if any) satisfying the requirements
of subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule
462(b), including payment of the applicable filing fee in accordance
with Rule 111(a) or (b) under the Act, prior to the time the Prospectus
was printed and distributed to any Underwriter; and, subsequent to the
dates of the most recent financial statements in the Prospectus, there
has been no material adverse change, nor any development or event
involving a prospective material adverse
12
<PAGE> 13
change, in the condition (financial or other), business, properties or
results of operations of the Company and its subsidiaries taken as a
whole except as set forth in or contemplated by the Prospectus or as
described in such certificate.
(g) The Representatives shall have received a letter, dated such
Closing Date, of PricewaterhouseCoopers LLP which meets the requirements
of subsection (a) of this Section, except that the specified date
referred to in such subsection will be a date not more than three days
prior to such Closing Date for the purposes of this subsection.
(h) On or prior to the date of this Agreement, the
Representatives shall have received lockup letters from each of the
executive officers and directors of the Company and all other security
holders of the Company.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. CSFBC may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder,
whether in respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person, if any, who controls such Underwriter within the meaning of Section 15
of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below; and provided, further,
that with respect to any untrue statement or alleged untrue statement in or
omission or alleged omission from any preliminary prospectus the indemnity
agreement contained in this subsection (a) shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased the Offered Securities concerned, to the extent that a
prospectus relating to such Offered Securities was required to be delivered by
such Underwriter under the Act in connection with such purchase and any such
loss, claim, damage or liability of such Underwriter results from the fact that
there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Offered Securities to such person, a copy of
the Prospectus if the Company had previously furnished copies thereof to such
Underwriter.
The Company agrees to indemnify and hold harmless the Designated
Underwriter and each person, if any, who controls the Designated Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act (the "DESIGNATED ENTITIES"), from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by any untrue statement or
alleged untrue statement of a material fact contained in any material prepared
by or with the consent of the Company for distribution to Participants in
connection with the Directed Share Program or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) caused by the
failure of any Participant to pay for and accept delivery of Directed Shares
that the Participant agreed to purchase; or (iii) related to, arising out of, or
in connection with the Directed Share Program, other than losses, claims,
damages or liabilities (or expenses relating thereto) that
13
<PAGE> 14
are finally judicially determined to have resulted from the bad faith or gross
negligence of the Designated Entities.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, its directors and officers and each person, if any who
controls the Company within the meaning of Section 15 of the Act, against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Underwriter consists
of the following information in the Prospectus furnished on behalf of each
Underwriter: the concession and reallowance figures appearing in the fourth
paragraph under the caption "Underwriting" and the information contained in the
sixth paragraph under the caption "Underwriting."
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. Notwithstanding anything contained herein to
the contrary, if indemnity may be sought pursuant to the last paragraph in
Section 7 (a) hereof in respect of such action or proceeding, then in addition
to such separate firm for the indemnified parties, the indemnifying party shall
be liable for the reasonable fees and expenses of not more than one separate
firm (in addition to any local counsel) for the Designated Underwriter for the
defense of any losses, claims, damages and liabilities arising out of the
Directed Share Program, and all persons, if any, who control the Designated
Underwriter within the meaning of either Section 15 of the Act of Section 20 of
the Exchange Act. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified party unless
such settlement (i) includes an unconditional release of such indemnified party
from all liability on any claims that are the subject matter of such action and
(ii) does not include a statement as to, or an admission of, fault, culpability
or a failure to act by or on behalf of an indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
14
<PAGE> 15
of the Company on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriters. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each officer of the Company
who has signed a Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
as provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery
15
<PAGE> 16
of and payment for the Offered Securities. If this Agreement is terminated
pursuant to Section 8 or if for any reason the purchase of the Offered
Securities by the Underwriters is not consummated, the Company shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
5 and the respective obligations of the Company and the Underwriters pursuant to
Section 7 shall remain in effect, and if any Offered Securities have been
purchased hereunder the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect. If the purchase of the
Offered Securities by the Underwriters is not consummated for any reason other
than solely because of the termination of this Agreement pursuant to Section 8
or the occurrence of any event specified in clause (iii), (iv) or (v) of Section
6(c), the Company will reimburse the Underwriters for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by them in
connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 189 Bernardo Avenue,
Mountain View, CA 94304, Attention: Chief Financial Officer; provided, however,
that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. Representation of Underwriters. The Representatives will act for the
several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly or by CSFBC will be binding
upon all the Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
principles of conflicts of laws.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
16
<PAGE> 17
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement between the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
HANDSPRING, INC.
By
----------------------------
Bernard J. Whitney
Chief Financial Officer
17
<PAGE> 18
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above written.
By CREDIT SUISSE FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
U.S. BANCORP PIPER JAFFRAY INC.
Acting on behalf of themselves and as the
Representatives of the several Underwriters.
By CREDIT SUISSE FIRST BOSTON CORPORATION
By
--------------------------------
Name:
Title:
18
<PAGE> 19
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER FIRM SECURITIES
- ----------- ---------------
<S> <C>
Credit Suisse First Boston Corporation ......................... $
Merrill Lynch, Pierce, Fenner & Smith Incorporated .............
Donaldson, Lufkin & Jenrette Securities Corporation ............
U.S. Bancorp Piper Jaffray Inc. ................................
Total .......................................................... $
--------------
==============
</TABLE>
19
<PAGE> 1
EXHIBIT 3.2
FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HANDSPRING, INC. (DELAWARE)
Handspring, Inc. (Delaware), a Delaware corporation (the
"Corporation"), which was originally incorporated on March 27, 2000, hereby
certifies that the First Amended and Restated Certificate of Incorporation of
the Corporation attached hereto as Exhibit A, which is incorporated herein by
this reference, has been duly adopted by the Board of Directors and stockholders
of the Corporation in accordance with Sections 242 and 245 of the Delaware
General Corporation Law, with the approval of the stockholders having been given
by written consent without a meeting in accordance with Section 228 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, said Corporation has caused this First Amended and
Restated Certificate of Incorporation to be signed by its duly authorized
officer.
Dated: May 16, 2000
HANDSPRING, INC. (DELAWARE)
/s/ DONNA L. DUBINSKY
----------------------------------------
Donna L. Dubinsky, President and Chief
Executive Officer
<PAGE> 2
EXHIBIT A
FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HANDSPRING, INC.
ARTICLE I
The name of the corporation is Handspring, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 15 East North Street, City of Dover, County of Kent. The name of its
registered agent at that address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
The total number of shares of all classes of capital stock which the
corporation has authority to issue is 114,300,000 shares, consisting of two
classes: (i) 105,000,000 shares of Common Stock, par value $0.001 per share and
(ii) 9,300,000 shares of Preferred Stock, par value $0.001 per share. Of the
9,300,000 shares of Preferred Stock authorized to be issued by the corporation,
(i) 8,300,000 shares are hereby designated "Series A Preferred Stock" and (ii)
1,000,000 shares are hereby designated "Series B Preferred Stock." The rights,
preferences, privileges and restrictions granted to and imposed upon the Series
A Preferred Stock, the Series B Preferred Stock, and the Common Stock are set
forth below.
1. DEFINITIONS. For purposes of this Article IV, the following
definitions apply:
1.1 "BOARD" shall mean the Board of Directors of the Company.
1.2 "COMPANY" shall mean this corporation.
1.3 "COMMON STOCK" shall mean the Common Stock, $0.001 par
value, of the Company.
1
<PAGE> 3
1.4 "COMMON STOCK DIVIDEND" shall mean a stock dividend
declared and paid on the Common Stock that is payable in shares of
Common Stock.
1.5 "DIVIDEND RATE" shall mean $0.0892 per share per annum for
the Series A Preferred Stock (as adjusted for any stock splits, stock
dividends, recapitalizations or the like, with respect to the Series A
Preferred Stock) and $0.4308 per share per annum for the Series B
Preferred Stock (as adjusted for any stock splits, stock dividends,
recapitalizations or the like, with respect to the Series B Preferred
Stock).
1.6 "ORIGINAL ISSUE DATE" shall mean the date on which the
first share of Series B Preferred Stock was issued by the Company's
predecessor, Handspring, Inc., a California corporation.
1.7 "ORIGINAL ISSUE PRICE" shall mean $2.23 per share for the
Series A Preferred Stock (as adjusted for any stock splits, stock
dividends, recapitalizations or the like, with respect to the Series A
Preferred Stock) and $10.77 per share for the Series B Preferred Stock
(as adjusted for any stock splits, stock dividends, recapitalizations
or the like, with respect to the Series B Preferred Stock).
1.8 "PERMITTED REPURCHASES" shall mean the repurchase by the
Company of shares of Common Stock held by employees, officers,
directors, consultants, independent contractors, advisors, or other
persons performing services for the Company or a subsidiary (if in
transactions that are primarily for non-financing purposes) that are
subject to restricted stock purchase agreements or stock option
exercise agreements under which the Company has the option to
repurchase such shares: (i) at cost, upon the occurrence of certain
events, such as the termination of employment or services; or (ii) at
any price pursuant to the Company's exercise of a right of first
refusal to repurchase such shares.
1.9 "PREFERRED STOCK" shall mean the Series A Preferred Stock
and the Series B Preferred Stock.
1.10 "SERIES A PREFERRED STOCK" shall mean the Series A
Preferred Stock, $0.001 par value, of the Company.
1.11 "SERIES B PREFERRED STOCK" shall mean the Series B
Preferred Stock, $0.001 par value, of the Company.
1.12 "SUBSIDIARY" shall mean any corporation of which at least
fifty percent (50%) of the outstanding voting stock is at the time
owned directly or indirectly by the Company or by one or more of such
subsidiary corporations.
2
<PAGE> 4
2. DIVIDEND RIGHTS.
2.1 Dividend Preference. In each calendar year, the holders of
the then outstanding Series A Preferred Stock and Series B Preferred Stock shall
be entitled to receive, when, as and if declared by the Board, out of any funds
and assets of the Company legally available therefor, noncumulative dividends at
the annual Dividend Rate for each series of Preferred Stock, prior and in
preference to the payment of any dividends on the Common Stock in such calendar
year (other than a Common Stock Dividend). No dividends (other than a Common
Stock Dividend) shall be paid with respect to the Common Stock during any
calendar year unless dividends in the total amount of the annual Dividend Rate
for the Series A Preferred Stock and Series B Preferred Stock, respectively,
shall have first been paid or declared and set apart for payment to the holders
of the Series A Preferred Stock and Series B Preferred Stock, respectively,
during that calendar year; provided, however, that this restriction shall not
apply to Permitted Repurchases. Payments of any dividends to the holders of
Series A Preferred Stock and Series B Preferred Stock shall be paid pro rata, on
an equal priority, pari passu basis according to their respective Dividend Rate
as set forth herein. Dividends on the Preferred Stock shall not be mandatory or
cumulative, and no rights or interest shall accrue to the holders of the
Preferred Stock by reason of the fact that the Company shall fail to declare or
pay dividends on the Series A Preferred Stock or Series B Preferred Stock,
respectively, in the amount of the annual Dividend Rate for the Series A
Preferred Stock or Series B Preferred Stock, respectively, or in any other
amount in any calendar year or any fiscal year of the Company, whether or not
the earnings of the Company in any calendar year or fiscal year were sufficient
to pay such dividends in whole or in part.
2.2 Participation Rights. If, after dividends in the full
preferential amount specified in this Section 2 for the Preferred Stock have
been paid or declared and set apart in any calendar year of the Company, the
Board shall declare additional dividends out of funds legally available therefor
in that calendar year, then such additional dividends shall be declared pro rata
on the Common Stock and the Preferred Stock on a pari passu basis according to
the number of shares of Common Stock held by such holders, where each holder of
shares of Preferred Stock is to be treated for this purpose as holding the
greatest whole number of shares of Common Stock then issuable upon conversion of
all shares of Preferred Stock held by such holder pursuant to Section 5.
2.3 Non-Cash Dividends. Whenever a dividend provided for in
this Section 2 shall be payable in property other than cash, the value of such
dividend shall be deemed to be the fair market value of such property as
determined in good faith by the Board.
3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the funds and
assets that may be legally distributed to the Company's stockholders (the
"AVAILABLE FUNDS AND ASSETS") shall be distributed to stockholders in the
following manner:
3.1 Liquidation Preferences. The holders of each share of
Preferred Stock then outstanding shall be entitled to be paid, out of the
Available Funds and Assets, and prior and in preference to any payment or
distribution (or any setting apart of any payment or distribution) of any
Available Funds and Assets on any shares of Common Stock, an amount per share
equal
3
<PAGE> 5
to the Original Issue Price for each series of Preferred Stock plus all declared
but unpaid dividends thereon. If upon any liquidation, dissolution or winding up
of the Company, the Available Funds and Assets shall be insufficient to permit
the payment to holders of the Preferred Stock of their full preferential amount
described in this subsection, then the entire Available Funds and Assets shall
be distributed among the holders of the then outstanding Preferred Stock pro
rata, on an equal priority, pari passu basis, according to their respective
liquidation preferences as set forth herein.
3.2 Remaining Assets. If there are any Available Funds and
Assets remaining after the payment or distribution (or the setting aside for
payment or distribution) to the holders of the Preferred Stock of their full
preferential amounts described above in this Section 3, then all such remaining
Available Funds and Assets shall be distributed among the holders of the then
outstanding Common Stock pro rata according to the number of shares of Common
Stock held by each holder thereof.
3.3 Merger or Sale of Assets. A (i) reorganization,
consolidation or merger (or similar transaction or series of transactions) of
the Company with or into any other corporation or corporations in which the
holders of the Company's outstanding shares immediately before such transaction
or series of transactions do not, immediately after such transaction or series
of transactions, retain stock representing a majority of the voting power of the
surviving corporation (or its parent corporation if the surviving corporation is
wholly owned by the parent corporation) of such transaction or series of
transactions; or (ii) a sale of all or substantially all of the assets of the
Company, shall each be deemed to be a liquidation, dissolution or winding up of
the Company as those terms are used in this Section 3.
3.4 Non-Cash Consideration. If any assets of the Company
distributed to stockholders in connection with any liquidation, dissolution, or
winding up of the Company are other than cash, then the value of such assets
shall be their fair market value as determined by the Board, except that any
securities to be distributed to stockholders in a liquidation, dissolution, or
winding up of the Company shall be valued as follows:
(a) The method of valuation of securities not subject
to investment letter or other similar restrictions on free marketability shall
be as follows:
(i) if the securities are then traded on a
national securities exchange or the Nasdaq National Market (or a
similar national quotation system), then the value shall be deemed to
be the average of the closing prices of the securities on such exchange
or system over the 30-day period ending three (3) days prior to the
distribution; and
(ii) if actively traded over-the-counter,
then the value shall be deemed to be the average of the closing bid
prices over the 30-day period ending three (3) days prior to the
distribution; and
(iii) if there is no active public market,
then the value shall be the fair market value thereof, as determined in
good faith by the Board of Directors of the Company.
4
<PAGE> 6
(b) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in
subparagraphs (a)(i), (ii) or (iii) of this subsection to reflect the
approximate fair market value thereof, as determined in good faith by the Board.
3.5 Notice and Waiver. The Company shall give each holder of
record of Preferred Stock written notice of an impending liquidation,
dissolution or winding up of the Company not later than ten (10) days prior to
the stockholders' meeting, if any, called to approve such transaction, or twenty
(20) days prior to the closing of such transaction, whichever is earlier. The
notice shall describe the nature of the impending transaction. The transaction
shall in no event take place sooner than twenty (20) days after the Company has
given the notice provided for herein. Notwithstanding the foregoing provisions
of this subsection 3.5, the periods and provisions specified herein may be
shortened or waived upon the written consent of the holders of Preferred Stock
that are entitled to such notice rights and that represent at least a majority
of the voting power of all then outstanding shares of Preferred Stock.
4. VOTING RIGHTS.
4.1 Common Stock. Each holder of shares of Common Stock shall
be entitled to one (1) vote for each share thereof held.
4.2 Preferred Stock. Each holder of shares of Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which such shares of Preferred Stock could be converted
pursuant to the provisions of Section 5 below at the record date for the
determination of the stockholders entitled to vote on such matters or, if no
such record date is established, the date such vote is taken or any written
consent of stockholders is solicited.
4.3 General. Subject to the foregoing provisions of this
Section 4, each holder of Preferred Stock shall have full voting rights and
powers equal to the voting rights and powers of the holders of Common Stock, and
shall be entitled to notice of any stockholders' meeting in accordance with the
bylaws of the Company (as in effect at the time in question) and applicable law,
and shall be entitled to vote, together with the holders of Common Stock, with
respect to any question upon which holders of Common Stock have the right to
vote, except as may be otherwise provided by applicable law. Except as otherwise
expressly provided herein or as required by law, the holders of Preferred Stock
and the holders of Common Stock shall vote together and not as separate classes.
4.4 Board Size. The authorized number of directors of the
Company's Board shall be seven (7). The Company shall not alter the authorized
number of directors in its Certificate of Incorporation, Bylaws or otherwise,
without first obtaining the written consent, or affirmative vote at a meeting,
of the holders of at least a majority of the then outstanding shares of Series A
Preferred Stock, consenting or voting (as the case may be) separately as a
class.
4.5 Board of Directors Election and Removal.
(a) Election. So long as at least 2,000,000 shares of
Series A Preferred Stock are outstanding (such number of shares being subject to
proportional adjustment to reflect
5
<PAGE> 7
combinations or subdivisions of such Series A Preferred Stock or dividends
declared in shares of such stock), (i) the holders of the Preferred Stock,
voting together as a separate class, shall be entitled to elect two (2)
directors of the Company; (ii) the holders of the Common Stock, voting as a
separate class, shall be entitled to elect two (2) directors of the Company; and
(iii) the holders of the Series A Preferred Stock, the Series B Preferred Stock
and the Common Stock, voting together as a single class shall be entitled to
elect the remaining directors of the Company.
(b) Quorum; Required Vote.
(i) Quorum. At any meeting held for the
purpose of electing directors, the presence in person or by proxy (A) of the
holders of a majority of the shares of the Preferred Stock or Common Stock then
outstanding, respectively, shall constitute a quorum of the Preferred Stock or
Common Stock, as the case may be, for the election of directors to be elected
solely by the holders of the Preferred Stock or Common Stock, respectively, and
(B) of holders of Preferred Stock and Common Stock representing a majority of
each of the voting power of all the then-outstanding shares (1) of Preferred
Stock and (2) of Common Stock shall constitute a quorum for the election of the
directors to be elected jointly by the holders of the Preferred Stock and the
Common Stock.
(ii) Required Vote. With respect to the
election of any director or directors by the holders of the outstanding shares
of a specified series, class or classes of stock given the right to elect such
director or directors pursuant to subsection 4.5(a) above ("SPECIFIED STOCK"),
that candidate or those candidates (as applicable) shall be elected who either:
(i) in the case of any such vote conducted at a meeting of the holders of such
Specified Stock, receive the highest number of affirmative votes of the
outstanding shares of such Specified Stock, up to the number of directors to be
elected by such Specified Stock; or (ii) in the case of any such vote taken by
written consent without a meeting, are elected by the written consent of the
holders of a majority of the outstanding shares of such Specified Stock entitled
to vote.
(c) Vacancy. If there shall be any vacancy in the
office of a director elected by the holders of any Specified Stock pursuant to
subsection 4.5(a), then a successor to hold office for the unexpired term of
such director may be elected by either: (i) the remaining director or directors
(if any) in office that were so elected by the holders of such Specified Stock,
by the affirmative vote of a majority of such directors (or by the sole
remaining director elected by the holders of such Specified Stock if there be
but one), or if such vacancy is not filled by such directors (ii) the required
vote of holders of the shares of such Specified Stock specified in subsection
4.5(b)(ii) above that are entitled to elect such director under subsection
4.5(a).
(d) Removal. Subject to Section 141(k) of the
Delaware General Corporation Law, any director who shall have been elected to
the Board by the holders of any Specified Stock pursuant to subsection 4.5(a) or
by any director or directors elected by holders of any Specified Stock as
provided in subsection 4.5(c), may be removed during his or her term of office,
either with or without cause, by, and only by, the affirmative vote of shares
representing a majority of the voting power of all the outstanding shares of
such Specified Stock entitled to vote, given either at a meeting of such
stockholders duly called for that purpose or pursuant to a
6
<PAGE> 8
written consent of stockholders without a meeting, and any vacancy created by
such removal may be filled only in the manner provided in subsection 4.5(c).
(e) Procedures. Any meeting of the holders of any
Specified Stock, and any action taken by the holders of any Specified Stock by
written consent without a meeting, in order to elect or remove a director under
this subsection 4.5, shall be held in accordance with the procedures and
provisions of the Company's Bylaws, the Delaware General Corporation law and
applicable law regarding stockholder meetings and stockholder actions by written
consent, as such are then in effect (including but not limited to procedures and
provisions for determining the record date for shares entitled to vote).
(f) Termination. Notwithstanding anything in this
subsection 4.5 to the contrary, the provisions of this subsection 4.5 shall
cease to be of any further force or effect upon the earlier to occur of: (i) the
first date on which the total number of outstanding shares of Series A Preferred
Stock is less than 2,000,000 shares (such number of shares being subject to
proportional adjustment to reflect combination or subdivisions of such Series A
Preferred Stock or dividends declared in shares of such stock); or (ii) upon the
merger or consolidation of the Company with or into any other corporation or
corporations if such consolidation or merger is approved by the stockholders of
the Company in compliance with applicable law and the Certificate of
Incorporation and Bylaws of the Company in which the holders of the Company's
outstanding shares immediately before such consolidation or merger do not,
immediately after such consolidation or merger, retain stock representing a
majority of the voting power of the surviving corporation (or its parent
corporation if the surviving corporation is wholly owned by the parent
corporation); or (iii) a sale of all or substantially all of the Company's
assets.
5. CONVERSION RIGHTS. The outstanding shares of Preferred Stock shall
be convertible into Common Stock as follows:
5.1 Optional Conversion.
(a) At the option of the holder thereof, each share
of Preferred Stock shall be convertible, at any time or from time to time prior
to the close of business on the business day before any date fixed for
redemption of such share, into fully paid and nonassessable shares of Common
Stock as provided herein.
(b) Each holder of Preferred Stock who elects to
convert the same into shares of Common Stock shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Company or any
transfer agent for the Preferred Stock or Common Stock, and shall give written
notice to the Company at such office that such holder elects to convert the same
and shall state therein the number of shares of Preferred Stock being converted.
Thereupon the Company shall promptly issue and deliver at such office to such
holder a certificate or certificates for the number of shares of Common Stock to
which such holder is entitled upon such conversion. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the certificate or certificates representing the shares of
Preferred Stock to be converted, and the person entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such shares of Common Stock on such date. If a
conversion election under this
7
<PAGE> 9
subsection 5.1 is made in connection with an underwritten offering of the
Company's securities pursuant to the Securities Act of 1933, as amended, (which
underwritten offering does not cause an automatic conversion pursuant to
subsection 5.2 to take place) the conversion may, at the option of the holder
tendering shares of Preferred Stock for conversion, be conditioned upon the
closing with the underwriters of the sale of the Company's securities pursuant
to such offering, in which event the holders making such elections who are
entitled to receive Common Stock upon conversion of their Preferred Stock shall
not be deemed to have converted such shares of Preferred Stock until immediately
prior to the closing of such sale of the Company's securities in the offering.
5.2 Automatic Conversion.
(a) Each share of Preferred Stock shall automatically
be converted into fully paid and nonassessable shares of Common Stock, as
provided herein: (i) immediately prior to the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act of 1933, as amended, covering the offer and sale
of Common Stock for the account of the Company in which the aggregate public
offering price (before deduction of underwriters' discounts and commissions)
equals or exceeds $20,000,000 and the public offering price per share of which
equals or exceeds $10.77 per share before deduction of underwriters' discounts
and commissions (such price per share of Common Stock to be appropriately
adjusted to reflect Common Stock Events (as defined in Section 5.4)); or (ii)
upon the Company's receipt of the written consent of the holders of not less
than a majority of the then outstanding shares of Preferred Stock to the
conversion of all then outstanding Preferred Stock under this Section 5.
(b) Upon the occurrence of any event specified in
subparagraph 5.2(a) (i) or (ii) above, the outstanding shares of Preferred Stock
shall be converted into Common Stock automatically without the need for any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its transfer agent;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Preferred Stock are either delivered to
the Company or its transfer agent as provided below, or the holder notifies the
Company or its transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such certificates. Upon
the occurrence of such automatic conversion of the Preferred Stock, the holders
of Preferred Stock shall surrender the certificates representing such shares at
the office of the Company or any transfer agent for the Preferred Stock or
Common Stock. Thereupon, there shall be issued and delivered to such holder
promptly at such office and in its name as shown on such surrendered certificate
or certificates, a certificate or certificates for the number of shares of
Common Stock into which the shares of Preferred Stock surrendered were
convertible on the date on which such automatic conversion occurred.
5.3 Conversion Price. Each share of Preferred Stock shall be
convertible in accordance with subsection 5.1 or subsection 5.2 above into the
number of shares of Common Stock which results from dividing the Original Issue
Price for such series of Preferred Stock by the conversion price for such series
of Preferred Stock that is in effect at the time of conversion
8
<PAGE> 10
(the "CONVERSION PRICE"). The initial Conversion Price for the Series A
Preferred Stock shall be the Original Issue Price for the Series A Preferred
Stock and the initial Conversion Price for the Series B Preferred Stock shall be
the Original Issue Price for the Series B Preferred Stock. The Conversion Price
of each series of Preferred Stock shall be subject to adjustment from time to
time as provided below.
5.4 Adjustment Upon Common Stock Event. Upon the happening of
a Common Stock Event (as hereinafter defined) at any time after the Original
Issue Date, the Conversion Price of the Series A Preferred Stock and the
Conversion Price of the Series B Preferred Stock shall, simultaneously with the
happening of such Common Stock Event, be adjusted by multiplying the Conversion
Price of such series of Preferred Stock in effect immediately prior to such
Common Stock Event by a fraction, (i) the numerator of which shall be the number
of shares of Common Stock issued and outstanding immediately prior to such
Common Stock Event, and (ii) the denominator of which shall be the number of
shares of Common Stock issued and outstanding immediately after such Common
Stock Event, and the product so obtained shall thereafter be the Conversion
Price for such series of Preferred Stock. The Conversion Price for a series of
Preferred Stock shall be readjusted in the same manner upon the happening of
each subsequent Common Stock Event. As used herein, the term "COMMON STOCK
EVENT" shall mean, at any time or from time to time after the Original Issue
Date, (i) the issue by the Company of additional shares of Common Stock as a
dividend or other distribution on outstanding Common Stock, (ii) a subdivision
of the outstanding shares of Common Stock into a greater number of shares of
Common Stock, or (iii) a combination of the outstanding shares of Common Stock
into a smaller number of shares of Common Stock.
5.5 Adjustments for Other Dividends and Distributions. If at
any time or from time to time after the Original Issue Date the Company pays a
dividend or makes another distribution to the holders of the Common Stock
payable in securities of the Company other than shares of Common Stock, then in
each such event provision shall be made so that the holders of the Series A
Preferred Stock and Series B Preferred Stock shall receive upon conversion
thereof, in addition to the number of shares of Common Stock receivable upon
conversion thereof, the amount of securities of the Company which they would
have received had their Preferred Stock been converted into Common Stock on the
date of such event (or such record date, as applicable) and had they thereafter,
during the period from the date of such event (or such record date, as
applicable) to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 5 with respect to
the rights of the holders of the Preferred Stock or with respect to such other
securities by their terms.
5.6 Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Original Issue Date
the Common Stock issuable upon the conversion of the Preferred Stock is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than by a
Common Stock Event or a stock dividend, reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 5), then in any such event
each holder of Preferred Stock shall have the right thereafter to convert such
stock into the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change by
holders of the number of shares of Common Stock into which such shares of
Preferred
9
<PAGE> 11
Stock could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
5.7 Reorganizations, Mergers and Consolidations. If at any
time or from time to time after the Original Issue Date there is a capital
reorganization of the Company (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section 5) or a merger or consolidation of the Company with or into another
corporation (except an event which is governed under subsection 3.3), then, as a
part of such reorganization, merger or consolidation, provision shall be made so
that the holders of the Preferred Stock thereafter shall be entitled to receive,
upon conversion of the Preferred Stock, the number of shares of stock or other
securities or property of the Company, or of such successor corporation
resulting from such reorganization, merger or consolidation, to which a holder
of Common Stock deliverable upon conversion would have been entitled on such
reorganization, merger or consolidation. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 5
with respect to the rights of the holders of the Preferred Stock after the
reorganization, merger or consolidation to the end that the provisions of this
Section 5 (including adjustment of the Conversion Price then in effect and
number of shares issuable upon conversion of each series of Preferred Stock)
shall be applicable after that event and be as nearly equivalent to the
provisions hereof as may be practicable. This subsection 5.7 shall similarly
apply to successive reorganizations, mergers and consolidations.
5.8 Sale of Shares Below Conversion Price.
(a) Adjustment Formula. If at any time or from time
to time after the Original Issue Date the Company issues or sells, or is deemed
by the provisions of this subsection 5.8 to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined), otherwise than in connection
with a Common Stock Event as provided in subsection 5.4, a dividend or
distribution as provided in subsection 5.5 or a recapitalization,
reclassification or other change as provided in subsection 5.6, or a
reorganization, merger or consolidation as provided in subsection 5.7, for an
Effective Price (as hereinafter defined) that is less than the Conversion Price
for the Series A Preferred Stock or Series B Preferred Stock, as the case may
be, in effect immediately prior to such issue or sale (or deemed issue or sale),
then, and in each such case, the Conversion Price for such series of Preferred
Stock shall be reduced, as of the close of business on the date of such issue or
sale, to the price obtained by multiplying such Conversion Price by a fraction:
(i) The numerator of which shall be the sum
of (A) the number of Common Stock Equivalents Outstanding (as hereinafter
defined) immediately prior to such issue or sale of Additional Shares of Common
Stock plus (B) the quotient obtained by dividing the Aggregate Consideration
Received (as hereinafter defined) by the Company for the total number of
Additional Shares of Common Stock so issued or sold (or deemed so issued and
sold) by the Conversion Price for such series of Preferred Stock in effect
immediately prior to such issue or sale; and
(ii) The denominator of which shall be the
sum of (A) the number of Common Stock Equivalents Outstanding immediately prior
to such issue or sale plus
10
<PAGE> 12
(B) the number of Additional Shares of Common Stock so issued or sold (or deemed
so issued and sold).
(b) Certain Definitions. For the purpose of making
any adjustment required under this subsection 5.8:
(i) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean all shares of Common Stock issued by the Company, whether or not
subsequently reacquired or retired by the Company, other than: (A) shares of
Common Stock issued or issuable upon conversion of Preferred Stock; (B) shares
of Common Stock (or options, warrants or other rights therefor) issued or
issuable to employees, officers, or directors of, or contractors, consultants or
advisers to, the Company or any Subsidiary (if in transactions with primarily
non-financing purposes) pursuant to stock purchase or stock option plans, stock
bonuses or awards, warrants, contracts or other arrangements that are approved
by the Board; and (C) shares of Common Stock or Preferred Stock (or options,
warrants or other rights therefor) issued or issuable to parties providing the
Company with equipment leases, real property leases, loans, credit lines,
guaranties of indebtedness, cash price reductions or similar transactions
(provided such issuances are pursuant to transactions with primarily non-equity
financing purposes), including, without limitation, shares of Series A Preferred
Stock (and shares of Common Stock issued or issuable upon conversion thereof)
issued or issuable to Comdisco, Inc. pursuant to that certain Subordinated Loan
and Security Agreement; and (D) up to 50,000 shares of Common Stock issued or
issuable to charitable organizations pursuant to stock issuance agreements or
other arrangements approved by the Board.
(ii) The "AGGREGATE CONSIDERATION RECEIVED"
by the Company for any issue or sale (or deemed issue or sale) of securities
shall (A) to the extent it consists of cash, be computed at the gross amount of
cash received by the Company before deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale and without deduction of any expenses payable
by the Company; (B) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith by the
Board; and (C) if Additional Shares of Common Stock, Convertible Securities or
Rights or Options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration which covers both,
be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or Rights or Options.
(iii) "COMMON STOCK EQUIVALENTS OUTSTANDING"
shall mean the number of shares of Common Stock that is equal to the sum of (A)
all shares of Common Stock of the Company that are outstanding at the time in
question, plus (B) all shares of Common Stock of the Company issuable upon
conversion of all shares of Preferred Stock or other Convertible Securities that
are outstanding at the time in question, plus (C) all shares of Common Stock of
the Company that are issuable upon the exercise of Rights or Options (excluding
any shares of Common Stock excluded from the definition of "Additional Shares of
Common Stock" pursuant to subsection 5.8(b)(i)(B), after the Original Issue
Date) that are outstanding at the time in question assuming the full conversion
or exchange into Common Stock of all such Rights or Options that are Rights or
Options to purchase or acquire Convertible Securities into or for Common Stock.
11
<PAGE> 13
(iv) "CONVERTIBLE SECURITIES" shall mean
stock or other securities convertible into or exchangeable for shares of Common
Stock.
(v) The "EFFECTIVE PRICE" of Additional
Shares of Common Stock shall mean the quotient determined by dividing the total
number of Additional Shares of Common Stock issued or sold, or deemed to have
been issued or sold, by the Company under this subsection 5.8, into the
Aggregate Consideration Received, or deemed to have been received, by the
Company under this subsection 5.8, for the issue of such Additional Shares of
Common Stock; and
(vi) "RIGHTS OR OPTIONS" shall mean
warrants, options or other rights to purchase or acquire shares of Common Stock
or Convertible Securities.
(c) Deemed Issuances. For the purpose of making any
adjustment to the Conversion Price of the Series A Preferred Stock or Series B
Preferred Stock required under this subsection 5.8, if the Company issues or
sells any Rights or Options or Convertible Securities and if the Effective Price
of the shares of Common Stock issuable upon exercise of such Rights or Options
and/or the conversion or exchange of Convertible Securities (computed without
reference to any additional or similar protective or antidilution clauses) is
less than the Conversion Price then in effect for a series of Preferred Stock,
then the Company shall be deemed to have issued, at the time of the issuance of
such Rights, Options or Convertible Securities, that number of Additional Shares
of Common Stock (as defined above) that is equal to the maximum number of shares
of Common Stock issuable upon exercise or conversion of such Rights, Options or
Convertible Securities upon their issuance and to have received, as the
Aggregate Consideration Received for the issuance of such shares, an amount
equal to the total amount of the consideration, if any, received by the Company
for the issuance of such Rights or Options or Convertible Securities, plus, in
the case of such Rights or Options, the minimum amounts of consideration, if
any, payable to the Company upon the exercise in full of such Rights or Options,
plus, in the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion or exchange thereof; provided that:
(i) if the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, then the Company shall be deemed to have received
the minimum amounts of consideration without reference to such clauses;
(ii) if the minimum amount of consideration
payable to the Company upon the exercise of Rights or Options or the conversion
or exchange of Convertible Securities is reduced over time or upon the
occurrence or non-occurrence of specified events other than by reason of
antidilution or similar protective adjustments, then the Effective Price shall
be recalculated using the figure to which such minimum amount of consideration
is reduced; and
(iii) if the minimum amount of consideration
payable to the Company upon the exercise of such Rights or Options or the
conversion or exchange of Convertible Securities is subsequently increased, then
the Effective Price shall again be
12
<PAGE> 14
recalculated using the increased minimum amount of consideration payable to the
Company upon the exercise of such Rights or Options or the conversion or
exchange of such Convertible Securities.
No further adjustment of the Conversion Price, adjusted upon the issuance of
such Rights or Options or Convertible Securities, shall be made as a result of
the actual issuance of shares of Common Stock on the exercise of any such Rights
or Options or the conversion or exchange of any such Convertible Securities. If
any such Rights or Options or the conversion rights represented by any such
Convertible Securities shall expire without having been fully exercised, then
the Conversion Price as adjusted upon the issuance of such Rights or Options or
Convertible Securities shall be readjusted to the Conversion Price which would
have been in effect had an adjustment been made on the basis that the only
shares of Common Stock so issued were the shares of Common Stock, if any, that
were actually issued or sold on the exercise of such Rights or Options or rights
of conversion or exchange of such Convertible Securities, and such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise, plus the consideration, if any,
actually received by the Company for the granting of all such Rights or Options,
whether or not exercised, plus the consideration received for issuing or selling
all such Convertible Securities actually converted or exchanged, plus the
consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion or exchange of such Convertible Securities,
provided that such readjustment shall not apply to prior conversions of
Preferred Stock.
5.9 Certificate of Adjustment. In each case of an adjustment
or readjustment of the Conversion Price for a series of Preferred Stock, the
Company, at its expense, shall cause its Chief Financial Officer to compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
the Preferred Stock at the holder's address as shown in the Company's books.
5.10 Fractional Shares. No fractional shares of Common Stock
shall be issued upon any conversion of Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the Company
shall pay the holder cash equal to the product of such fraction multiplied by
the Common Stock's fair market value as determined in good faith by the Board as
of the date of conversion.
5.11 Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
13
<PAGE> 15
5.12 Notices. Any notice required by the provisions of this
Section 5 to be given to the holders of shares of the Preferred Stock shall be
deemed given upon the earlier of actual receipt or deposit in the United States
mail, by certified or registered mail, return receipt requested, postage
prepaid, addressed to each holder of record at the address of such holder
appearing on the books of the Company.
5.13 No Impairment. The Company shall not avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but shall at all times in good faith assist
in carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred Stock
against impairment.
6. RESTRICTIONS AND LIMITATIONS.
6.1 Class Protective Provisions. So long as any shares of
Preferred Stock remain outstanding, the Company shall not, without the approval,
by vote or written consent, of the holders of a majority of the Preferred Stock
then outstanding, voting as a single class:
(1) amend its Certificate of Incorporation or Bylaws
in any manner that would alter, change or affect any of the rights, preferences,
privileges or restrictions of the Preferred Stock;
(2) authorize any other equity security, including
any other security convertible into or exercisable for any equity security
having rights or preferences senior to or on a parity with the Preferred Stock
as to dividend rights, liquidation preferences, redemption or voting;
(3) merge or consolidate with or into any corporation
or effect any transaction or series of related transactions if such merger,
consolidation or transaction or series of transactions would result in the
stockholders of the Company immediately prior to such merger, consolidation or
transaction or series of transactions holding less than a majority of the voting
power of the stock of the surviving corporation (or its parent corporation if
the surviving corporation is wholly owned by the parent corporation) immediately
after such merger, consolidation or transaction or series of transactions;
(4) sell all or substantially all the Company's
assets in a single transaction or series of related transactions;
(5) liquidate or dissolve; or
(6) declare or pay any dividends (other than
dividends payable solely in shares of its own Common Stock) on or declare or
make any other distribution, purchase, redemption or acquisition (other than
Permitted Repurchases), directly or indirectly, on account of any shares of
Preferred Stock or Common Stock now or hereafter outstanding.
6.2 Series Protective Provisions. So long as any shares of
Series A Preferred Stock or Series B Preferred Stock remain outstanding, as the
case may be, the Company shall not, without the approval, by vote or written
consent, of the holders of a majority of the Series A
14
<PAGE> 16
Preferred Stock then outstanding and/or the Series B Preferred Stock then
outstanding, as applicable, each voting as a separate class, take any of the
following actions to the extent it effects such series of Preferred Stock:
(1) with respect to the holders of Series A Preferred
Stock, authorize additional shares of Series A Preferred Stock, and with respect
to the holders of Series B Preferred Stock, authorize additional shares of
Series B Preferred Stock;
(2) reclassify any outstanding shares of securities
of the Company into shares having rights, preferences or privileges senior to or
on a parity with such series of Preferred Stock;
(3) authorize any other equity security, including
any other security convertible into or exercisable for any equity security
having rights or preferences senior to such series of Preferred Stock as to
dividend rights or liquidation preferences.
7. MISCELLANEOUS
7.1 No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the Company shall be
authorized to issue.
7.2 Consent to Certain Transactions. Each holder of shares of
Preferred Stock shall, by virtue of its acceptance of a stock certificate
evidencing Preferred Stock, be deemed to have consented, for purposes of
Sections 502, 503 and 506 of the California Corporations Code, to all Permitted
Repurchases.
ARTICLE V
In furtherance of and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the Bylaws of this corporation, subject to the right of the stockholders
entitled to vote with respect thereto, in accordance with the provisions of such
Bylaws, to alter and repeal the Bylaws adopted or amended by the Board of
Directors. Notwithstanding any other provisions of law, this First Amended and
Restated Certificate of Incorporation or the Bylaws, each as amended, and
notwithstanding the fact that a lesser percentage may be specified by law, this
First Amended and Restated Certificate of Incorporation or the Bylaws, the
affirmative vote of the holders of at least sixty six and two-thirds percent (66
2/3%) of the outstanding voting stock then entitled to vote at an election of
directors, voting together as a single class, shall be required to alter,
change, amend, repeal or adopt any provision inconsistent with this Article V.
ARTICLE VI
To the fullest extent permitted by law, no director of the corporation
shall be personally liable to the corporation or its stockholders for monetary
damages for any breach of fiduciary duty as a director, notwithstanding any
provision of law imposing such liability. Without limiting the effect of the
preceding sentence, if the Delaware General Corporation Law is
15
<PAGE> 17
hereafter amended to authorize the further elimination or limitation of the
liability of a director, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. No amendment to or repeal of this
provision, nor the adoption of any provision of this First Amended and Restated
Certificate of Incorporation inconsistent with this Article VI, shall apply to
or have any effect on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
16
<PAGE> 1
EXHIBIT 3.5
RESTATED BYLAWS
OF
HANDSPRING, INC.
May 16, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I - STOCKHOLDERS
Section 1.1: Annual Meetings....................................................... 1
Section 1.2: Special Meetings...................................................... 1
Section 1.3: Notice of Meetings.................................................... 1
Section 1.4: Adjournments.......................................................... 1
Section 1.5: Quorum................................................................ 2
Section 1.6: Organization.......................................................... 2
Section 1.7: Voting; Proxies....................................................... 2
Section 1.8: Fixing Date for Determination of Stockholders of Record............... 3
Section 1.9: List of Stockholders Entitled to Vote................................. 3
Section 1.10: Inspectors of Elections............................................... 3
Section 1.11: Notice of Stockholder Business; Nominations........................... 4
ARTICLE II - BOARD OF DIRECTORS
Section 2.1: Number; Qualifications................................................ 6
Section 2.2: Election; Resignation; Removal; Vacancies............................. 6
Section 2.3: Regular Meetings...................................................... 8
Section 2.4: Special Meetings...................................................... 8
Section 2.5: Telephonic Meetings Permitted......................................... 8
Section 2.6: Quorum; Vote Required for Action...................................... 8
</TABLE>
i
<PAGE> 3
RESTATED BYLAWS
OF
HANDSPRING, INC.
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 2.7: Organization......................................................... 8
Section 2.8: Written Action by Directors.......................................... 8
Section 2.9: Powers............................................................... 8
Section 2.10: Compensation of Directors............................................ 8
ARTICLE III - COMMITTEES
Section 3.1: Committees........................................................... 9
Section 3.2: Committee Rules...................................................... 9
ARTICLE IV - OFFICERS
Section 4.1: Generally............................................................ 9
Section 4.2: Chief Executive Officer.............................................. 9
Section 4.3: Chairperson of the Board............................................. 10
Section 4.4: President............................................................ 10
Section 4.5: Vice President....................................................... 10
Section 4.6: Chief Financial Officer.............................................. 10
Section 4.7: Treasurer............................................................ 11
Section 4.8: Secretary............................................................ 11
Section 4.9: Delegation of Authority.............................................. 11
Section 4.10: Removal.............................................................. 11
</TABLE>
ii
<PAGE> 4
RESTATED BYLAWS
OF
HANDSPRING, INC.
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE V - STOCK
Section 5.l: Certificates......................................................... 11
Section 5.2: Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificate.......................................... 11
Section 5.3: Other Regulations.................................................... 11
ARTICLE VI - INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors............................ 12
Section 6.2: Advance of Expenses.................................................. 12
Section 6.3: Non-Exclusivity of Rights............................................ 12
Section 6.4: Indemnification Contracts............................................ 13
Section 6.5: Effect of Amendment.................................................. 13
ARTICLE VII - NOTICES
Section 7.l: Notice............................................................... 13
Section 7.2: Waiver of Notice..................................................... 13
ARTICLE VIII - INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum......................................... 13
ARTICLE IX - MISCELLANEOUS
Section 9.1: Fiscal Year.......................................................... 14
Section 9.2: Seal................................................................. 14
Section 9.3: Form of Records...................................................... 14
</TABLE>
iii
<PAGE> 5
RESTATED BYLAWS
OF
HANDSPRING, INC.
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 9.4: Reliance Upon Books and Records...................................... 14
Section 9.5: Certificate of Incorporation Governs................................. 14
Section 9.6: Severability......................................................... 15
ARTICLE X - AMENDMENT
Section 10.1: Amendments........................................................... 15
</TABLE>
iv
<PAGE> 6
RESTATED BYLAWS
OF
HANDSPRING, INC.
ARTICLE I
STOCKHOLDERS
Section 1.1: Annual Meetings. An annual meeting of stockholders shall
be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as the Board of Directors shall each
year fix. Any other proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Chairperson of the Board of
Directors, the Chief Executive Officer, or if there is no Chief Executive
Officer, the President, by a majority of the members of the Board of Directors
or by holders of at least a majority of the outstanding voting stock then
entitled to vote at an election of directors. Special meetings may not be called
by any other person or persons. If a special meeting of stockholders is called
at the request of any person or persons other than by a majority of the members
of the Board of Directors, then such person or persons shall request such
meeting by delivering a written request to call such meeting to each member of
the Board of Directors, and the Board of Directors shall then determine the
time, date and place of such special meeting, which shall be held not more than
one hundred twenty (120) nor less than thirty-five (35) days after the written
request to call such special meeting was delivered to each member of the Board
of Directors.
Section 1.3: Notice of Meetings. Written notice of all meetings of
stockholders shall be given stating the place, date and time of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by applicable law or the Certificate of
Incorporation of the Corporation, such notice shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder of record entitled to vote at such meeting. Such notice shall be
given by the Secretary of the Corporation or by an officer of the Corporation
designated by the Board of Directors, or in the case of a special meeting of
stockholders, by the officer or persons calling such meeting. The business to be
transacted at any special meeting of stockholders shall be limited to matters
relating to the purpose or purposes stated in the notice of meeting. If mailed,
notice is given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation.
Section 1.4: Adjournments. Any meeting of stockholders may adjourn from
time to time to reconvene at the same or another place, and notice need not be
given of any such adjourned meeting if the time, date and place thereof are
announced at the meeting at which the adjournment is taken; provided, however,
that if the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, then a
1
<PAGE> 7
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. At the adjourned meeting the Corporation may
transact any business that might have been transacted at the original meeting.
Section 1.5: Quorum. At each meeting of stockholders the holders of a
majority of the shares of stock entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business, except if otherwise required by applicable law or the Certificate of
Incorporation. If a quorum shall fail to attend any meeting, the chairperson of
the meeting or the holders of a majority of the shares entitled to vote who are
present, in person or by proxy, at the meeting may adjourn the meeting. The
shares of the capital stock of the Corporation belonging to the Corporation, or
to another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation are held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of the Corporation or any other corporation to vote any shares of the
capital stock of the Corporation held by it in a fiduciary capacity.
Section 1.6: Organization. The meetings of stockholders shall be
presided over by such person as the Board of Directors may designate, or, in the
absence of such a person, the Chairperson of the Board of Directors, or, in the
absence of such person, the President of the Corporation, or, in the absence of
such person, such person as may be chosen by the holders of a majority of the
shares entitled to vote who are present, in person or represented by proxy, at
the meeting. Such person shall be chairperson of the meeting and, subject to
Section 1.11 hereof, shall determine the order of business and the procedure at
the meeting, including such regulation of the manner of voting and the conduct
of discussion as seems to him or her to be in order. The Secretary of the
Corporation shall act as secretary of the meeting, but in such person's absence
the chairperson of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7: Voting; Proxies. Unless otherwise provided by law or the
Certificate of Incorporation, and subject to the provisions of Section 1.8 of
these Bylaws, each stockholder shall be entitled to one (1) vote for each share
of stock held by such stockholder. Each stockholder entitled to vote at a
meeting of stockholders may authorize another person or persons to act for such
stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in
any manner permitted by applicable law. The voting at meetings of stockholders
need not be by written ballot unless such is demanded at the meeting before
voting begins by a stockholder or stockholders holding shares, either directly
or represented by proxy, representing at least one percent (1%) of the votes
entitled to vote at such meeting; provided, however, that an election of
directors shall be by written ballot if demand is so made by any stockholder at
the meeting before voting begins. If a vote is to be taken by written ballot,
then each such ballot shall state the name of the stockholder or proxy voting
and such other information as the chairperson of the meeting deems appropriate.
The directors shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote on the
election of directors. Unless otherwise provided by applicable law, the
Certificate of Incorporation or these Bylaws, every matter other than the
election of directors shall be decided by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote thereon that are present in
person or represented by proxy at the meeting and are voted for or against the
matter.
2
<PAGE> 8
Section 1.8: Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors and which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. If no record date is fixed by the Board of Directors,
then the record date shall be as provided by applicable law. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 1.9: List of Stockholders Entitled to Vote. A complete list of
stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present at the meeting.
Section 1.10: Inspectors of Elections.
(a) Applicability. Unless otherwise provided in the Certificate of
Incorporation or required by the Delaware General Corporation Law, the following
provisions of this Section 1.10 shall apply only if and when the Corporation has
a class of voting stock that is: (i) listed on a national securities exchange;
(ii) authorized for quotation on an automated interdealer quotation system of a
registered national securities association; or (iii) held of record by more than
two thousand stockholders. In all other cases, observance of the provisions of
this Section 1.10 shall be optional and at the discretion of the Corporation.
(b) Appointment. The Corporation shall, in advance of any meeting of
stockholders, appoint one or more inspectors of election to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of stockholders, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting.
(c) Inspector's Oath. Each inspector of election, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
such inspector's ability.
(d) Duties of Inspectors. At a meeting of stockholders, the inspectors
of election shall (i) ascertain the number of shares outstanding and the voting
power of each share, (ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes
3
<PAGE> 9
and ballots, (iv) determine and retain for a reasonable period of time a record
of the disposition of any challenges made to any determination by the
inspectors, and (v) certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.
(e) Opening and Closing of Polls. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced by the chairperson of the meeting. No ballot,
proxies or votes, nor any revocations thereof or changes thereto, shall be
accepted by the inspectors after the closing of the polls unless the Court of
Chancery upon application by a stockholder shall determine otherwise.
(f) Determinations. In determining the validity and counting of proxies
and ballots, the inspectors shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in
connection with proxies in accordance with Section 212(c)(2) of the Delaware
General Corporation Law, ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable information
for the limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons which represent more
votes than the holder of a proxy is authorized by the record owner to cast or
more votes than the stockholder holds of record. If the inspectors consider
other reliable information for the limited purpose permitted herein, the
inspectors at the time they make their certification of their determinations
pursuant to this Section 1.10 shall specify the precise information considered
by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
Section 1.11: Notice of Stockholder Business; Nominations.
(a) Annual Meeting of Stockholders.
(i) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the stockholders
shall be made at an annual meeting of stockholders (A) pursuant to the notice of
such meeting, (B) by or at the direction of the Board of Directors or (C) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of the notice provided for in this Section 1.11, who is entitled to vote
at such meeting and who complies with the notice procedures set forth in this
Section 1.11.
(ii) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (C) of subparagraph
(a)(i) of this Section 1.11, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other business
must otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice must be in writing and delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the seventy-fifth (75th) day nor earlier than the close of business
on the one hundred and fifth (105th) day prior to the first anniversary of the
preceding year's annual meeting, except in the case of the first annual meeting
after the adoption of these Bylaws, for which such notice shall be timely if
delivered in the same time period as if such meeting were a special meeting
governed by subparagraph (b) of this
4
<PAGE> 10
Section 1.11; provided, however, that in the event that the date of the annual
meeting is more than thirty (30) days before or more than sixty (60) days after
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred and fifth
(105th) day prior to such annual meeting and not later than the close of
business on the later of the seventy-fifth (75th) day prior to such annual
meeting or the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
Corporation. Such stockholder's notice shall set forth: (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected, as well as
such other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as a director of the
Corporation; (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (1) the name and address of such stockholder,
as they appear on the books of the Corporation, and of such beneficial owner,
and (2) the class and number of shares of the Corporation that are owned
beneficially and held of record by such stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of
subparagraph (a)(ii) of this Section 1.11 to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the Corporation
is increased and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the increased Board of
Directors at least seventy-five (75) days prior to the first anniversary of the
preceding year's annual meeting (or, if the annual meeting is held more than
thirty (30) days before or sixty (60) days after such anniversary date, at least
seventy-five (75) days prior to such annual meeting), a stockholder's notice
required by this Section 1.11 shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary of the Corporation at the principal executive
office of the Corporation not later than the close of business on the tenth
(10th) day following the day on which such public announcement is first made by
the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the notice of such meeting. Nominations of persons for
election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the notice of such
meeting (i) by or at the direction of the Board of Directors or (ii) provided
that the Board of Directors has determined that directors shall be elected at
such meeting, by any stockholder of the Corporation who is a stockholder of
record at the time of giving of notice of the special meeting, who shall be
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Section 1.11. In the event the Corporation calls a special meeting
of stockholders for the purpose of electing one or more directors to the Board
of Directors, any such stockholder may nominate a person or persons, as the case
may be, for
5
<PAGE> 11
election to such positions as specified in the notice of meeting, if the
stockholder's notice required by subparagraph (a)(ii) of this Section 1.11 shall
be delivered to the Secretary of the Corporation at the principal executive
offices of the Corporation not earlier than the one hundred fifth (105th) day
prior to such special meeting and not later than the close of business on the
later of the seventy-fifth (75th) day prior to such special meeting or the tenth
(10th) day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(c) General.
(i) Only such persons who are nominated in accordance with the
procedures set forth in this Section 1.11 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.11. Except as otherwise provided by law or these
Bylaws, the chairperson of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Section 1.11 and, if any proposed nomination or
business is not in compliance herewith, to declare that such defective proposal
or nomination shall be disregarded.
(ii) For purposes of this Section 1.11, the term "PUBLIC
ANNOUNCEMENT" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section
1.11, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth herein. Nothing in this Section 1.11 shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the proxy
statement pursuant to Rule 14a-8 under the Exchange Act and any stockholder
proposal which complies with Rule 14a-8 of the proxy rules, or any successor
provision, promulgated under the Securities Exchange Act of 1934, as amended,
and is to be included in the proxy statement of this Corporation for an annual
meeting of stockholders shall be deemed to comply with the requirements of this
Section 1.11.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. Unless otherwise provided in the
Certificate of Incorporation, the Board of Directors shall consist of one or
more members and shall be fixed from time to time by resolution of the Board of
Directors, but in no event shall the number of directors be less than three. No
decrease in the authorized number of directors constituting the Board of
Directors shall shorten the term of any incumbent director. The directors need
not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. The Board of
Directors shall initially consist of the person or persons elected by the
incorporator or named in the initial Certificate of Incorporation. Subject to
the rights of the holders of any series of Preferred Stock
6
<PAGE> 12
to elect additional directors under specified circumstances, following the
closing of the initial public offering of the Corporation pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of common stock to the public (the "INITIAL PUBLIC
OFFERING"), the directors shall be divided, with respect to the time for which
they severally hold office, into three classes designated as Class I, Class II
and Class III, respectively. The directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors,
with the number of directors in each class to be divided as equally as
reasonably possible. No one class shall have more than one director more than
any other class. The term of office of the Class I directors shall expire at the
first annual meeting of stockholders following the closing of the Initial Public
Offering, the term of office of the Class II directors shall expire at the
second annual meeting of stockholders following the closing of the Initial
Public Offering, and the term of office of the Class III directors shall expire
at the third annual meeting of stockholders following the closing of the Initial
Public Offering. At each annual meeting of stockholders commencing with the
first annual meeting of stockholders following the closing of the Initial Public
Offering, directors elected to succeed those directors of the class whose terms
then expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election. Prior to the
closing of the Initial Public Offering, or in the event the Corporation is
prohibited from dividing its Board of Directors in the manner described above
through the operation of Section 2115 of the California General Corporation Law
following the record date of the first annual meeting of stockholders following
the closing of the Initial Public Offering, each director shall hold office
until the next annual meeting of stockholders and until such director's
successor is elected and qualified, or until such director's earlier death,
resignation or removal. Any director may resign at any time upon written notice
to the Corporation. Subject to the rights of the holders of any series of
Preferred Stock, any director or the entire Board of Directors may be removed by
the holders of at least sixty six and two-thirds percent (66 2/3%) of the shares
then entitled to vote at an election of directors. Subject to the rights of the
holders of any series of Preferred Stock, any vacancy occurring in the Board of
Directors for any cause, and any newly created directorship resulting from any
increase in the authorized number of directors, shall, unless the Board of
Directors determines by resolution that any such vacancies or newly created
directorship shall be filled by the stockholders, be filled only by the
affirmative vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director, and not by the stockholders. A
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office, and a director chosen to fill a position resulting
from an increase in the number of directors shall hold office until the next
election of the class for which such director shall have been chosen, subject to
the election and qualification of his successor and to his earlier death,
resignation or removal. In the event of any increase or decrease in the
authorized number of directors, (i) each director then serving as such shall
nevertheless continue as a director of the class of which he is a member and
(ii) the newly created or eliminated directorships resulting from such increase
or decrease shall be apportioned by the Board of Directors among the three
classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of office are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
7
<PAGE> 13
Section 2.3: Regular Meetings. The regular meetings of the Board of
Directors may be held at such places, within or without the State of Delaware,
and at such times as the Board of Directors may from time to time determine. The
notice of regular meetings need not be given if the date, times and places
thereof are fixed by resolution of the Board of Directors.
Section 2.4: Special Meetings. Special meetings of the Board of
Directors may be called by the Chairperson of the Board of Directors, the
President or a majority of the members of the Board of Directors then in office
and may be held at any time, date or place, within or without the State of
Delaware, as the person or persons calling the meeting shall fix. Notice of the
time, date and place of such meeting shall be given, orally or in writing, by
the person or persons calling the meeting to all directors at least four (4)
days before the meeting if the notice is mailed, or at least twenty-four (24)
hours before the meeting if such notice is given by telephone, hand delivery,
telegram, telex, mailgram, facsimile or similar communication method. Unless
otherwise indicated in the notice, any and all business may be transacted at a
special meeting.
Section 2.5: Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee of the Board of Directors, may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to conference telephone or similar communications equipment shall
constitute presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action. At all meetings of the
Board of Directors, a majority of the total number of authorized directors shall
constitute a quorum for the transaction of business. Except as otherwise
provided herein or in the Certificate of Incorporation, or required by
applicable law, the vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
Section 2.7: Organization. The meetings of the Board of Directors shall
be presided over by the Chairperson of the Board of Directors, or in such
person's absence by the President, or in such person's absence by a chairperson
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in such person's absence the chairperson of the meeting may appoint any person
to act as secretary of the meeting.
Section 2.8: Written Action by Directors. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee, respectively.
Section 2.9: Powers. The Board of Directors may, except as otherwise
required by law or the Certificate of Incorporation, exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation.
Section 2.10: Compensation of Directors. Directors, as such, may
receive, pursuant to a resolution of the Board of Directors, fees and other
compensation for their services as directors, including without limitation their
services as members of committees of the Board of Directors.
8
<PAGE> 14
ARTICLE III
COMMITTEES
Section 3.1: Committees. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting of
such committee who are not disqualified from voting, whether or not such member
or members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in a resolution
of the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers that may require it. No such committee, however, shall
have the power or authority in reference to the following matters: (i) approving
or adopting, or recommending to the stockholders, any action or matter expressly
required by the Delaware General Corporation Law to be submitted to stockholders
for approval or (ii) adopting, amending or repealing any bylaw of the
Corporation.
Section 3.2: Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
ARTICLE IV
OFFICERS
Section 4.1: Generally. The officers of the Corporation shall consist
of a Chief Executive Officer and/or a President, one or more Vice Presidents, a
Secretary, a Treasurer and such other officers, including a Chairperson of the
Board of Directors and/or Chief Financial Officer, as may from time to time be
appointed by the Board of Directors. All officers shall be elected by the Board
of Directors; provided, however, that the Board of Directors may empower the
Chief Executive Officer of the Corporation to appoint officers other than the
Chairperson of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer or the Treasurer. Each officer shall hold office until such
person's successor is elected and qualified or until such person's earlier
resignation or removal. Any number of offices may be held by the same person.
Any officer may resign at any time upon written notice to the Corporation. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled by the Board of Directors.
Section 4.2: Chief Executive Officer. Subject to the control of the
Board of Directors and such supervisory powers, if any, as may be given by the
Board of Directors, the powers and duties of the Chief Executive Officer of the
Corporation are: (a) to act as the general manager and, subject to the control
of the Board of Directors, to have general supervision, direction and
9
<PAGE> 15
control of the business and affairs of the Corporation; (b) to preside at all
meetings of the stockholders; (c) to call meetings of the stockholders to be
held at such times and, subject to the limitations prescribed by law or by these
Bylaws, at such places as he or she shall deem proper; and (d) to affix the
signature of the Corporation to all deeds, conveyances, mortgages, guarantees,
leases, obligations, bonds, certificates and other papers and instruments in
writing which have been authorized by the Board of Directors or which, in the
judgment of the Chief Executive Officer, should be executed on behalf of the
Corporation; to sign certificates for shares of stock of the Corporation; and,
subject to the direction of the Board of Directors, to have general charge of
the property of the Corporation and to supervise and control all officers,
agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the
Corporation unless the Board of Directors shall designate another officer to be
the Chief Executive Officer. If there is no President, and the Board of
Directors has not designated any other officer to be the Chief Executive
Officer, then the Chairperson of the Board of Directors shall be the Chief
Executive Officer.
Section 4.3: Chairperson of the Board. The Chairperson of the Board of
Directors shall have the power to preside at all meetings of the Board of
Directors and shall have such other powers and duties as provided in these
Bylaws and as the Board of Directors may from time to time prescribe.
Section 4.4: President. The President shall be the Chief Executive
Officer of the Corporation unless the Board of Directors shall have designated
another officer as the Chief Executive Officer of the Corporation. Subject to
the provisions of these Bylaws and to the direction of the Board of Directors,
and subject to the supervisory powers of the Chief Executive Officer, if the
Chief Executive Officer is an officer other than the President, and subject to
such supervisory powers and authority as may be given by the Board of Directors
to the Chairperson of the Board of Directors, and/or to any other officer, the
President shall have the responsibility for the general management the control
of the business and affairs of the Corporation and the general supervision and
direction of all of the officers, employees and agents of the Corporation, other
than the Chief Executive Officer, if the Chief Executive Officer is an officer
other than the President, and shall perform all duties and have all powers that
are commonly incident to the office of President or that are delegated to the
President by the Board of Directors.
Section 4.5: Vice President. Each Vice President shall have all such
powers and duties as are commonly incident to the office of Vice President, or
that are delegated to him or her by the Board of Directors or the Chief
Executive Officer. A Vice President may be designated by the Board of Directors
to perform the duties and exercise the powers of the Chief Executive Officer in
the event of the absence or disability of the Chief Executive Officer.
Section 4.6: Chief Financial Officer. The Chief Financial Officer shall
be the Treasurer of the Corporation unless the Board of Directors shall have
designated another officer as the Treasurer of the Corporation. Subject to the
direction of the Board of Directors and the Chief Executive Officer, the Chief
Financial Officer shall perform all duties and have all powers that are commonly
incident to the office of Chief Financial Officer.
10
<PAGE> 16
Section 4.7: Treasurer. The Treasurer shall have custody of all monies
and securities of the Corporation. The Treasurer shall be the Chief Financial
Officer of the Corporation unless the Board of Directors shall have designated
another officer as Chief Financial Officer of the Corporation. The Treasurer
shall make such disbursements of the funds of the Corporation as are authorized
and shall render from time to time an account of all such transactions. The
Treasurer shall also perform such other duties and have such other powers as are
commonly incident to the office of Treasurer, or as the Board of Directors or
the Chief Executive Officer may from time to time prescribe.
Section 4.8: Secretary. The Secretary shall issue or cause to be issued
all authorized notices for, and shall keep, or cause to be kept, minutes of all
meetings of the stockholders and the Board of Directors. The Secretary shall
have charge of the corporate minute books and similar records and shall perform
such other duties and have such other powers as are commonly incident to the
office of Secretary, or as the Board of Directors or the Chief Executive Officer
may from time to time prescribe.
Section 4.9: Delegation of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
Section 4.10: Removal. Any officer of the Corporation shall serve at
the pleasure of the Board of Directors and may be removed at any time, with or
without cause, by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
ARTICLE V
STOCK
Section 5.1: Certificates. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the Corporation by the
Chairperson or Vice-Chairperson of the Board of Directors, or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, of the Corporation, certifying the number of shares
owned by such stockholder in the Corporation. Any or all of the signatures on
the certificate may be a facsimile.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to agree
to indemnify the Corporation and/or to give the Corporation a bond sufficient to
indemnify it, against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
Section 5.3: Other Regulations. The issue, transfer, conversion and
registration of stock certificates shall be governed by such other regulations
as the Board of Directors may establish.
11
<PAGE> 17
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification of Officers and Directors. Each person who
was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "PROCEEDING"), by reason of the fact that
such person, or a person of whom such person is the legal representative, is or
was a director or officer of the Corporation or a Reincorporated Predecessor, as
defined below, or is or was serving at the request of the Corporation or a
Reincorporated Predecessor, as defined below, as a director or officer of
another corporation, or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by the Delaware General Corporation Law, against all expenses, liability and
loss, including attorneys' fees, judgments, fines, ERISA excise taxes and
penalties and amounts paid or to be paid in settlement, reasonably incurred or
suffered by such person in connection therewith, provided such person acted in
good faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful. Such indemnification shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of such
person's heirs, executors and administrators. Notwithstanding the foregoing, the
Corporation shall indemnify any such person seeking indemnity in connection with
a Proceeding, or part thereof, initiated by such person only if such Proceeding
or part thereof was authorized by the Board of Directors of the Corporation. As
used herein, the term "REINCORPORATED PREDECESSOR" means a corporation that is
merged with and into the Corporation in a statutory merger where (a) the
Corporation is the surviving corporation of such merger and (b) the primary
purpose of such merger is to change the corporate domicile of the Reincorporated
Predecessor to Delaware.
Section 6.2: Advance of Expenses. The Corporation shall pay all
expenses, including attorneys' fees, incurred by such a director or officer in
defending any such Proceeding as they are incurred in advance of its final
disposition; provided, however, that if the Delaware General Corporation Law
then so requires, the payment of such expenses incurred by such a director or
officer in advance of the final disposition of such Proceeding shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article VI or otherwise; and provided, further, that the Corporation shall
not be required to advance any expenses to a person against whom the Corporation
directly brings a claim, in a Proceeding, alleging that such person has breached
such person's duty of loyalty to the Corporation, committed an act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of law, or derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any
person in this Article VI shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders
or disinterested directors, or otherwise. Additionally, nothing in this
12
<PAGE> 18
Article VI shall limit the ability of the Corporation, in its discretion, to
indemnify or advance expenses to persons whom the Corporation is not obligated
to indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is
authorized to cause the Corporation to enter into indemnification contracts with
any director, officer, employee or agent of the Corporation, or any person
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing indemnification rights
to such person. Such rights may be greater than those provided in this Article
VI.
Section 6.5: Effect of Amendment. Any amendment, repeal or modification
of any provision of this Article VI shall be prospective only, and shall not
adversely affect any right or protection conferred on a person pursuant to this
Article VI and existing at the time of such amendment, repeal or modification.
ARTICLE VII
NOTICES
Section 7.1: Notice. Except as otherwise specifically provided herein
or required by law, all notices required to be given pursuant to these Bylaws
shall be in writing and may in every instance be effectively given by hand
delivery, including use of a delivery service, by depositing such notice in the
mail, postage prepaid, or by sending such notice by prepaid telegram, telex,
overnight express courier, mailgram or facsimile. Any such notice shall be
addressed to the person to whom notice is to be given at such person's address
as it appears on the records of the Corporation. The notice shall be deemed
given (i) in the case of hand delivery, when received by the person to whom
notice is to be given or by any person accepting such notice on behalf of such
person, (ii) in the case of delivery by mail, upon deposit in the mail, (iii) in
the case of delivery by overnight express courier, when dispatched, and (iv) in
the case of delivery via telegram, telex, mailgram or facsimile, when
dispatched.
Section 7.2: Waiver of Notice. Whenever notice is required to be given
under any provision of these Bylaws, a written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE VIII
INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any
13
<PAGE> 19
other corporation, partnership, association or other organization in which one
or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors or committee thereof that authorizes the contract or
transaction, or solely because his, her or their votes are counted for such
purpose, if: (i) the material facts as to his, her or their relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; (ii) the material facts as to his, her or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified by the Board of Directors, a
committee thereof, or the stockholders. Interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IX
MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
Section 9.2: Seal. The Board of Directors may provide for a corporate
seal, which shall have the name of the Corporation inscribed thereon and shall
otherwise be in such form as may be approved from time to time by the Board of
Directors.
Section 9.3: Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, magnetic tape,
diskettes, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 9.4: Reliance Upon Books and Records. A member of the Board of
Directors, or a member of any committee designated by the Board of Directors
shall, in the performance of such person's duties, be fully protected in relying
in good faith upon records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of the
officers or employees of the Corporation , or committees of the Board of
Directors, or by any other person as to matters the member reasonably believes
are within such other person's professional or expert competence and who has
been selected with reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of any
conflict between the provisions of the Certificate of Incorporation and Bylaws
of the Corporation, the provisions of the Certificate of Incorporation shall
govern.
14
<PAGE> 20
Section 9.6: Severability. If any provision of these Bylaws shall be
held to be invalid, illegal, unenforceable or in conflict with the provisions of
the Certificate of Incorporation of the Corporation, then such provision shall
nonetheless be enforced to the maximum extent possible consistent with such
holding and the remaining provisions of these Bylaws, including without
limitation, all portions of any section of these Bylaws containing any such
provision held to be invalid, illegal, unenforceable or in conflict with the
Certificate of Incorporation, that are not themselves invalid, illegal,
unenforceable or in conflict with the Certificate of Incorporation, shall remain
in full force and effect.
ARTICLE X
AMENDMENT
Section 10.1: Amendments. Following the closing of the Initial Public
Offering and notwithstanding any other provision of law, the Certificate of
Incorporation or these Bylaws, each as amended, and notwithstanding the fact
that a lesser percentage may be specified by applicable law, the Certificate of
Incorporation or the Bylaws, the affirmative vote of the holders of at least
sixty six and two-thirds percent (66 2/3%) of the outstanding voting stock then
entitled to vote at an election of directors, voting together as a single class,
shall be required to alter, amend, or repeal any provision of these Bylaws or to
adopt new Bylaws. Prior to the closing of the Initial Public Offering, the
affirmative vote of the holders of at least a majority of the outstanding voting
stock then entitled to vote at an election of directors shall be required to
alter, amend, or repeal any provision of these Bylaws or to adopt new Bylaws. To
the extent provided in the Certificate of Incorporation, the Board of Directors
of the Corporation shall also have the power to adopt, amend, or repeal these
Bylaws or to adopt new Bylaws.
15
<PAGE> 1
EXHIBIT 4.1
NUMBER SHARES
COMMON STOCK COMMON STOCK
[HANDSPRING LOGO]
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, MA AND NEW YORK, NY
CUSIP 410293 10 4
THIS CERTIFIES THAT
SEE REVERSE FOR
CERTAIN DEFINITIONS
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, PAR VALUE, $.001 PER SHARE
OF HANDSPRING, INC.
transferable on the books of the Corporation by the holder hereof in person or
by a duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated
[corporate seal]
/s/ Bernard J. Whitney /s/ Donna L. Dubinsky
CHIEF FINANCIAL OFFICER AND SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
EQUISERVE TRUST COMPANY, N.A.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
HANDSPRING, INC.
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Such requests shall be made to the Corporation's Secretary at the
principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as through they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ______________ Custodian _____________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act __________________________________
tenants in common (State)
UNIF TRF MIN ACT -- _________ Custodian (until age _______
(Cust)
______________ under Uniform Transfers
(Minor)
to Minors and ________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------------
- -----------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
-----------------------
X
-----------------------------------
X
-----------------------------------
NOTICE: THE SIGNATURE(S) TO
ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed
- -----------------------------------------------------------------------------
By THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.2
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (this
"AGREEMENT") is made and entered into as of July 7, 1999 by and among
Handspring, Inc., a California corporation (the "COMPANY"), and the persons and
entities listed on Exhibit A attached hereto (the "INVESTORS").
A. Certain of the Investors (the "PRIOR INVESTORS") are holders of
outstanding shares of the Company's Series A Preferred Stock ("SERIES A STOCK")
issued by the Company to such Prior Investors pursuant to a Series A Preferred
Stock Purchase Agreement by and among the Company and the Prior Investors dated
October 22, 1998, and have also been granted certain information and
registration rights and rights of first refusal under an Investors' Rights
Agreement by and among the Company and the Prior Investors dated October 22,
1998 (the "PRIOR RIGHTS AGREEMENT").
B. Certain Investors (the "SERIES B INVESTORS") have agreed to purchase
from the Company, and the Company has agreed to sell to the Series B Investors,
shares of the Company's Series B Preferred Stock ("SERIES B STOCK") on the terms
and conditions set forth in that certain Series B Preferred Stock Purchase
Agreement, dated of even date herewith by and among the Company and the Series B
Investors, as amended from time to time (the "SERIES B AGREEMENT").
C. The Company and the undersigned parties hereto desire to enter into
this Agreement in order to amend, restate and replace their rights and
obligations under the Prior Rights Agreement with the rights and obligations set
forth in this Agreement. Section 4.2 of the Prior Rights Agreement provides that
the Prior Rights Agreement may be amended by the written consent of the holders
of a majority of the "Investors' Shares" (as defined in Section 4.2 of the Prior
Rights Agreement) and the undersigned parties to this Agreement hold a majority
of the Investors' Shares, as defined in the Prior Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. INFORMATION RIGHTS.
1.1 Financial Information. The Company covenants and agrees
that, commencing on the date of this Agreement, for so long as any Investor
holds at least 500,000 shares of Series A Stock issued under the Series A
Agreement or Series B Stock issued under the Series B Agreement and/or the
equivalent number (on an as-converted basis) of shares of Common Stock of the
Company ("COMMON STOCK") issued upon the conversion of such shares of Series A
Stock or Series B Stock ("CONVERSION STOCK"), subject to adjustment of such
fixed share amounts for any stock splits, stock dividends, combinations,
recapitalizations or the like, or some combination thereof, the Company will:
(a) Annual Reports. Furnish to such Investor, as soon
as practicable and in any event within 90 days after the end of each
fiscal year of the Company, a
<PAGE> 2
consolidated Balance Sheet as of the end of such fiscal year, a
consolidated Statement of Income and a consolidated Statement of Cash
Flows of the Company and its subsidiaries for such year, setting forth
in each case in comparative form the figures from the Company's
previous fiscal year (if any), all prepared in accordance with
generally accepted accounting principles and practices and audited by
nationally recognized independent certified public accountants; and
(b) Quarterly Reports. Furnish to such Investor as
soon as practicable, and in any case within forty-five (45) days after
the end of each fiscal quarter of the Company (except the last quarter
of the Company's fiscal year), quarterly unaudited financial
statements, including an unaudited Balance Sheet, Statement of Income
and Statement of Cash Flows.
(c) Certification. With respect to the financial
statements called for in subsections (a) and (b) of this Section 1.1,
an instrument executed by the Chief Financial Officer or President of
the Company certifying that such financials were prepared in accordance
with GAAP consistently applied with prior practice for earlier periods
(with the exception of footnotes that may be required by GAAP) and
fairly present the financial condition of the Company and its results
of operation for the period specified, subject to year-end audit
adjustment.
(d) Other Information. Such other information
relating to the financial condition, business, prospects or corporate
affairs of the Company as the Investor or any assignee of the Investor
may from time to time request; provided, however, that (i) such
requested information must be reasonably related to the Investor's
investment in the Company and (ii) the Company shall not be obligated
under this subsection (d) or any other subsection of Section 1.1 to
provide information that it deems in good faith to be a trade secret or
similar confidential information or subject to attorney-client
privilege.
Each Investor agrees to hold all information received pursuant to this Section
in confidence, and not to use or disclose any of such information to any third
party, except to the extent such information may be made publicly available by
the Company and subject to disclosure as required by applicable law or
regulation or as permitted in writing by the Company. Notwithstanding the
foregoing, Investors may provide such information to their tax, legal,
investment and other advisors, who shall hold such information in confidence.
1.2 Inspection. The Company shall permit each Investor that
holds at least 500,000 shares of Series A Preferred Stock or Series B Preferred
Stock (and/or Common Stock issued upon conversion thereof), subject to
adjustment of such fixed share amounts for any stock splits, stock dividends,
combinations, recapitalizations or the like, or some combination thereof, at
such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Investor; provided, however, that (i) such inspection must be
reasonably related to the Investor's investment in the Company and (ii) the
-2-
<PAGE> 3
Company shall not be obligated under this Section 1.2 to provide information
that it in good faith considers to be a trade secret or similar confidential
information.
1.3 Termination of Certain Rights. The Company's obligations
under Sections 1.1 and 1.2 above will terminate upon the closing of (i) the
Company's firm commitment, underwritten initial public offering of Common Stock
pursuant to an effective registration statement filed under the U.S. Securities
Act of 1933, as amended (the "SECURITIES ACT") or (ii) a consolidation or merger
of the Company with or into any other entity that has a class of securities that
is traded on a national market or exchange in which the holders of the Company's
outstanding shares immediately before such consolidation or merger do not,
immediately after such consolidation or merger, retain stock representing a
majority of the voting power of the surviving corporation (or its parent
corporation if the surviving corporation is wholly owned by the parent
corporation) of such consolidation or merger.
2. REGISTRATION RIGHTS.
2.1 Definitions. For purposes of this Section 2:
(a) Registration. The terms "REGISTER,"
"REGISTRATION" and "REGISTERED" refer to a registration effected by preparing
and filing a registration statement in compliance with the Securities Act, and
the declaration or ordering of effectiveness of such registration statement.
(b) Registrable Securities. The term "REGISTRABLE
SECURITIES" means: (1) all the shares of Common Stock of the Company issued or
issuable upon the conversion of any shares of Series A Stock issued under the
Series A Agreement; (2) all the shares of Common Stock of the Company issued or
issuable upon the conversion of any shares of Series B Stock issued under the
Series B Agreement and (3) any shares of Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, all such shares of Common Stock
described in clauses (1) and (2) of this subsection (b); excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
rights under this Section 2 are not assigned in accordance with this Agreement
or any Registrable Securities sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act.
(c) Registrable Securities Then Outstanding. The
number of shares of "REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean the
number of shares of Common Stock which are Registrable Securities and (1) are
then issued and outstanding or (2) are then issuable pursuant to the exercise or
conversion of then outstanding and then exercisable options, warrants or
convertible securities.
(d) Holder. For purposes of this Section 2 and
Sections 3 and 4 hereof, the term "HOLDER" means any person owning of record
Registrable Securities that have not been sold to the public or pursuant to Rule
144 promulgated under the Securities Act or any assignee of record of such
Registrable Securities to whom rights under such Sections have been duly
assigned in accordance with this Agreement; provided, however, that for purposes
of this
-3-
<PAGE> 4
Agreement, a record holder of shares of Series A Stock or Series B Stock
convertible into such Registrable Securities shall be deemed to be the Holder of
such Registrable Securities; and provided, further, that the Company shall in no
event be obligated to register shares of Series A Stock or Series B Stock, and
that Holders of Registrable Securities will not be required to convert their
shares of Series A Stock or Series B Stock into Common Stock in order to
exercise the registration rights granted hereunder, until immediately before the
closing of the offering to which the registration relates.
(e) Form S-3. The term "FORM S-3" means such form
under the Securities Act as is in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
(f) SEC. The term "SEC" or "COMMISSION" means the
U.S. Securities and Exchange Commission.
2.2 Demand Registration.
(a) Request by Holders. If the Company shall receive
at any time after the earlier of September 30, 2002, or six (6) months after the
effective date of the Company's initial public offering of its securities
pursuant to a registration filed under the Securities Act, a written request
from the Holders of at least a majority of the Registrable Securities then
outstanding that the Company file a registration statement under the Securities
Act covering the registration of Registrable Securities pursuant to this Section
2.2, then the Company shall, within twenty (20) days after the receipt of such
written request, give written notice of such request ("REQUEST NOTICE") to all
Holders, and effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities which Holders request to be
registered and included in such registration by written notice given by such
Holders to the Company within twenty (20) days after receipt of the Request
Notice, subject only to the limitations of this Section 2; provided that the
Registrable Securities requested by all Holders to be registered pursuant to
such request must have an anticipated aggregate public offering price (before
any underwriting discounts and commissions) of not less than $20,000,000.
(b) Underwriting. If the Holders initiating the
registration request under this Section 2.2 ("INITIATING HOLDERS") intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, then they shall so advise the Company as a part of their request
made pursuant to this Section 2.2 and the Company shall include such information
in the written notice referred to in subsection 2.2(a). In such event, the right
of any Holder to include his Registrable Securities in such registration shall
be conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 2.2, if the underwriter(s)
-4-
<PAGE> 5
advise(s) the Company in writing that marketing factors require a limitation of
the number of securities to be underwritten then the Company shall so advise all
Holders of Registrable Securities that would otherwise be registered and
underwritten pursuant hereto, and the number of Registrable Securities that may
be included in the underwriting shall be reduced as required by the
underwriter(s) and allocated among the Holders of Registrable Securities on a
pro rata basis according to the number of Registrable Securities then
outstanding held by each Holder requesting registration (including the
Initiating Holders); provided, however, that the number of shares of Registrable
Securities to be included in such underwriting and registration shall not be
reduced unless all other securities of the Company and all other selling
shareholders other than the Holders (if any) are first entirely excluded from
the underwriting and registration. Any Registrable Securities excluded and
withdrawn from such underwriting shall be withdrawn from the registration.
(c) Maximum Number of Demand Registrations. The
Company is obligated to effect only two (2) such registrations pursuant to this
Section 2.2.
(d) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a registration
statement pursuant to this Section 2.2, a certificate signed by the President or
Chief Executive Officer of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be detrimental to the Company
and its shareholders for such registration statement to be filed and it
therefore wishes to defer the filing of such registration statement, then the
Company shall have the right to defer such filing for a period of not more than
180 days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve (12) month period.
(e) Expenses. All expenses incurred in connection
with a registration pursuant to this Section 2.2, including without limitation
all registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, (but excluding underwriters' discounts
and commissions and fees and disbursements of any counsel for the selling
Holders), shall be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2.2 shall bear such Holder's proportionate
share (based on the total number of shares sold on behalf of the Holders in such
registration other than for the account of the Company) of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering and the fees and disbursements of any counsel for the
participating Holders. Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to this Section 2.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered, unless the Holders of a majority of the Registrable Securities then
outstanding agree to forfeit their right to one (1) demand registration pursuant
to this Section 2.2 (in which case such right shall be forfeited by all Holders
of Registrable Securities); provided, further, however, that if at the time of
such withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company not known to the Holders at the
time of their request for such registration and have withdrawn their request for
registration with reasonable promptness after learning of such material adverse
-5-
<PAGE> 6
change, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to this Section 2.2.
2.3 Piggyback Registrations. The Company shall notify all
Holders of Registrable Securities in writing at least twenty (20) days prior to
filing any registration statement under the Securities Act for purposes of
effecting a public offering of securities of the Company (including, but not
limited to, registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to any
registration under Section 2.2 or Section 2.4 of this Agreement or to any
employee benefit plan or a corporate reorganization or other transaction under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by
such Holder shall, within twenty (20) days after receipt of the above-described
notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities such Holder
wishes to include in such registration statement. The Company shall, subject to
Section 2.3(a), use reasonable efforts to cause to be registered under the
Securities Act all of the Registrable Securities that each such Holder has
requested to be registered pursuant to this Section 2.3. If a Holder decides not
to include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(a) Underwriting. If a registration statement under
which the Company gives notice under this Section 2.3 is for an underwritten
offering, then the Company shall so advise the Holders of Registrable
Securities. In such event, the right of any such Holder's Registrable Securities
to be included in a registration pursuant to this Section 2.3 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the managing underwriter or underwriter(s) selected for
such underwriting. Notwithstanding any other provision of this Agreement, if the
managing underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first, to the
Company and second, to each of the Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Registrable Securities then held by each such Holder;
provided however, that the right of the underwriters to exclude shares
(including Registrable Securities) from the registration and underwriting as
described above shall be restricted so that all shares that are not Registrable
Securities and are held by persons who are employees of the Company (or any
subsidiary of the Company) shall first be excluded from such registration and
underwriting before any Registrable Securities are so excluded and so that the
number of Registrable Securities included in any such registration is not
-6-
<PAGE> 7
reduced below 25% of the shares included in the registration, except for a
registration relating to the Company's initial public offering from which all
Registrable Securities may be excluded. If any Holder disapproves of the terms
of any such underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least fifteen (15) days
prior to the effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration. For any Holder that is a partnership or
corporation, the partners, retired partners and shareholders of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "Holder," and any pro rata reduction with respect to such "Holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "Holder," as defined in this
sentence.
(b) Expenses. All expenses incurred in connection
with a registration pursuant to this Section 2.3 (excluding underwriters' and
brokers' discounts and commissions and fees and disbursements of any counsel for
the selling Holders), including, without limitation all federal and "blue sky"
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.
2.4 Form S-3 Registration. In case the Company shall receive
from any Holder or Holders of Registrable Securities then outstanding a written
request or requests that the Company effect a registration on Form S-3 and any
related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, then the Company will:
(a) Notice. Promptly give written notice of the
proposed registration and the Holder's or Holders' request therefor, and any
related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) Registration. As soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this Section 2.4:
(1) if Form S-3 is not available for such
offering;
(2) if the Holders, together with the
holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less
than $2,000,000;
-7-
<PAGE> 8
(3) if the Company shall furnish to the
Holders a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be detrimental to the
Company and its shareholders for such Form S-3 Registration to be
effected at such time, in which event the Company shall have the right
to defer the filing of the Form S-3 registration statement no more than
once during any twelve month period for a period of not more than 180
days after receipt of the request of the Holder or Holders under this
Section 2.4;
(4) if the Company has, within the twelve
(12) month period preceding the date of such request, already effected
one (1) registration on Form S-3 for the Holders pursuant to this
Section 2.4; or
(5) in any particular jurisdiction in which
the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Expenses. Subject to the foregoing, the Company
shall file a Form S-3 registration statement covering the Registrable Securities
and other securities so requested to be registered pursuant to this Section 2.4
as soon as practicable after receipt of the request or requests of the Holders
for such registration. The Company shall pay all expenses incurred in connection
with the first registration requested pursuant to this Section 2.4, (excluding
underwriters' or brokers' discounts and commissions and fees of any counsel for
the selling Holders), including without limitation all filing, registration and
qualification, printers' and accounting fees and the reasonable fees and
disbursements of counsel for the Company. All expenses incurred in connection
with any subsequent registration requested pursuant to this Section 2.4 shall be
borne by the Holders who participate in such registration on a pro rata basis
according to the number of Registrable Securities owned by the Holders that are
included in such registration at the time it goes effective.
(d) Not Demand Registration. Form S-3 registrations
shall not be deemed to be demand registrations as described in Section 2.2
above.
2.5 Obligations of the Company. Whenever required to effect
the registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use
reasonable, diligent efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of
the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120)
days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such
-8-
<PAGE> 9
registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by them that are included in such
registration.
(d) Use reasonable, diligent efforts to register and
qualify the securities covered by such registration statement under
such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Holders, provided that the Company shall
not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement,
in usual and customary form, with the managing underwriter(s) of such
offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such
Registrable Securities are delivered to the underwriters for sale, if
such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that
the registration statement with respect to such securities becomes
effective, (1) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an
underwritten public offering and reasonably satisfactory to a majority
in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (2) a "comfort" letter dated as of such
date, from the independent certified public accountants of the Company,
in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
-9-
<PAGE> 10
2.6 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to Sections 2.2, 2.3
or 2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of their Registrable Securities.
2.7 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.
2.8 Indemnification. In the event any Registrable Securities
are included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) By the Company. To the extent permitted by law,
the Company will indemnify and hold harmless each Holder, the partners,
officers, directors and shareholders of each Holder, any underwriter (as defined
in the Securities Act) for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended, (the "1934 ACT"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the l934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, "VIOLATIONS" and, individually, a
"VIOLATION"):
(1) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto;
(2) the omission or alleged omission to
state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or
(3) any violation or alleged violation by
the Company of the Securities Act, the 1934 Act, any federal or state
securities law or any rule or regulation promulgated under the
Securities Act, the 1934 Act or any federal or state securities law in
connection with the offering covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
shareholder, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this subsection 2.8(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
-10-
<PAGE> 11
use in connection with such registration by such Holder, partner, officer,
director, shareholder, underwriter or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by
law, each selling Holder will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration statement,
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder within the meaning of the
Securities Act or the 1934 Act, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, partner or
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
2.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; and provided
further, that the total amounts payable in indemnity by a Holder under this
Section 2.8(b) in respect of any Violation shall not exceed the net proceeds
received by such Holder in the registered offering out of which such Violation
arises.
(c) Notice. Promptly after receipt by an indemnified
party under this Section 2.8 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
2.8, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential conflict of interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.8.
-11-
<PAGE> 12
(d) Defect Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Company and Holders are subject to the
condition that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
SEC at the time the registration statement in question becomes effective or the
amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "FINAL
PROSPECTUS"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished by or on behalf of such indemnified person, if required by
law so to have been delivered, to the person asserting the loss, liability,
claim or damage at or prior to the time such action is required by the
Securities Act.
(e) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any case
in which either (1) any Holder exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this Section 2.8 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 2.8 provides for indemnification in such case, or (2) contribution
under the Securities Act may be required on the part of any such selling Holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 2.8; then, and in each such case, the Company and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by and sold under the registration statement bears to the public
offering price of all securities offered by and sold under such registration
statement, and the Company and other selling Holders are responsible for the
remaining portion; provided, however, that, in any such case, (A) no such Holder
will be required to contribute any amount in excess of the public offering price
of all such Registrable Securities offered and sold by such Holder pursuant to
such registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and
Holders under this Section 2.8 shall survive the completion of any offering of
Registrable Securities in a registration statement, and otherwise.
2.9 "Market Stand-Off" Agreement. Each Holder hereby agrees
that it shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any
Registrable Securities or other shares of stock of the Company then owned by
such Holder (other than to donees or partners of the Holder who agree to be
similarly bound) for up to one hundred eighty (180) days following the effective
date of a registration statement of the Company filed under the Securities Act;
provided, however, that:
-12-
<PAGE> 13
(a) such agreement shall be applicable only to the
first such registration statement of the Company which covers
securities to be sold on its behalf to the public in an underwritten
offering but not to Registrable Securities sold pursuant to such
registration statement; and
(b) all officers, directors and one percent (1%)
shareholders of the Company enter into similar agreements.
In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section and to impose stop transfer instructions with respect to the
Registrable Securities and such other shares of stock of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
2.10 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to:
(a) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities
Act, at all times after the effective date of the first registration
under the Securities Act filed by the Company for an offering of its
securities to the general public;
(b) Use reasonable, diligent efforts to file with the
Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the 1934 Act (at any time
after it has become subject to such reporting requirements); and
(c) So long as a Holder owns any Registrable
Securities, to furnish to the Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company
for an offering of its securities to the general public), and of the
Securities Act and the 1934 Act (at any time after it has become
subject to the reporting requirements of the 1934 Act), a copy of the
most recent annual or quarterly report of the Company, and such other
reports and documents of the Company as a Holder may reasonably request
in availing itself of any rule or regulation of the Commission allowing
a Holder to sell any such securities without registration (at any time
after the Company has become subject to the reporting requirements of
the 1934 Act).
2.11 Termination of the Company's Obligations. The Company
shall have no obligations pursuant to Sections 2.2 through 2.4 with respect to:
(a) any request or requests for registration made by any Holder on a date more
than five (5) years after the closing date of the Company's initial public
offering in which the aggregate public offering price (before deduction of
underwriters' discounts and commissions) equals or exceeds $20,000,000 and the
public
-13-
<PAGE> 14
offering price per share of which equals or exceeds $10.77 per share before
deduction of underwriters' discounts and commissions (such price per share of
Common Stock to be appropriately adjusted to reflect subdivisions, combinations,
stock dividends and similar transactions affecting the number of outstanding
shares of Common Stock); or (b) any Registrable Securities proposed to be sold
by a Holder in a registration pursuant to Section 2.2, 2.3 or 2.4 if, in the
opinion of counsel to the Company, all such Registrable Securities proposed to
be sold by a Holder may be sold in a three-month period without registration
under the Securities Act pursuant to Rule 144 under the Securities Act.
3. RIGHT OF FIRST REFUSAL.
3.1 General. Each Holder (as defined in Section 2.1(d)) (each
such Holder or assignee being hereinafter referred to as a "RIGHTS HOLDER") has
the right of first refusal to purchase such Rights Holder's Pro Rata Share (as
defined below), of all (or any part) of any "New Securities" (as defined in
Section 3.2) that the Company may from time to time issue after the date of this
Agreement. A Rights Holder's "PRO RATA SHARE" for purposes of this right of
first refusal is the ratio of (a) the number of Registrable Securities as to
which such Rights Holder is the Holder (and/or is deemed to be the Holder under
Section 2.1(d)), to (b) a number of shares of Common Stock of the Company equal
to the sum of (1) the total number of shares of Common Stock of the Company then
outstanding plus (2) the total number of shares of Common Stock of the Company
into which all then outstanding shares of Preferred Stock of the Company are
then convertible plus (3) the number of shares of Common Stock of the Company
reserved for issuance under stock purchase and stock option plans of the Company
and outstanding warrants.
3.2 New Securities. "NEW SECURITIES" shall mean any Common
Stock or Preferred Stock of the Company, whether now authorized or not, and
rights, options or warrants to purchase such Common Stock or Preferred Stock,
and securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or Preferred Stock; provided, however, that
the term "New Securities" does not include:
(a) any shares of the Company's Common Stock (and/or
options or warrants therefor) issued (if in transactions that are
primarily for non-financing purposes) to employees, officers,
directors, contractors, advisors or consultants of the Company pursuant
to incentive agreements or plans approved by the Board of Directors of
the Company;
(b) any shares of Series A Preferred Stock issued
under the Series A Agreement, as of the date hereof;
(c) any shares of Series A Preferred Stock issued or
issuable to Comdisco, Inc. pursuant to a Subordinated Loan and Security
Agreement;
(d) any shares of Series B Preferred Stock issued
under the Series B Agreement, as such agreement may be amended;
-14-
<PAGE> 15
(e) any securities issuable upon conversion of or
with respect to any then outstanding shares of Series A Stock or Series
B Stock of the Company or Common Stock or other securities issuable
upon conversion thereof;
(f) any securities issuable upon exercise of any
options, warrants or rights to purchase any securities of the Company
outstanding on the date of this Agreement ("WARRANT SECURITIES") and
any securities issuable upon the conversion of any Warrant Securities
or upon the exercise or conversion of any securities, if such
securities were first offered to the Rights Holders hereunder;
(g) shares of the Company's Common Stock or Preferred
Stock issued in connection with any stock split or stock dividend;
(h) securities offered by the Company to the public
pursuant to a registration statement filed under the Securities Act;
(i) any shares of the Company's Common Stock or
Preferred Stock (and/or options or warrants therefor) issued or
issuable to parties providing the Company with equipment leases, real
property leases, loans, credit lines, guaranties of indebtedness, cash
price reductions or similar transactions, provided such issuances are
pursuant to transactions with primarily non-equity financing purposes;
or
(j) securities issued pursuant to the bona fide
acquisition of another corporation or entity by the Company by
consolidation, merger, purchase of all or substantially all of the
assets, or other reorganization in which the Company acquires, in a
single transaction or series of related transactions, all or
substantially all of the assets of such other corporation or entity or
fifty percent (50%) or more of the voting power of such other
corporation or entity or fifty percent (50%) or more of the equity
ownership of such other entity.
3.3 Procedures. In the event that the Company proposes to
undertake an issuance of New Securities, it shall give to each Rights Holder
written notice of its intention to issue New Securities (the "NOTICE"),
describing the type of New Securities and the price and the general terms upon
which the Company proposes to issue such New Securities. Each Rights Holder
shall have ten (10) days from the date of mailing of any such Notice to agree in
writing to purchase up to such Rights Holder's Pro Rata Share of such New
Securities for the price and upon the general terms specified in the Notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased (not to exceed such Rights Holder's Pro Rata Share).
If any Rights Holder fails to so agree in writing within such ten (10) day
period to purchase such Rights Holder's full Pro Rata Share of an offering of
New Securities (a "NONPURCHASING HOLDER"), then such Nonpurchasing Holder shall
forfeit the right hereunder to purchase that part of his Pro Rata Share of such
New Securities that he did not so agree to purchase and the Company shall
promptly give each Rights Holder who has timely agreed to purchase his full Pro
Rata Share of such offering of New Securities (a "PURCHASING HOLDER") written
notice of the failure of any Nonpurchasing Holder to purchase such Nonpurchasing
Holder's full Pro Rata Share of such offering of New Securities (the
"OVERALLOTMENT NOTICE").
-15-
<PAGE> 16
Each Purchasing Holder shall have a right of overallotment
such that such Purchasing Holder may agree to purchase a portion of the
Nonpurchasing Holders' unpurchased Pro Rata Shares of such offering on a pro
rata basis according to the relative Pro Rata Shares of the Purchasing Rights
Holders, at any time within five (5) days after receiving the Overallotment
Notice.
3.4 Failure to Exercise. In the event that the Rights Holders
fail to exercise in full the right of first refusal within such ten (10) plus
five (5) day period, then the Company shall have 120 days thereafter to sell the
New Securities with respect to which the Rights Holders' rights of first refusal
hereunder were not exercised, at a price and upon general terms no more
favorable to the purchasers thereof than specified in the Company's Notice to
the Rights Holders. In the event that the Company has not issued and sold the
New Securities within such 120 day period, then the Company shall not thereafter
issue or sell any New Securities without again first offering such New
Securities to the Rights Holders pursuant to this Section 3.
3.5 Termination. This right of first refusal shall terminate
(a) immediately before the closing of the first underwritten sale of Common
Stock of the Company to the public pursuant to a registration statement filed
with, and declared effective by, the SEC under the Securities Act, covering the
offer and sale of Common Stock to the public in which the aggregate public
offering price (before deduction of underwriters' discounts and commissions)
equals or exceeds $20,000,000 and the public offering price per share of which
equals or exceeds $10.77 per share before deduction of underwriters' discounts
and commissions (such price per share of Common Stock to be appropriately
adjusted to reflect subdivisions, combinations, stock dividends and similar
transactions affecting the number of outstanding shares of Common Stock) or (b)
upon (1) the acquisition of all or substantially all the assets of the Company
or (2) an acquisition of the Company by another corporation or entity by
consolidation, merger or other reorganization in which the holders of the
Company's outstanding voting stock immediately prior to such transaction own,
immediately after such transaction, securities representing less than fifty
percent (50%) or more of the voting power of the corporation or other entity
(including parent corporation) surviving such transaction.
4. ASSIGNMENT AND AMENDMENT.
4.1 Assignment. Notwithstanding anything herein to the
contrary:
(a) Information Rights. The rights of an Investor
under Section 1.1 hereof may be assigned only to a party who acquires from an
Investor (or an Investor's permitted assigns) at least that number of shares of
Series A Stock or Series B Stock and/or an equivalent number (on an as-converted
basis) of shares of Conversion Stock described in Section 1.1 hereof.
(b) Registration Rights. The registration rights of a
Holder under Section 2 hereof may be assigned only to a party who (i) acquires
at least 500,000 shares of Series A Stock issued under the Series A Agreement or
at least 500,000 shares of Series B Stock issued under the Series B Agreement
and/or an equivalent number (on an as-converted basis) of Registrable Securities
issued upon conversion thereof, (ii) is a subsidiary, parent, partner, limited
partner, retired partner or shareholder of a Holder or (iii) is a Holder's
family member or trust for the benefit of an individual Holder; provided,
however that no party may be assigned any of the
-16-
<PAGE> 17
foregoing rights unless the Company is given written notice by the assigning
party at the time of such assignment stating the name and address of the
assignee and identifying the securities of the Company as to which the rights in
question are being assigned; and provided further that any such assignee shall
receive such assigned rights subject to all the terms and conditions of this
Agreement, including without limitation the provisions of this Section 4.
4.2 Amendment of Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors (and/or any of their permitted
successors or assigns) holding shares of Series A Stock, Series B Stock and/or
Conversion Stock representing and/or convertible into a majority of all the
Investors' Shares (as defined below); provided, that any amendment or waiver
that treats any Investor in a materially adverse manner that is different than
any other Investor will require the separate approval of such Investor. As used
herein, the term "INVESTORS' SHARES" shall mean the shares of Common Stock then
issuable upon conversion of (i) all then outstanding shares of Series A Stock
issued under the Series A Agreement and (ii) all then outstanding shares of
Series B Stock issued under the Series B Agreement, plus all then outstanding
shares of Conversion Stock. Any amendment or waiver effected in accordance with
this Section 4.2 shall be binding upon each Investor, each Holder, each
permitted successor or assignee of such Investor or Holder and the Company.
4.3 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders holding shares of Series A Stock, Series B Stock
and/or Conversion Stock representing and/or convertible into a majority of all
the Investors' Shares, enter into any agreement with any holder or prospective
holder of any securities of the Company that would allow such holder or
prospective holder (a) to include such securities in any registration statement
filed under Section 2.3 hereof, unless under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of such securities will not
reduce the amount of the Registrable Securities of the Holders that are included
or (b) to demand registration of their securities.
5. GENERAL PROVISIONS.
5.1 Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if (1) sent via facsimile and (2) personally delivered or if
deposited in the U.S. mail by registered or certified mail, return receipt
requested, postage prepaid, as follows:
(a) if to an Investor, at such Investor's respective
address and facsimile number as set forth on Exhibit A hereto.
(b) if to the Company, at 299 California Avenue,
Suite 300, Palo Alto, California 94306 and facsimile (650) 566-2222.
-17-
<PAGE> 18
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail in the manner set forth above.
5.2 Entire Agreement. This Agreement, together with all the
Exhibits hereto, constitutes and contains the entire agreement and understanding
of the parties with respect to the subject matter hereof and supersedes any and
all prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
5.3 Governing Law. This Agreement shall be governed by and
construed exclusively in accordance with the internal laws of the State of
California as applied to agreements among California residents entered into and
to be performed entirely within California, excluding that body of law relating
to conflict of laws and choice of law.
5.4 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, then such provision(s) shall
be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
5.5 Third Parties. Nothing in this Agreement, express or
implied, is intended to confer upon any person, other than the parties hereto
and their successors and assigns, any rights or remedies under or by reason of
this Agreement.
5.6 Successors And Assigns. Subject to the provisions of
Section 4.1, the provisions of this Agreement shall inure to the benefit of, and
shall be binding upon, the successors and permitted assigns of the parties
hereto.
5.7 Captions. The captions to sections of this Agreement have
been inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.
5.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.9 Costs And Attorneys' Fees. In the event that any action,
suit or other proceeding is instituted concerning or arising out of this
Agreement or any transaction contemplated hereunder, the prevailing party shall
recover all of such party's costs and reasonable attorneys' fees incurred in
each such action, suit or other proceeding, including any and all appeals or
petitions therefrom.
5.10 Adjustments for Stock Splits, Etc. Wherever in this
Agreement there is a reference to a specific number of shares of Common Stock or
Preferred Stock of the Company of any class or series, then, upon the occurrence
of any subdivision, combination or stock dividend of such class or series of
stock, the specific number of shares so referenced in this Agreement
-18-
<PAGE> 19
shall automatically be proportionally adjusted to reflect the affect on the
outstanding shares of such class or series of stock by such subdivision,
combination or stock dividend.
5.11 Aggregation of Stock. All shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
5.12 Prior Agreement Superseded. Pursuant to Section 4.2 of
the Prior Rights Agreement, the undersigned parties who are parties to such
Prior Rights Agreement hereby restate the Prior Rights Agreement to read in its
entirety as set forth in this Agreement, such that the Prior Rights Agreement is
hereby terminated and entirely replaced and superseded by this Agreement.
-19-
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.
HANDSPRING, INC:
Name: /s/ DONNA L. DUBINSKY
--------------------------------------
Donna L. Dubinsky
President
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
-20-
<PAGE> 21
THE INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VIII, L.P.
By: KPCB VIII Associates, L.P., its
General Partner
By: /s/ L. JOHN DOERR
-------------------------------------------
a General Partner
KPCB VIII FOUNDERS FUND, L.P.
By: KPCB VIII Associates, L.P., its
General Partner
By: /s/ L. JOHN DOERR
-------------------------------------------
a General Partner
KPCB INFORMATION SCIENCES
ZAIBATSU FUND II, L.P.
By: KPCB VII Associates, L.P., its
General Partner
By: /s/ L. JOHN DOERR
-------------------------------------------
a General Partner
BENCHMARK CAPITAL PARTNERS II, L.P.
as nominee for
Benchmark Capital Partners, II, L.P.
Benchmark Founders' Fund II, L.P.
Benchmark Founders' Fund II-A, L.P. and
Benchmark Members' Fund II, L.P.
By: Benchmark Capital Management
Co. II, L.L.C., General Partner
By: /s/ BRUCE DUNLEVIE
-------------------------------------------
Managing Member
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
-21-
<PAGE> 22
QUALCOMM INCORPORATED
By: /s/ ANTHONY S. THORNLEY
-------------------------------------------
Name: Anthony S. Thornley
-----------------------------------------
Title: Executive VP, CFO
----------------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
-22-
<PAGE> 23
EXHIBIT A
LIST OF INVESTORS
<TABLE>
<CAPTION>
SHARES OF SERIES A SHARES OF SERIES B
INVESTOR STOCK PURCHASED STOCK PURCHASED
- -------- ----------------- ------------------
<S> <C> <C>
KLEINER PERKINS CAUFIELD & BYERS VIII, L.P. 3,721,847 128,357
2750 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-0300
KPCB VIII FOUNDERS FUND, L.P. 215,654 7,437
2750 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-0300
KPCB INFORMATION SCIENCES 100,961 3,482
ZAIBATSU FUND II, L.P.
2750 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-0300
BENCHMARK CAPITAL PARTNERS II, L.P. 4,038,462 139,276
as nominee for
Benchmark Capital Partners, II, L.P.
Benchmark Founders' Fund II, L.P.
Benchmark Founders' Fund II-A, L.P. and
Benchmark Members' Fund II, L.P.
2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 854-8183
QUALCOMM INCORPORATED 0 649,954
Attn: Chief Financial Officer
5775 Morehouse Avenue
San Diego, CA 92121-1714
Fax: (858) 658-2501
</TABLE>
<PAGE> 1
EXHIBIT 5.01
May 16, 2000
Handspring, Inc.
189 Bernardo Avenue
Mountain View, CA 94043
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form S-1
(File Number 333-33666) (the "REGISTRATION STATEMENT") filed by Handspring,
Inc., a Delaware corporation (the "COMPANY"), with the Securities and Exchange
Commission (the "COMMISSION") on March 31, 2000, Amendment No. 1 thereto filed
on April 24, 2000, and Amendment No. 2 to be filed on or about the date hereof,
in connection with the registration under the Securities Act of 1933, as
amended, of an aggregate of 11,500,000 shares of the Company's Common Stock
(the "STOCK").
In rendering this opinion, we have examined the following.
(1) the Company's First Amended and Restated Certificate of
Incorporation, certified by the Delaware Secretary of State on
May 16, 2000.
(2) the Company's Restated Bylaws, certified by the Company's
Secretary on May 16, 2000.
(3) the Registration Statement, together with the Exhibits filed as a
part thereof or incorporated therein by reference.
(4) the Prospectus prepared in connection with the Registration
Statement.
(5) the minutes of meetings and actions by written consent of the
stockholders and Board of Directors that are contained in the
Company's minute books and the minute books of your predecessor,
Handspring, Inc., a California corporation ("HANDSPRING
CALIFORNIA"), that are in our possession.
(6) the stock records for both the Company and Handspring California
that the Company has provided to us (consisting of a list of
stockholders and a list of option holders respecting the
Company's capital and of any rights to purchase capital stock
that was prepared by the Company and dated May 16, 2000 verifying
the number of such issued and outstanding securities).
(7) a Management Certificate addressed to us and dated of even date
herewith executed by the Company containing certain factual and
other representations.
<PAGE> 2
May 16, 2000
Page 2
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents submitted
to us as originals, the conformity to originals and completeness of all
documents submitted to us as copies, the legal capacity of all persons or
entities executing the same, the lack of any undisclosed termination,
modification, waiver or amendment to any document reviewed by us and the due
authorization, execution and delivery of all documents where due authorization,
execution and delivery are prerequisites to the effectiveness thereof. We have
also assumed that the certificates representing the Stock have been, or will be
when issued, properly signed by authorized officers of the Company or their
agents.
As to matters of fact relevant to this opinion, we have relied solely
upon our examination of the documents referred to above and have assumed the
current accuracy and completeness of the information obtained from public
officials, records and documents referred to above. We have made no independent
investigation or other attempt to verify the accuracy of any of such information
or to determine the existence or non-existence of any other factual matters;
however, we are not aware of any facts that would cause us to believe that the
opinion expressed herein is not accurate.
We are admitted to practice law in the State of California, and we
render this opinion only with respect to, and express no opinion herein
concerning the application or effect of the laws of any jurisdiction other than,
the existing laws of the United States of America, of the State of California
and, with respect to the validity of corporate action and the requirements for
the issuance of stock, of the State of Delaware.
In connection with our opinion expressed below, we have assumed that, at
or prior to the time of the delivery of any shares of Stock, the Registration
Statement will have been declared effective under the Securities Act of 1933, as
amended, that the registration will apply to such shares of Stock and will not
have been modified or rescinded and that there will not have occurred any change
in law affecting the validity or enforceability of such shares of Stock.
Based upon the foregoing, it is our opinion that the up to 11,500,000
shares of Stock to be issued and sold by the Company, when issued, sold and
delivered in the manner and for the consideration stated in the Registration
Statement and the Prospectus, will be validly issued, fully paid and
nonassessable.
<PAGE> 3
May 16, 2000
Page 3
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto. This opinion speaks only as of its date and we assume no
obligation to update this opinion should circumstances change after the date
hereof. This opinion is intended solely for use in connection with the issuance
and sale of shares subject to the Registration Statement and is not to be relied
upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
By: /s/ Dennis R. DeBroeck
--------------------------------
Dennis R. DeBroeck
<PAGE> 1
EXHIBIT 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement (this "AGREEMENT"), dated as of _________,
____, is made by and between Handspring, Inc., a Delaware corporation (the
"COMPANY"), and _________________________, a director and/or officer of the
Company (the "INDEMNITEE").
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations unless
they are protected by comprehensive liability insurance and/or indemnification,
due to increased exposure to litigation costs and risks resulting from their
service to such corporations, and due to the fact that the exposure frequently
bears no reasonable relationship to the compensation of such directors and
officers;
B. Based on their experience as business managers, the Board of
Directors of the Company (the "BOARD OF DIRECTORS") has concluded that, to
retain and attract talented and experienced individuals to serve as officers and
directors of the Company, and to encourage such individuals to take the business
risks necessary for the success of the Company, it is necessary for the Company
contractually to indemnify officers and directors and to assume for itself
maximum liability for expenses and damages in connection with claims against
such officers and directors in connection with their service to the Company;
C. Section 145 of the General Corporation Law of Delaware, under which
the Company is organized (the "DELAWARE LAW"), empowers the Company to indemnify
by agreement its officers, directors, employees, agents and persons who serve,
at the request of the Company, as directors, officers, employees or agents of
other corporations or enterprises, and expressly provides that the
indemnification provided by the Law is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or officer of the Company free from undue
concern for claims for damages arising out of or related to such services to the
Company.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS.
1.1 Agent. For the purposes of this Agreement, "AGENT" of the
Company means any person who (a) is or was a director or officer of the Company
or a subsidiary of the Company, (b) is or was serving at the request of, for the
convenience of, or to represent the interest of the Company or a subsidiary of
the Company as a director or officer of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise or an affiliate of the
Company; or (c) was a director or officer of a foreign or domestic corporation
which was a predecessor corporation of the Company, including, without
limitation, Handspring, Inc., a California corporation, or was a director or
officer of another enterprise or affiliate of the Company at the request of, for
the convenience of, or to represent the interests of such
1
<PAGE> 2
predecessor corporation. The term "ENTERPRISE" includes any employee benefit
plan of the Company, its subsidiaries, affiliates and predecessor corporations.
1.2 Expenses. For purposes of this Agreement, "EXPENSES"
includes all direct and indirect costs of any type or nature whatsoever,
including, without limitation, all attorneys' fees and related disbursements and
other out-of-pocket costs actually and reasonably incurred by the Indemnitee in
connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification or advancement of expenses
under this Agreement, Section 145 or otherwise; provided, however, that expenses
shall not include any judgments, fines, ERISA excise taxes or penalties or
amounts paid in settlement of a proceeding.
1.3 Proceeding. For the purposes of this Agreement,
"PROCEEDING" means any threatened, pending or completed action, suit or other
proceeding, whether civil, criminal, administrative, investigative or any other
type whatsoever arising on or after the date of this Agreement, regardless of
when the act of Indemnities or failure to act occurred.
1.4 Subsidiary. For purposes of this Agreement, "SUBSIDIARY"
means any corporation of which more than fifty percent (50%) of the outstanding
voting securities is owned directly or indirectly by the Company, by the Company
and one or more of its subsidiaries or by one or more subsidiaries of the
Company.
2. AGREEMENT TO SERVE. The Indemnitee agrees to serve and/or continue
to serve as an agent of the Company, at the will of the Company, or under
separate agreement, if such agreement exists, in the capacity the Indemnitee
currently serves as an agent of the Company, faithfully and to the best of his
ability, so long as he is duly appointed or elected and qualified in accordance
with the applicable provisions of the charter documents of the Company or any
subsidiary of the Company; provided, however, that the Indemnitee may at any
time and for any reason resign from such position, subject to any contractual
obligation that the Indemnitee may have assumed apart from this Agreement, and
the Company or any subsidiary shall have no obligation under this Agreement to
continue the Indemnitee in any such position.
3. DIRECTORS' AND OFFICERS' INSURANCE. The Company shall, to the extent
that the Board of Directors determines it to be economically reasonable,
maintain a policy of directors' and officers' liability insurance ("DIRECTOR AND
OFFICER INSURANCE"), on such terms and conditions as may be approved by the
Board of Directors, BUT IN NO EVENT LESS THAN $[ ].
4. MANDATORY INDEMNIFICATION. Subject to Section 9 below, the Company
shall indemnify the Indemnitee as provided in this Agreement, and to the fullest
extent permitted by law.
4.1 Third Party Actions. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any proceeding other than
an action by or in the right of the Company, by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, the Company shall indemnify Indemnitee against any and all
expenses and liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding if he acted in
good faith and in a manner he reasonably believed to
2
<PAGE> 3
be in, or not opposed to, the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Notwithstanding the preceding, it is the intention of the
parties hereto that Indemnitee shall be indemnified to the full extent
authorized or permitted by Delaware Law and, therefore, to the extent Delaware
Law shall permit broader contractual indemnification, this contract shall be
deemed amended to incorporate such broader indemnification.
4.2 Derivative Actions. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any proceeding by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that he is or was an agent of the Company, or by reason of anything done or not
done by him in any such capacity, the Company shall indemnify the Indemnitee
against any amounts paid in settlement of any such proceeding and all expenses
actually and reasonably incurred by him in connection with the investigation,
defense, settlement or appeal of such proceeding if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Company; provided, however, that no indemnification under this
subsection shall be made in respect of any claim, issue or matter as to which
such person shall have been finally adjudged to be liable to the Company by a
court of competent jurisdiction due to willful misconduct of a culpable nature
in the performance of his duty to the Company, unless and only to the extent
that the Court of Chancery or the court in which such proceeding was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such amounts which the Court of Chancery or
such other court shall deem proper. Notwithstanding the preceding, it is the
intention of the parties hereto that Indemnitee shall be indemnified to the full
extent authorized or permitted by Delaware Law and, therefore, to the extent
Delaware Law shall permit broader contractual indemnification, this contract
shall be deemed amended to incorporate such broader indemnification.
4.3 Exception for Amounts Covered by Insurance.
Notwithstanding the foregoing, the Company shall not be obligated to indemnify
the Indemnitee for expenses or liabilities of any type whatsoever, including,
but not limited to, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement, to the extent such have been paid directly to the
Indemnitee by Director and Officer Insurance.
5. PARTIAL INDEMNIFICATION AND CONTRIBUTION.
5.1 Partial Indemnification. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for some
or a portion of any expenses or liabilities of any type whatsoever (including,
but not limited to, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) incurred by him in the investigation, defense,
settlement or appeal of a proceeding but is not entitled, however, to
indemnification for all of the total amount thereof, then the Company shall
nevertheless indemnify the Indemnitee for such total amount except as to the
portion thereof to which the Indemnitee is not entitled to indemnification.
5.2 Contribution. If the Indemnitee is not entitled to the
indemnification provided in Section 4 for any reason other than the statutory
limitations set forth in the Delaware Law, then in respect of any threatened,
pending or completed proceeding in which the Company
3
<PAGE> 4
is jointly liable with the Indemnitee, or would be if joined in such proceeding,
the Company shall contribute to the amount of expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred and paid or payable by the Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and the Indemnitee on the other hand from the transaction from which
such proceeding arose and (ii) the relative fault of the Company on the one hand
and of the Indemnitee on the other hand in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of the Indemnitee on the other hand shall be determined by
reference to, among other things, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent the circumstances
resulting in such expenses, judgments, fines or settlement amounts. The Company
agrees that it would not be just and equitable if contribution pursuant to this
Section 5 were determined by pro rata allocation or any other method of
allocation which does not take account of the foregoing equitable
considerations.
6. MANDATORY ADVANCEMENT OF EXPENSES.
6.1 Advancement. Subject to Section 9 below, the Company shall
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company or by reason of anything
done or not done by him in any such capacity. The Indemnitee hereby undertakes
to promptly repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company under the provisions of this Agreement, the
Certificate of Incorporation or Bylaws of the Company, the Delaware Law or
otherwise. The advances to be made hereunder shall be paid by the Company to the
Indemnitee within thirty (30) days following delivery of a written request
therefor by the Indemnitee to the Company.
6.2 Exception. Notwithstanding the foregoing provisions of
this Section 6, the Company shall not be obligated to advance any expenses to
the Indemnitee arising from a lawsuit filed directly by the Company against the
Indemnitee if an absolute majority of the members of the Board reasonably
determines in good faith, within thirty (30) days of the Indemnitee's request to
be advanced expenses, that the facts known to them at the time such
determination is made demonstrate clearly and convincingly that the Indemnitee
acted in bad faith. If such a determination is made, the Indemnitee may have
such decision reviewed by another forum, in the manner set forth in Sections
8.3, 8.4 and 8.5 hereof, with all references therein to "indemnification" being
deemed to refer to "advancement of expenses," and the burden of proof shall be
on the Company to demonstrate clearly and convincingly that, based on the facts
known at the time, the Indemnitee acted in bad faith. The Company may not avail
itself of this Section 6.2 as to a given lawsuit if, at any time after the
occurrence of the activities or omissions that are the primary focus of the
lawsuit, the Company has undergone a change in control. For this purpose, a
change in control shall mean a given person or group of affiliated persons or
groups increasing their beneficial ownership interest in the Company by at least
twenty (20) percentage points without advance approval by the Board of
Directors.
4
<PAGE> 5
7. NOTICE AND OTHER INDEMNIFICATION PROCEDURES.
7.1 Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
7.2 If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7.1 hereof, the Company has
Director and Officer Insurance in effect, the Company shall give prompt notice
of the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such D&O Insurance policies.
7.3 In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee, which approval shall not be unreasonably withheld,
upon the delivery to the Indemnitee of written notice of its election to do so.
After delivery of such notice, approval of such counsel by the Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
the Indemnitee under this Agreement for any fees of counsel subsequently
incurred by the Indemnitee with respect to the same proceeding, provided,
however, that: (a) the Indemnitee shall have the right to employ his own counsel
in any such proceeding at the Indemnitee's expense; (b) the Indemnitee shall
have the right to employ his own counsel in connection with any such proceeding,
at the expense of the Company, if such counsel serves in a review, observer,
advice and counseling capacity and does not otherwise materially control or
participate in the defense of such proceeding; and (c) if (i) the employment of
counsel by the Indemnitee has been previously authorized by the Company, (ii)
the Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and the Indemnitee in the conduct of any such
defense or (iii) the Company shall not, in fact, have employed counsel to assume
the defense of such proceeding, then the fees and expenses of the Indemnitee's
counsel shall be at the expense of the Company.
8. DETERMINATION OF RIGHT TO INDEMNIFICATION.
8.1 To the extent the Indemnitee has been successful on the
merits or otherwise in defense of any proceeding referred to in Section 4.1 or
4.2 of this Agreement or in the defense of any claim, issue or matter described
therein, the Company shall indemnify the Indemnitee against expenses actually
and reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding, or such claim, issue or matter, as the case may be.
8.2 In the event that Section 8.1 is inapplicable, or does not
apply to the entire proceeding, the Company shall nonetheless indemnify the
Indemnitee unless the Company shall prove by clear and convincing evidence to a
forum listed in Section 8.3 below that the Indemnitee has not met the applicable
standard of conduct required to entitle the Indemnitee to such indemnification.
5
<PAGE> 6
8.3 The Indemnitee shall be entitled to select the forum in
which the validity of the claim under Section 8.2 hereof that the Indemnitee is
not entitled to indemnification will be heard from among the following,
provided, however, that the Indemnitee can select a forum consisting of the
stockholders of the Company only with the approval of the Company: (a) a quorum
of the Board of Directors consisting of directors who are not parties to the
proceeding for which indemnification is being sought; (b) the stockholders of
the Company; (c) independent legal counsel mutually agreed upon by the
Indemnitee and the Board of Directors, which counsel shall make such
determination in a written opinion; (d) a panel of three arbitrators, one of
whom is selected by the Company, another of whom is selected by the Indemnitee
and the last of whom is selected by the first two arbitrators so selected; or
(e) the Court of Chancery of Delaware or other court having jurisdiction of
subject matter and the parties.
8.4 As soon as practicable, and in no event later than thirty
(30) days after the forum has been selected pursuant to Section 8.3 above, the
Company shall, at its own expense, submit to the selected forum its claim that
the Indemnitee is not entitled to indemnification, and the Company shall act in
the utmost good faith to assure the Indemnitee a complete opportunity to defend
against such claim.
8.5 If the forum selected in accordance with Section 8.3
hereof is not a court, then after the final decision of such forum is rendered,
the Company or the Indemnitee shall have the right to apply to the Court of
Chancery of Delaware, the court in which the proceeding giving rise to the claim
for indemnification by the Indemnitee is or was pending or any other court of
competent jurisdiction, for the purpose of appealing the decision of such forum,
provided, however, that such right is executed within sixty (60) days after the
final decision of such forum is rendered. If the forum selected in accordance
with Section 8.3 hereof is a court, then the rights of the Company or the
Indemnitee to appeal any decision of such court shall be governed by the
applicable laws and rules governing appeals of the decision of such court.
8.6 Notwithstanding any other provision in this Agreement to
the contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by the
Indemnitee in connection with any other proceeding between the Company and the
Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement, unless a court of competent jurisdiction finds
that each of the material claims and/or defenses of the Indemnitee in any such
proceeding was frivolous or not made in good faith.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
9.1 Claims Initiated by Indemnitee. To indemnify or advance
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense, other than with
respect to proceedings specifically authorized by the Board of Directors or
brought to establish or enforce a right to indemnification and/or advancement of
expenses arising under this Agreement, the charter documents of the Company or
any subsidiary or any statute or law or otherwise, but such indemnification or
6
<PAGE> 7
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee
hereunder for any amounts paid in settlement of a proceeding unless the Company
consents in advance in writing to such settlement, which consent shall not be
unreasonably withheld; or
9.3 Securities Law Actions. To indemnify the Indemnitee on
account of any suit in which judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of Section l6(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law; or
9.4 Unlawful Indemnification. To indemnify the Indemnitee if a
final decision by a court having jurisdiction in the matter shall determine that
such indemnification is not lawful. In this respect, the Company and the
Indemnitee have been advised that the Securities and Exchange Commission takes
the position that indemnification for liabilities arising under the federal
securities laws is against public policy and, therefore, is unenforceable and
that claims for indemnification should be submitted to appropriate courts for
adjudication.
10. NON-EXCLUSIVITY. The provisions for indemnification and advancement
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Certificate of Incorporation or Bylaws of the Company, the vote of the
stockholders or disinterested directors of the Company, other agreements or
otherwise, both as to action in the official capacity of the Indemnitee and to
action in another capacity while occupying his position as an agent of the
Company, and the rights of the Indemnitee hereunder shall continue after the
Indemnitee has ceased acting as an agent of the Company and shall inure to the
benefit of the heirs, executors and administrators of the Indemnitee.
11. GENERAL PROVISIONS.
11.1 Interpretation of Agreement. It is understood that the
parties hereto intend this Agreement to be interpreted and enforced so as to
provide indemnification and advancement of expenses to the Indemnitee to the
fullest extent now or hereafter permitted by law, except as expressly limited
herein.
11.2 Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, then: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement, including, without limitation, all portions of any
paragraphs of this Agreement containing any such provision held to be invalid,
illegal or unenforceable that are not themselves invalid, illegal or
unenforceable, shall not in any way be affected or impaired thereby; and (b) to
the fullest extent possible, the provisions of this Agreement, including,
without limitation, all portions of any paragraphs of this Agreement containing
any such provision held to be invalid, illegal or unenforceable that are not
themselves invalid, illegal or unenforceable, shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable and to give effect to Section 11.1 hereof.
7
<PAGE> 8
11.3 Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof,
whether or not similar, nor shall such waiver constitute a continuing waiver.
11.4 Subrogation. In the event of full payment under this
Agreement, the Company shall be subrogated to the extent of such payment to all
of the rights of recovery of the Indemnitee, who shall execute all documents
required and shall do all acts that may be necessary or desirable to secure such
rights and to enable the Company effectively to bring suit to enforce such
rights.
11.5 Counterparts. This Agreement may be executed in one or
more counterparts, which shall together constitute one agreement.
11.6 Successors and Assigns. The terms of this Agreement shall
bind, and shall inure to the benefit of, the successors and assigns of the
parties hereto.
11.7 Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (a) if delivered by hand and signed for by the party addressee or (b) if
mailed by certified or registered mail, with postage prepaid, on the third
business day after the mailing date. The addresses for notice to either party
are as shown on the signature page of this Agreement or as subsequently modified
by written notice.
11.8 Governing Law. This Agreement shall be governed
exclusively by and construed according to the laws of the State of California,
as applied to contracts between California residents entered into and to be
performed entirely within California.
11.9 Consent to Jurisdiction. The Company and the Indemnitee
each hereby irrevocably consent to the jurisdiction of the courts of the State
of California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement.
11.10 Attorneys' Fees. In the event Indemnitee is required to
bring any action to enforce rights under this Agreement, including, without
limitation, the expenses of any proceeding described in Section 3, the
Indemnitee shall be entitled to all reasonable fees and expenses in bringing and
pursuing such action, unless a court of competent jurisdiction finds each of the
material claims of the Indemnitee in any such action was frivolous and not made
in good faith.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have entered into this Indemnity
Agreement effective as of the date first written above.
<TABLE>
<CAPTION>
<S> <C>
HANDSPRING, INC. INDEMNITEE:
By:
-------------------------------------------- --------------------------------------------
Name: Donna L. Dubinsky
Title: President and Chief Executive Officer
Address: 189 Bernardo Avenue Address:
--------------------------------------- ------------------------------------
Mountain View, California 94043
- ----------------------------------------------- --------------------------------------------
</TABLE>
9
<PAGE> 1
EXHIBIT 10.2
HANDSPRING, INC.
1998 EQUITY INCENTIVE PLAN
AS ADOPTED ON OCTOBER 8, 1998 AND
AMENDED ON AUGUST 4, 1999 AND MARCH 28, 2000
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options and Restricted Stock. Capitalized
terms not defined in the text are defined in Section 22 hereof. This Plan is
intended to be a written compensatory benefit plan within the meaning of Rule
701 promulgated under the Securities Act.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 17
hereof, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 28,707,693(1) Shares or such lesser number of
Shares as permitted under Section 260.140.45 of Title 10 of the California Code
of Regulations. Subject to Sections 2.2 and 17 hereof, Shares previously granted
will again be available for grant and issuance in connection with future Awards
under this Plan that: (i) are subject to issuance upon exercise of an Option but
cease to be subject to such Option for any reason other than exercise of such
Option or (ii) are subject to a Restricted Stock Award that otherwise terminates
without Shares being issued. At all times the Company will reserve and keep
available a sufficient number of Shares as will be required to satisfy the
requirements of all Awards granted and outstanding under this Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (i) the number of Shares reserved for issuance under
this Plan, (ii) the Exercise Prices of and number of Shares subject to
outstanding Options and (iii) the Purchase Prices of and number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the shareholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be paid in cash at the Fair Market
Value of such fraction of a Share or will be rounded down to the nearest whole
Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in
Section 5 hereof) and Restricted Stock Awards may be granted to employees,
officers, directors and consultants of the Company or any Parent or Subsidiary
of the Company; provided such consultants render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. A person may be granted more than one Award under this Plan.
(1) This 28,707,693 figure reflects the 3-for-1 stock split which became
effective on March 23, 2000, the 1,600,000 (post-split) share increase to
the total pool effective on March 28, 2000, and the 3-for-2 stock split
which became effective in May 2000.
1
<PAGE> 2
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or the Board if no Committee is created by the Board. Subject to the
general purposes, terms and conditions of this Plan, and to the direction of the
Board, the Committee will have full power to implement and carry out this Plan.
Without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement
and any other agreement or document executed pursuant
to this Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan;
(c) approve persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of,
or as alternatives to, other Awards under this Plan
or awards under any other incentive or compensation
plan of the Company or any Parent or Subsidiary of
the Company;
(g) grant waivers of any conditions of this Plan or any
Award;
(h) determine the terms of vesting, exercisability and
payment of Awards;
(i) correct any defect, supply any omission, or reconcile
any inconsistency in this Plan, any Award, any Award
Agreement, any Exercise Agreement or any Restricted
Stock Purchase Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable
for the administration of this Plan.
4.2 Committee Discretion. Unless in contravention of any
express terms of this Plan or Award, any determination made by the Committee
with respect to any Award will be made in its sole discretion either (i) at the
time of grant of the Award, or (ii) subject to Section 5.9 hereof, at any later
time. Any such determination will be final and binding on the Company and on all
persons having an interest in any Award under this Plan. The Committee may
delegate to one or more officers of the Company the authority to grant an Award
under this Plan, provided such officer or officers are members of the Board.
5. OPTIONS. The Committee may grant Options to eligible persons
described in Section 3 hereof and will determine whether such Options will be
Incentive Stock Options within the meaning of the Code ("ISOS") or Nonqualified
Stock Options ("NQSOS"), the number of Shares subject to the Option, the
Exercise Price of the Option, the period during which the Option may be
exercised, and all other terms and conditions of the Option, subject to the
following:
2
<PAGE> 3
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
a later date is otherwise specified by the Committee. The Stock Option Agreement
and a copy of this Plan will be delivered to the Participant within a reasonable
time after the granting of the Option.
5.3 Exercise Period. Options may be exercisable immediately
but subject to repurchase pursuant to Section 11 hereof or may be exercisable
within the times or upon the events determined by the Committee as set forth in
the Stock Option Agreement governing such Option; provided, however, that no
Option will be exercisable after the expiration of ten (10) years from the date
the Option is granted; and provided further that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("TEN PERCENT SHAREHOLDER") will be exercisable after
the expiration of five (5) years from the date the ISO is granted. The Committee
also may provide for Options to become exercisable at one time or from time to
time, periodically or otherwise, in such number of Shares or percentage of
Shares as the Committee determines. Subject to earlier termination of the Option
as provided herein, each Participant who is not an officer, director or
consultant of the Company or of a Parent or Subsidiary of the Company shall have
the right to exercise an Option granted hereunder at the rate of no less than
twenty percent (20%) per year over five (5) years from the date such Option is
granted.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
eighty-five percent (85%) of the Fair Market Value of the Shares on the date of
grant; provided that (i) the Exercise Price of an ISO will not be less than one
hundred percent (100%) of the Fair Market Value of the Shares on the date of
grant and (ii) the Exercise Price of any Option granted to a Ten Percent
Shareholder will not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 7 hereof.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant). The Exercise Agreement will state (i) the number of
Shares being purchased, (ii) the restrictions imposed on the Shares purchased
under such Exercise Agreement, if any, and (iii) such representations and
agreements regarding Participant's investment intent and access to information
and other matters, if any, as may be required or desirable by the Company to
comply with applicable securities laws. Participant shall execute and deliver to
the Company the Exercise Agreement together with payment in full of the Exercise
Price, and any applicable taxes, for the number of Shares being purchased.
3
<PAGE> 4
5.6 Termination. Subject to earlier termination pursuant to
Sections 17 and 18 hereof and notwithstanding the exercise periods set forth in
the Stock Option Agreement, exercise of an Option will always be subject to the
following:
(a) If the Participant is Terminated for any reason other
than death, Disability or for Cause, then the
Participant may exercise such Participant's Options
only to the extent that such Options are exercisable
upon the Termination Date. Such Options must be
exercised by the Participant, if at all, as to all or
some of the Vested Shares calculated as of the
Termination Date, within three (3) months after the
Termination Date (or within such shorter time period,
not less than thirty (30) days, or within such longer
time period, not exceeding five (5) years, after the
Termination Date as may be determined by the
Committee, with any exercise beyond three (3) months
after the Termination Date deemed to be an NQSO) but
in any event, no later than the expiration date of
the Options.
(b) If the Participant is Terminated because of
Participant's death or Disability (or the Participant
dies within three (3) months after a Termination
other than for Cause), then Participant's Options may
be exercised only to the extent that such Options are
exercisable by Participant on the Termination Date.
Such options must be exercised by Participant (or
Participant's legal representative or authorized
assignee), if at all, as to all or some of the Vested
Shares calculated as of the Termination Date, within
twelve (12) months after the Termination Date (or
within such shorter time period, not less than six
(6) months, or within such longer time period, not
exceeding five (5) years, after the Termination Date
as may be determined by the Committee, with any
exercise beyond (i) three (3) months after the
Termination Date when the Termination is for any
reason other than the Participant's death or
disability, within the meaning of Section 22(e)(3) of
the Code, or (ii) twelve (12) months after the
Termination Date when the Termination is for
Participant's disability, within the meaning of
Section 22(e)(3) of the Code, deemed to be an NQSO)
but in any event no later than the expiration date of
the Options.
(c) If the Participant is terminated for Cause, then
Participant's Options shall expire on such
Participant's Termination Date, or at such later time
and on such conditions as are determined by the
Committee.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) will not exceed One Hundred Thousand
Dollars ($100,000). If the Fair Market Value of Shares on the date of grant with
respect to which ISOs are exercisable for the first time by a Participant during
any calendar year
4
<PAGE> 5
exceeds One Hundred Thousand Dollars ($100,000), then the Options for the first
One Hundred Thousand Dollars ($100,000) worth of Shares to become exercisable in
such calendar year will be ISOs and the Options for the amount in excess of One
Hundred Thousand Dollars ($100,000) that become exercisable in that calendar
year will be NQSOs. In the event that the Code or the regulations promulgated
thereunder are amended after the Effective Date (as defined in Section 18
hereof) to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, then such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. Subject to Section 5.10 hereof, the Committee may
reduce the Exercise Price of outstanding Options without the consent of
Participants by a written notice to them; provided, however, that the Exercise
Price may not be reduced below the minimum Exercise Price that would be
permitted under Section 5.4 hereof for Options granted on the date the action is
taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision
in this Plan, no term of this Plan relating to ISOs will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant, to disqualify any Participant's ISO
under Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to certain
specified restrictions. The Committee will determine to whom an offer will be
made, the number of Shares the person may purchase, the Purchase Price, the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The Restricted Stock Award will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within such thirty (30)
days, then the offer will terminate, unless otherwise determined by the
Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
to a Restricted Stock Award will be determined by the Committee and will be at
least eighty-five percent (85%) of the Fair Market Value of the Shares on the
date the Restricted Stock Award is granted or at the time the purchase is
consummated, except in the case of a sale to a Ten Percent Shareholder, in which
case the Purchase Price will be one hundred percent (100%) of the Fair Market
Value on
5
<PAGE> 6
the date the Restricted Stock Award is granted or at the time the purchase is
consummated. Payment of the Purchase Price must be made in accordance with
Section 7 hereof.
6.3 Restrictions. Restricted Stock Awards may be subject to
the restrictions set forth in Section 11 hereof or such other restrictions not
inconsistent with Section 25102(o) of the California Corporations Code.
7. PAYMENT FOR SHARE PURCHASES.
7.1 Payment. Payment for Shares purchased pursuant to this
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company owed
to the Participant;
(b) by surrender of shares that: (i) either (A) have been
owned by Participant for more than six (6) months and
have been paid for within the meaning of SEC Rule 144
(and, if such shares were purchased from the Company
by use of a promissory note, such note has been fully
paid with respect to such shares) or (B) were
obtained by Participant in the public market and (ii)
are clear of all liens, claims, encumbrances or
security interests;
(c) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of
the Code; provided, however, that Participants who
are not employees or directors of the Company will
not be entitled to purchase Shares with a promissory
note unless the note is adequately secured by
collateral other than the Shares;
(d) by waiver of compensation due or accrued to the
Participant from the Company for services rendered;
(e) with respect only to purchases upon exercise of an
Option, and provided that a public market for the
Company's stock exists:
(i) through a "same day sale" commitment from
the Participant and a broker-dealer that is
a member of the National Association of
Securities Dealers (an "NASD DEALER")
whereby the Participant irrevocably elects
to exercise the Option and to sell a portion
of the Shares so purchased sufficient to pay
the total Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt
of such Shares to forward the total Exercise
Price directly to the Company; or
(ii) through a "margin" commitment from the
Participant and an NASD Dealer whereby the
Participant irrevocably elects to exercise
the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin
account as security for a loan from the NASD
Dealer in the amount of the total Exercise
Price, and whereby the NASD Dealer
irrevocably commits upon receipt of
6
<PAGE> 7
such Shares to forward the total Exercise
Price directly to the Company; or
(f) by any combination of the foregoing.
7.2 Loan Guarantees. The Committee may, in its sole
discretion, elect to assist the Participant in paying for Shares purchased under
this Plan by authorizing a guarantee by the Company of a third-party loan to the
Participant.
8. WITHHOLDING TAXES.
8.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash by the Company, such payment
will be net of an amount sufficient to satisfy federal, state, and local
withholding tax requirements.
8.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee for such elections and be in writing in a form
acceptable to the Committee.
9. PRIVILEGES OF STOCK OWNERSHIP.
9.1 Voting and Dividends. No Participant will have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock. The Participant will have no right to retain such stock
dividends or stock distributions with respect to Unvested Shares that are
repurchased pursuant to Section 11 hereof. The Company will comply with Section
260.140.1 of Title 10 of the California Code of Regulations with respect to the
voting rights of Common Stock.
9.2 Financial Statements. The Company will provide financial
statements to each Participant annually during the period such Participant has
Awards outstanding, or as otherwise required under Section 260.140.46 of Title
10 of the California Code of Regulations. Notwithstanding the foregoing, the
Company will not be required to provide such financial statements to
Participants when issuance is limited to key employees whose services in
connection with the Company assure them access to equivalent information.
7
<PAGE> 8
10. TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, other than by
will or by the laws of descent and distribution, and may not be made subject to
execution, attachment or similar process. During the lifetime of the Participant
an Award will be exercisable only by the Participant or Participant's legal
representative and any elections with respect to an Award may be made only by
the Participant or Participant's legal representative.
11. RESTRICTIONS ON SHARES.
11.1 Right of First Refusal. At the discretion of the
Committee, the Company may reserve to itself and/or its assignee(s) in the Award
Agreement a right of first refusal to purchase all Shares that a Participant (or
a subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(o) of the California Corporations Code,
provided that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act.
11.2 Right of Repurchase. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
a right to repurchase Unvested Shares held by a Participant for cash and/or
cancellation of purchase money indebtedness owed to the Company by the
Participant following such Participant's Termination at any time within the
later of ninety (90) days after the Participant's Termination Date and the date
the Participant purchases Shares under the Plan at the Participant's Exercise
Price or Purchase Price, as the case may be, provided that, unless the
Participant is an officer, director or consultant of the Company or of a Parent
or Subsidiary of the Company, such right of repurchase lapses at the rate of no
less than twenty percent (20%) per year over five (5) years from: (a) the date
of grant of the Option or (b) in the case of Restricted Stock, the date the
Participant purchases the Shares.
12. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares set forth in Section 11 hereof, the Committee may require
the Participant to deposit all certificates representing Shares, together with
stock powers or other instruments of transfer approved by the Committee,
appropriately endorsed in blank, with the Company or an agent designated by the
Company to hold in escrow until such restrictions have lapsed or terminated. The
Committee may cause a legend or legends referencing such restrictions to be
placed on the certificates. Any Participant who is permitted to execute a
promissory note as partial or full consideration for the purchase of Shares
under this Plan will be required to pledge and deposit with the Company all or
part of the Shares so purchased as collateral to secure the payment of
Participant's obligation to the Company under the promissory note; provided,
however, that the Committee may require or accept other or additional forms of
collateral to secure the payment of such obligation and, in any event, the
Company will have full recourse against the Participant under the promissory
note notwithstanding any pledge of the Participant's Shares or other collateral.
In connection with any pledge of the Shares, Participant will be
8
<PAGE> 9
required to execute and deliver a written pledge agreement in such form as the
Committee will from time to time approve.
14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including Restricted Stock) or other consideration, based
on such terms and conditions as the Committee and the Participant may agree.
15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is
intended to comply with Section 25102(o) of the California Corporations Code.
Any provision of this Plan which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o). An Award will not be effective
unless such Award is in compliance with all applicable federal and state
securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to (i) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (ii) compliance with any exemption, completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the exemption, registration,
qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company will have no liability
for any inability or failure to do so.
16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
Cause.
17. CORPORATE TRANSACTIONS.
17.1 Assumption or Replacement of Awards by Successor or
Acquiring Corporation. In the event of (i) a dissolution or liquidation of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company or their relative stock holdings and the Awards granted under this
Plan are assumed, converted or replaced by the successor or acquiring
corporation, which assumption, conversion or replacement will be binding on all
Participants), (iii) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately prior to such merger
(other than any shareholder which merges with the Company in such merger, or
which
9
<PAGE> 10
owns or controls another corporation which merges with the Company in such
merger) cease to own their shares or other equity interests in the Company, or
(iv) the sale of all or substantially all of the assets of the Company, any or
all outstanding Awards may be assumed, converted or replaced by the successor or
acquiring corporation (if any), which assumption, conversion or replacement will
be binding on all Participants. In the alternative, the successor or acquiring
corporation may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to shareholders (after taking into
account the existing provisions of the Awards). The successor or acquiring
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant, substantially similar shares or other property subject to
repurchase restrictions and other provisions no less favorable to the
Participant than those which applied to such outstanding Shares immediately
prior to such transaction described in this Section 17.1. In the event such
successor or acquiring corporation (if any) does not assume or substitute
Awards, as provided above, pursuant to a transaction described in this Section
17.1, then notwithstanding any other provision in this Plan to the contrary, the
vesting of such Awards will accelerate and the Options will become exercisable
in full prior to the consummation of such event at such times and on such
conditions as the Committee determines, and if such Options are not exercised
prior to the consummation of the corporate transaction, they shall terminate in
accordance with the provisions of this Plan.
17.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 17, in
the event of the occurrence of any transaction described in Section 17.1 hereof,
any outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation or sale of assets.
17.3 Assumption of Awards by the Company. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (i) granting an Award under this Plan in substitution of
such other company's award or (ii) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
18. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective
on the date that it is adopted by the Board (the "EFFECTIVE DATE"). This Plan
will be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve (12)
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Awards pursuant to this Plan; provided, however, that: (i) no Option
may be exercised prior to initial shareholder approval of this Plan; (ii) no
Option granted pursuant to an increase in the number of Shares approved by the
Board shall be exercised prior to the time such increase has been approved by
the shareholders of the Company;
10
<PAGE> 11
(iii) in the event that initial shareholder approval is not obtained within the
time period provided herein, all Awards granted hereunder shall be canceled, any
Shares issued pursuant to any Award shall be canceled and any purchase of Shares
issued hereunder shall be rescinded; and (iv) Awards granted pursuant to an
increase in the number of Shares approved by the Board which increase is not
timely approved by shareholders shall be canceled, any Shares issued pursuant to
any such Awards shall be canceled, and any purchase of Shares subject to any
such Award shall be rescinded.
19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the Effective Date or, if
earlier, the date of shareholder approval. This Plan and all agreements
hereunder shall be governed by and construed in accordance with the laws of the
State of California.
20. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9 hereof,
the Board may at any time terminate or amend this Plan in any respect, including
without limitation amendment of any form of Award Agreement or instrument to be
executed pursuant to this Plan; provided, however, that the Board will not,
without the approval of the shareholders of the Company, amend this Plan in any
manner that requires such shareholder approval pursuant to Section 25102(o) of
the California Corporations Code or the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans.
21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
the Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and other equity awards otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
22. DEFINITIONS. As used in this Plan, the following terms will have
the following meanings:
"AWARD" means any award under this Plan, including any Option
or Restricted Stock Award.
"AWARD AGREEMENT" means, with respect to each Award, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Award, including the Stock Option Agreement and
Restricted Stock Agreement.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means Termination because of (i) any willful, material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, or any willful perpetration by the Participant of a common law fraud,
(ii) the Participant's commission of an act of personal dishonesty which
involves personal profit in connection with the Company or any other entity
having a business relationship with the Company, (iii) any material breach by
the Participant of any provision of any agreement or understanding between the
Company or any Parent or Subsidiary of the Company and the Participant regarding
the terms of the Participant's service as an employee, officer, director or
consultant to the Company or a Parent or Subsidiary of the Company, including
without
11
<PAGE> 12
limitation, the willful and continued failure or refusal of the Participant to
perform the material duties required of such Participant as an employee,
officer, director or consultant of the Company or a Parent or Subsidiary of the
Company, other than as a result of having a Disability, or a breach of any
applicable invention assignment and confidentiality agreement or similar
agreement between the Company or a Parent or Subsidiary of the Company and the
Participant, (iv) Participant's disregard of the policies of the Company or any
Parent or Subsidiary of the Company so as to cause loss, damage or injury to the
property, reputation or employees of the Company or a Parent or Subsidiary of
the Company, or (v) any other misconduct by the Participant which is materially
injurious to the financial condition or business reputation of, or is otherwise
materially injurious to, the Company or a Parent or Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee created and appointed by the
Board to administer this Plan, or if no committee is created and appointed, the
Board.
"COMPANY" means Handspring, Inc. or any successor corporation.
"DISABILITY" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee.
"EXERCISE PRICE" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq
National Market on the date of determination as
reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the Common
Stock is listed or admitted to trading as reported in
The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on the date of determination as reported by
The Wall Street Journal (or, if not so reported, as
otherwise reported by any newspaper or other source
as the Board may determine); or
(d) if none of the foregoing is applicable, by the
Committee in good faith.
"OPTION" means an award of an option to purchase Shares
pursuant to Section 5 hereof.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company
12
<PAGE> 13
owns stock representing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this
Plan.
"PLAN" means this Handspring, Inc. 1998 Equity Incentive Plan,
as amended from time to time.
"PURCHASE PRICE" means the price at which a Participant may
purchase Restricted Stock.
"RESTRICTED STOCK" means Shares purchased pursuant to a
Restricted Stock Award.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6 hereof.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 17 hereof,
and any successor security.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
representing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. A Participant will not be deemed to
have ceased to provide services in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence approved by the Committee, provided
that such leave is for a period of not more than ninety (90) days (a) unless
reinstatement (or, in the case of an employee with an ISO, reemployment) upon
the expiration of such leave is guaranteed by contract or statute, or (b) unless
provided otherwise pursuant to formal policy adopted from time to time by the
Company's Board and issued and promulgated in writing. In the case of any
Participant on (i) sick leave, (ii) military leave or (iii) an approved leave of
absence, the Committee may make such provisions respecting suspension of vesting
of the Award while on leave from the Company or a Parent or Subsidiary of the
Company as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Stock Option
Agreement. The Committee will have sole discretion to determine whether a
Participant has ceased to provide services and the effective date on which the
Participant ceased to provide services (the "TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the
Award Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
13
<PAGE> 1
EXHIBIT 10.3
HANDSPRING, INC.
1999 EXECUTIVE EQUITY INCENTIVE PLAN
AS ADOPTED ON AUGUST 4, 1999 AND
AMENDED ON JANUARY 3, 2000 AND MARCH 28, 2000
1. PURPOSE. The purpose of this Executive Plan is to provide incentives
to attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options and Restricted Stock. Capitalized
terms not defined in the text are defined in Section 22 hereof.
2. SHARES SUBJECT TO THE EXECUTIVE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 17
hereof, the total number of Shares reserved and available for grant and issuance
pursuant to this Executive Plan will be 10,350,000(1) Shares or such lesser
number of Shares as permitted under Section 260.140.45 of Title 10 of the
California Code of Regulations. Subject to Sections 2.2 and 17 hereof, Shares
previously granted will again be available for grant and issuance in connection
with future Awards under this Executive Plan that: (i) are subject to issuance
upon exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option or (ii) are subject to a Restricted Stock
Award that otherwise terminates without Shares being issued. At all times the
Company will reserve and keep available a sufficient number of Shares as will be
required to satisfy the requirements of all Awards granted and outstanding under
this Executive Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (i) the number of Shares reserved for issuance under
this Executive Plan, (ii) the Exercise Prices of and number of Shares subject to
outstanding Options and (iii) the Purchase Prices of and number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the shareholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be paid in cash at the Fair Market
Value of such fraction of a Share or will be rounded down to the nearest whole
Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be granted
only to employees (including officers and directors who are also employees and
certain other employees who may be selected for grants in the discretion of the
Committee or the Board) of the Company or of a Parent or Subsidiary of the
Company. NQSOs (as defined in Section 5 hereof) and Restricted Stock Awards may
be granted to officers, directors and, in the discretion of the Committee or the
Board, selected employees and selected consultants of the Company or any Parent
or Subsidiary of the Company; provided such consultants render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction. A person may be granted more than one Award under
this Executive Plan.
(1) This 10,350,000 figure reflects the 3-for-1 stock split which became
effective on March 23, 2000, the 900,000 (post-split) share increase to the
total pool effective on March 28, 2000 and the 3-for-2 stock split which
became effective in May 2000.
1
<PAGE> 2
4. ADMINISTRATION.
4.1 Committee Authority. This Executive Plan will be
administered by the Committee or the Board if no Committee is created by the
Board. Subject to the general purposes, terms and conditions of this Executive
Plan, and to the direction of the Board, the Committee will have full power to
implement and carry out this Executive Plan. Without limitation, the Committee
will have the authority to:
(a) construe and interpret this Executive Plan, any Award
Agreement and any other agreement or document
executed pursuant to this Executive Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Executive Plan;
(c) approve persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of,
or as alternatives to, other Awards under this
Executive Plan or awards under any other incentive or
compensation plan of the Company or any Parent or
Subsidiary of the Company;
(g) grant waivers of any conditions of this Executive
Plan or any Award;
(h) determine the terms of vesting, exercisability and
payment of Awards;
(i) correct any defect, supply any omission, or reconcile
any inconsistency in this Executive Plan, any Award,
any Award Agreement, any Exercise Agreement or any
Restricted Stock Purchase Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable
for the administration of this Executive Plan.
4.2 Committee Discretion. Unless in contravention of any
express terms of this Executive Plan or Award, any determination made by the
Committee with respect to any Award will be made in its sole discretion either
(i) at the time of grant of the Award, or (ii) subject to Section 5.9 hereof, at
any later time. Any such determination will be final and binding on the Company
and on all persons having an interest in any Award under this Executive Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Executive Plan, provided such officer or officers
are members of the Board.
5. OPTIONS. The Committee may grant Options to eligible persons
described in Section 3 hereof and will determine whether such Options will be
Incentive Stock Options within the meaning of the Code ("ISOS") or Nonqualified
Stock Options ("NQSOS"), the number of Shares subject to the Option, the
Exercise Price of the Option, the period during which the Option may be
exercised, and all other terms and conditions of the Option, subject to the
following:
2
<PAGE> 3
5.1 Form of Option Grant. Each Option granted under this
Executive Plan will be evidenced by an Award Agreement which will expressly
identify the Option as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be
in such form and contain such provisions (which need not be the same for each
Participant) as the Committee may from time to time approve, and which will
comply with and be subject to the terms and conditions of this Executive Plan.
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
a later date is otherwise specified by the Committee. The Stock Option Agreement
and a copy of this Executive Plan will be delivered to the Participant within a
reasonable time after the granting of the Option.
5.3 Exercise Period. Options may be exercisable immediately
but subject to repurchase pursuant to Section 11 hereof or may be exercisable
within the times or upon the events determined by the Committee as set forth in
the Stock Option Agreement governing such Option; provided, however, that no
Option will be exercisable after the expiration of ten (10) years from the date
the Option is granted; and provided further that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("TEN PERCENT SHAREHOLDER") will be exercisable after
the expiration of five (5) years from the date the ISO is granted. The Committee
also may provide for Options to become exercisable at one time or from time to
time, periodically or otherwise, in such number of Shares or percentage of
Shares as the Committee determines. Subject to earlier termination of the Option
as provided herein, each Participant who is not an officer, director or
consultant of the Company or of a Parent or Subsidiary of the Company shall have
the right to exercise an Option granted hereunder at the rate of no less than
twenty percent (20%) per year over five (5) years from the date such Option is
granted.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
eighty-five percent (85%) of the Fair Market Value of the Shares on the date of
grant; provided that (i) the Exercise Price of an ISO will not be less than one
hundred percent (100%) of the Fair Market Value of the Shares on the date of
grant and (ii) the Exercise Price of any Option granted to a Ten Percent
Shareholder will not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 7 hereof.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant). The Exercise Agreement will state (i) the number of
Shares being purchased, (ii) the restrictions imposed on the Shares purchased
under such Exercise Agreement, if any, and (iii) such representations and
agreements regarding Participant's investment intent and access to information
and other matters, if any, as may be required or desirable by the Company to
comply with applicable securities laws. Participant shall execute and deliver to
the Company the Exercise Agreement together with payment in full of the Exercise
Price, and any applicable taxes, for the number of Shares being purchased.
3
<PAGE> 4
5.6 Termination. Subject to earlier termination pursuant to
Sections 17 and 18 hereof and notwithstanding the exercise periods set forth in
the Stock Option Agreement, exercise of an Option will always be subject to the
following:
(a) If the Participant is Terminated for any reason other
than death, Disability or for Cause, then the
Participant may exercise such Participant's Options
only to the extent that such Options are exercisable
upon the Termination Date. Such Options must be
exercised by the Participant, if at all, as to all or
some of the Vested Shares calculated as of the
Termination Date, within three (3) months after the
Termination Date (or within such shorter time period,
not less than thirty (30) days, or within such longer
time period, not exceeding five (5) years, after the
Termination Date as may be determined by the
Committee, with any exercise beyond three (3) months
after the Termination Date deemed to be an NQSO) but
in any event, no later than the expiration date of
the Options.
(b) If the Participant is Terminated because of
Participant's death or Disability (or the Participant
dies within three (3) months after a Termination
other than for Cause), then Participant's Options may
be exercised only to the extent that such Options are
exercisable by Participant on the Termination Date.
Such options must be exercised by Participant (or
Participant's legal representative or authorized
assignee), if at all, as to all or some of the Vested
Shares calculated as of the Termination Date, within
twelve (12) months after the Termination Date (or
within such shorter time period, not less than six
(6) months, or within such longer time period, not
exceeding five (5) years, after the Termination Date
as may be determined by the Committee, with any
exercise beyond (i) three (3) months after the
Termination Date when the Termination is for any
reason other than the Participant's death or
disability, within the meaning of Section 22(e)(3) of
the Code, or (ii) twelve (12) months after the
Termination Date when the Termination is for
Participant's disability, within the meaning of
Section 22(e)(3) of the Code, deemed to be an NQSO)
but in any event no later than the expiration date of
the Options.
(c) If the Participant is terminated for Cause, then
Participant's Options shall expire on such
Participant's Termination Date, or at such later time
and on such conditions as are determined by the
Committee.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value (determined as
of the date of grant) of Shares with respect to which ISOs are exercisable for
the first time by a Participant during any calendar year (under this Executive
Plan or under any other incentive stock option plan of the Company or any Parent
or Subsidiary of the Company) will not exceed One Hundred Thousand Dollars
($100,000). If the Fair Market Value of Shares on the date of grant with respect
to which ISOs are exercisable for the first time by a Participant during any
4
<PAGE> 5
calendar year exceeds One Hundred Thousand Dollars ($100,000), then the Options
for the first One Hundred Thousand Dollars ($100,000) worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of One Hundred Thousand Dollars ($100,000) that become exercisable in
that calendar year will be NQSOs. In the event that the Code or the regulations
promulgated thereunder are amended after the Effective Date (as defined in
Section 18 hereof) to provide for a different limit on the Fair Market Value of
Shares permitted to be subject to ISOs, then such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. Subject to Section 5.10 hereof, the Committee may
reduce the Exercise Price of outstanding Options without the consent of
Participants by a written notice to them; provided, however, that the Exercise
Price may not be reduced below the minimum Exercise Price that would be
permitted under Section 5.4 hereof for Options granted on the date the action is
taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision
in this Executive Plan, no term of this Executive Plan relating to ISOs will be
interpreted, amended or altered, nor will any discretion or authority granted
under this Executive Plan be exercised, so as to disqualify this Executive Plan
under Section 422 of the Code or, without the consent of the Participant, to
disqualify any Participant's ISO under Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to certain
specified restrictions. The Committee will determine to whom an offer will be
made, the number of Shares the person may purchase, the Purchase Price, the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Executive Plan will be evidenced by
an Award Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such
form (which need not be the same for each Participant) as the Committee will
from time to time approve, and will comply with and be subject to the terms and
conditions of this Executive Plan. The Restricted Stock Award will be accepted
by the Participant's execution and delivery of the Restricted Stock Purchase
Agreement and full payment for the Shares to the Company within thirty (30) days
from the date the Restricted Stock Purchase Agreement is delivered to the
person. If such person does not execute and deliver the Restricted Stock
Purchase Agreement along with full payment for the Shares to the Company within
such thirty (30) days, then the offer will terminate, unless otherwise
determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Committee and will be at least
eighty-five percent (85%) of the Fair Market Value of the Shares on the date the
Restricted Stock Award is granted or at the time the purchase is consummated,
except in the case of a sale to a Ten Percent Shareholder, in which case the
Purchase Price will be one hundred percent (100%) of the Fair Market Value on
5
<PAGE> 6
the date the Restricted Stock Award is granted or at the time the purchase is
consummated. Payment of the Purchase Price must be made in accordance with
Section 7 hereof.
6.3 Restrictions. Restricted Stock Awards may be subject to
the restrictions set forth in Section 11 hereof or such other restrictions not
inconsistent with Section 25102(f) of the California Corporations Code.
7. PAYMENT FOR SHARE PURCHASES.
7.1 Payment. Payment for Shares purchased pursuant to this
Executive Plan may be made in cash (by check) or, where expressly approved for
the Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company owed
to the Participant;
(b) by surrender of shares that: (i) either (A) have been
owned by Participant for more than six (6) months and
have been paid for within the meaning of SEC Rule 144
(and, if such shares were purchased from the Company
by use of a promissory note, such note has been fully
paid with respect to such shares) or (B) were
obtained by Participant in the public market and (ii)
are clear of all liens, claims, encumbrances or
security interests;
(c) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of
the Code; provided, however, that Participants who
are not employees or directors of the Company will
not be entitled to purchase Shares with a promissory
note unless the note is adequately secured by
collateral other than the Shares;
(d) by waiver of compensation due or accrued to the
Participant from the Company for services rendered;
(e) with respect only to purchases upon exercise of an
Option, and provided that a public market for the
Company's stock exists:
(i) through a "same day sale" commitment from
the Participant and a broker-dealer that is
a member of the National Association of
Securities Dealers (an "NASD DEALER")
whereby the Participant irrevocably elects
to exercise the Option and to sell a portion
of the Shares so purchased sufficient to pay
the total Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt
of such Shares to forward the total Exercise
Price directly to the Company; or
(ii) through a "margin" commitment from the
Participant and an NASD Dealer whereby the
Participant irrevocably elects to exercise
the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin
account as security for a loan from the NASD
Dealer in the amount of the total Exercise
Price, and
6
<PAGE> 7
whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the
total Exercise Price directly to the
Company; or
(f) by any combination of the foregoing.
7.2 Loan Guarantees. The Committee may, in its sole
discretion, elect to assist the Participant in paying for Shares purchased under
this Executive Plan by authorizing a guarantee by the Company of a third-party
loan to the Participant.
8. WITHHOLDING TAXES.
8.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Executive Plan, the Company may
require the Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such Shares. Whenever, under this Executive
Plan, payments in satisfaction of Awards are to be made in cash by the Company,
such payment will be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements.
8.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee for such elections and be in writing in a form
acceptable to the Committee.
9. PRIVILEGES OF STOCK OWNERSHIP.
9.1 Voting and Dividends. No Participant will have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock. The Participant will have no right to retain such stock
dividends or stock distributions with respect to Unvested Shares that are
repurchased pursuant to Section 11 hereof. The Company will comply with Section
260.140.1 of Title 10 of the California Code of Regulations with respect to the
voting rights of Common Stock.
9.2 Financial Statements. The Company will provide financial
statements to each Participant annually during the period such Participant has
Awards outstanding, or as otherwise required under Section 260.140.46 of Title
10 of the California Code of Regulations. Notwithstanding the foregoing, the
Company will not be required to provide such financial
7
<PAGE> 8
statements to Participants when issuance is limited to key employees whose
services in connection with the Company assure them access to equivalent
information.
10. TRANSFERABILITY. Awards granted under this Executive Plan, and any
interest therein, will not be transferable or assignable by Participant, other
than by will or by the laws of descent and distribution, and may not be made
subject to execution, attachment or similar process. During the lifetime of the
Participant an Award will be exercisable only by the Participant or
Participant's legal representative and any elections with respect to an Award
may be made only by the Participant or Participant's legal representative.
11. RESTRICTIONS ON SHARES.
11.1 Right of First Refusal. At the discretion of the
Committee, the Company may reserve to itself and/or its assignee(s) in the Award
Agreement a right of first refusal to purchase all Shares that a Participant (or
a subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(f) of the California Corporations Code,
provided that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act.
11.2 Right of Repurchase. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
a right to repurchase Unvested Shares held by a Participant for cash and/or
cancellation of purchase money indebtedness owed to the Company by the
Participant following such Participant's Termination at any time within the
later of ninety (90) days after the Participant's Termination Date and the date
the Participant purchases Shares under the Executive Plan at the Participant's
Exercise Price or Purchase Price, as the case may be, provided that, unless the
Participant is an officer, director or consultant of the Company or of a Parent
or Subsidiary of the Company, such right of repurchase lapses at the rate of no
less than twenty percent (20%) per year over five (5) years from: (a) the date
of grant of the Option or (b) in the case of Restricted Stock, the date the
Participant purchases the Shares.
12. CERTIFICATES. All certificates for Shares or other securities
delivered under this Executive Plan will be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem necessary or
advisable, including restrictions under any applicable federal, state or foreign
securities law, or any rules, regulations and other requirements of the SEC or
any stock exchange or automated quotation system upon which the Shares may be
listed or quoted.
13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares set forth in Section 11 hereof, the Committee may require
the Participant to deposit all certificates representing Shares, together with
stock powers or other instruments of transfer approved by the Committee,
appropriately endorsed in blank, with the Company or an agent designated by the
Company to hold in escrow until such restrictions have lapsed or terminated. The
Committee may cause a legend or legends referencing such restrictions to be
placed on the certificates. Any Participant who is permitted to execute a
promissory note as partial or full consideration for the purchase of Shares
under this Executive Plan will be required to pledge and deposit with the
Company all or part of the Shares so purchased as collateral to secure the
payment of Participant's obligation to the Company under the promissory note;
8
<PAGE> 9
provided, however, that the Committee may require or accept other or additional
forms of collateral to secure the payment of such obligation and, in any event,
the Company will have full recourse against the Participant under the promissory
note notwithstanding any pledge of the Participant's Shares or other collateral.
In connection with any pledge of the Shares, Participant will be required to
execute and deliver a written pledge agreement in such form as the Committee
will from time to time approve.
14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including Restricted Stock) or other consideration, based
on such terms and conditions as the Committee and the Participant may agree.
15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Executive Plan, the Company will have no obligation
to issue or deliver certificates for Shares under this Executive Plan prior to
(i) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable, and/or (ii) compliance with any
exemption, completion of any registration or other qualification of such Shares
under any state or federal law or ruling of any governmental body that the
Company determines to be necessary or advisable. The Company will be under no
obligation to register the Shares with the SEC or to effect compliance with the
exemption, registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.
16. NO OBLIGATION TO EMPLOY. Nothing in this Executive Plan or any
Award granted under this Executive Plan will confer or be deemed to confer on
any Participant any right to continue in the employ of, or to continue any other
relationship with, the Company or any Parent or Subsidiary of the Company or
limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Participant's employment or other relationship at any time,
with or without Cause.
17. CORPORATE TRANSACTIONS.
17.1 Assumption or Replacement of Awards by Successor or
Acquiring Corporation. In the event of (i) a dissolution or liquidation of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company or their relative stock holdings and the Awards granted under this
Executive Plan are assumed, converted or replaced by the successor or acquiring
corporation, which assumption, conversion or replacement will be binding on all
Participants), (iii) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company
9
<PAGE> 10
immediately prior to such merger (other than any shareholder which merges with
the Company in such merger, or which owns or controls another corporation which
merges with the Company in such merger) cease to own their shares or other
equity interests in the Company, or (iv) the sale of all or substantially all of
the assets of the Company, any or all outstanding Awards may be assumed,
converted or replaced by the successor or acquiring corporation (if any), which
assumption, conversion or replacement will be binding on all Participants. In
the alternative, the successor or acquiring corporation may substitute
equivalent Awards or provide substantially similar consideration to Participants
as was provided to shareholders (after taking into account the existing
provisions of the Awards). The successor or acquiring corporation may also
issue, in place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions and other provisions no less favorable to the Participant than
those which applied to such outstanding Shares immediately prior to such
transaction described in this Section 17.1. In the event such successor or
acquiring corporation (if any) does not assume or substitute Awards, as provided
above, pursuant to a transaction described in this Section 17.1, then
notwithstanding any other provision in this Executive Plan to the contrary, the
vesting of such Awards will accelerate and the Options will become exercisable
in full prior to the consummation of such event at such times and on such
conditions as the Committee determines, and if such Options are not exercised
prior to the consummation of the corporate transaction, they shall terminate in
accordance with the provisions of this Executive Plan.
17.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 17, in
the event of the occurrence of any transaction described in Section 17.1 hereof,
any outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation or sale of assets.
17.3 Assumption of Awards by the Company. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (i) granting an Award under this Executive Plan in
substitution of such other company's award or (ii) assuming such award as if it
had been granted under this Executive Plan if the terms of such assumed award
could be applied to an Award granted under this Executive Plan. Such
substitution or assumption will be permissible if the holder of the substituted
or assumed award would have been eligible to be granted an Award under this
Executive Plan if the other company had applied the rules of this Executive Plan
to such grant. In the event the Company assumes an award granted by another
company, the terms and conditions of such award will remain unchanged (except
that the exercise price and the number and nature of shares issuable upon
exercise of any such option will be adjusted appropriately pursuant to Section
424(a) of the Code). In the event the Company elects to grant a new Option
rather than assuming an existing option, such new Option may be granted with a
similarly adjusted Exercise Price.
18. ADOPTION AND SHAREHOLDER APPROVAL. This Executive Plan will become
effective on the date that it is adopted by the Board (the "EFFECTIVE DATE").
This Executive Plan will be approved by the shareholders of the Company
(excluding Shares issued pursuant to this Executive Plan), consistent with
applicable laws, within twelve (12) months before or after the Effective Date.
Upon the Effective Date, the Board may grant Awards pursuant to this Executive
Plan; provided, however, that: (i) no Option may be exercised prior to
10
<PAGE> 11
initial shareholder approval of this Executive Plan; (ii) no Option granted
pursuant to an increase in the number of Shares approved by the Board shall be
exercised prior to the time such increase has been approved by the shareholders
of the Company; (iii) in the event that initial shareholder approval is not
obtained within the time period provided herein, all Awards granted hereunder
shall be canceled, any Shares issued pursuant to any Award shall be canceled and
any purchase of Shares issued hereunder shall be rescinded; and (iv) Awards
granted pursuant to an increase in the number of Shares approved by the Board
which increase is not timely approved by shareholders shall be canceled, any
Shares issued pursuant to any such Awards shall be canceled, and any purchase of
Shares subject to any such Award shall be rescinded.
19. TERM OF EXECUTIVE PLAN/GOVERNING LAW. Unless earlier terminated as
provided herein, this Executive Plan will terminate ten (10) years from the
Effective Date or, if earlier, the date of shareholder approval. This Executive
Plan and all agreements hereunder shall be governed by and construed in
accordance with the laws of the State of California.
20. AMENDMENT OR TERMINATION OF EXECUTIVE PLAN. Subject to Section 5.9
hereof, the Board may at any time terminate or amend this Executive Plan in any
respect, including without limitation amendment of any form of Award Agreement
or instrument to be executed pursuant to this Executive Plan; provided, however,
that the Board will not, without the approval of the shareholders of the
Company, amend this Executive Plan in any manner that requires such shareholder
approval pursuant to the California Corporations Code or the Code or the
regulations promulgated thereunder as such provisions apply to ISO plans.
21. NONEXCLUSIVITY OF THE EXECUTIVE PLAN. Neither the adoption of this
Executive Plan by the Board, the submission of this Executive Plan to the
shareholders of the Company for approval, nor any provision of this Executive
Plan will be construed as creating any limitations on the power of the Board to
adopt such additional compensation arrangements as it may deem desirable,
including, without limitation, the granting of stock options and other equity
awards otherwise than under this Executive Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
22. DEFINITIONS. As used in this Executive Plan, the following terms
will have the following meanings:
"AWARD" means any award under this Executive Plan, including
any Option or Restricted Stock Award.
"AWARD AGREEMENT" means, with respect to each Award, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Award, including the Stock Option Agreement and
Restricted Stock Agreement.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means Termination because of (i) any willful, material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, or any willful perpetration by the Participant of a common law fraud,
(ii) the Participant's commission of an act of personal dishonesty which
involves personal profit in connection with the Company or any other entity
having a business relationship with the
11
<PAGE> 12
Company, (iii) any material breach by the Participant of any provision of any
agreement or understanding between the Company or any Parent or Subsidiary of
the Company and the Participant regarding the terms of the Participant's service
as an employee, officer, director or consultant to the Company or a Parent or
Subsidiary of the Company, including without limitation, the willful and
continued failure or refusal of the Participant to perform the material duties
required of such Participant as an employee, officer, director or consultant of
the Company or a Parent or Subsidiary of the Company, other than as a result of
having a Disability, or a breach of any applicable invention assignment and
confidentiality agreement or similar agreement between the Company or a Parent
or Subsidiary of the Company and the Participant, (iv) Participant's disregard
of the policies of the Company or any Parent or Subsidiary of the Company so as
to cause loss, damage or injury to the property, reputation or employees of the
Company or a Parent or Subsidiary of the Company, or (v) any other misconduct by
the Participant which is materially injurious to the financial condition or
business reputation of, or is otherwise materially injurious to, the Company or
a Parent or Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee created and appointed by the
Board to administer this Executive Plan, or if no committee is created and
appointed, the Board.
"COMPANY" means Handspring, Inc. or any successor corporation.
"DISABILITY" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee.
"EXECUTIVE PLAN" means this Handspring, Inc. 1999 Executive
Equity Incentive Plan, as amended from time to time.
"EXERCISE PRICE" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq
National Market on the date of determination as
reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the Common
Stock is listed or admitted to trading as reported in
The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on the date of determination as reported by
The Wall Street Journal (or, if not so reported, as
otherwise reported by any newspaper or other source
as the Board may determine); or
(d) if none of the foregoing is applicable, by the
Committee in good faith.
12
<PAGE> 13
"OPTION" means an award of an option to purchase Shares
pursuant to Section 5 hereof.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock representing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this
Executive Plan.
"PURCHASE PRICE" means the price at which a Participant may
purchase Restricted Stock.
"RESTRICTED STOCK" means Shares purchased pursuant to a
Restricted Stock Award.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6 hereof.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved
for issuance under this Executive Plan, as adjusted pursuant to Sections 2 and
17 hereof, and any successor security.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
representing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this
Executive Plan with respect to a Participant, that the Participant has for any
reason ceased to provide services as an employee, officer, director or
consultant to the Company or a Parent or Subsidiary of the Company. A
Participant will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided that such leave is for a period of not more
than ninety (90) days (a) unless reinstatement (or, in the case of an employee
with an ISO, reemployment) upon the expiration of such leave is guaranteed by
contract or statute, or (b) unless provided otherwise pursuant to formal policy
adopted from time to time by the Company's Board and issued and promulgated in
writing. In the case of any Participant on (i) sick leave, (ii) military leave
or (iii) an approved leave of absence, the Committee may make such provisions
respecting suspension of vesting of the Award while on leave from the Company or
a Parent or Subsidiary of the Company as it may deem appropriate, except that in
no event may an Option be exercised after the expiration of the term set forth
in the Stock Option Agreement. The Committee will have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "TERMINATION
DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the
Award Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
13
<PAGE> 1
EXHIBIT 10.4
HANDSPRING, INC.
2000 EQUITY INCENTIVE PLAN
As Adopted April 26, 2000
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and
18, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 15,000,000(1) Shares plus Shares that are subject
to: (a) issuance upon exercise of an Option but cease to be subject to such
Option for any reason other than exercise of such Option; (b) an Award granted
hereunder but are forfeited or are repurchased by the Company at the original
issue price; and (c) an Award that otherwise terminates without Shares being
issued. In addition, any authorized shares not issued or subject to outstanding
grants under the Company's 1998 Equity Incentive Plan and 1999 Executive Equity
Incentive Plan (the "PRIOR PLANS") on the Effective Date (as defined below) and
any shares issued under the Prior Plans that are forfeited or repurchased by the
Company or that are issuable upon exercise of options granted pursuant to the
Prior Plans that expire or become unexercisable for any reason without having
been exercised in full, will no longer be available for grant and issuance under
the Prior Plans, but will be available for grant and issuance under this Plan.
In addition, on each January 1, the aggregate number of Shares reserved and
available for grant and issuance pursuant to this Plan will be increased
automatically by a number of Shares equal to 5% of the total outstanding shares
of the Company as of the immediately preceding December 31; provided, that the
Board may in its sole discretion reduce the amount of the increase in any
particular year; and, provided further, provided that no more than 30,000,000
shares shall be issued as ISOs (as defined in Section 5 below). At all times the
Company shall reserve and keep available a sufficient number of Shares as shall
be required to satisfy the requirements of all outstanding Options granted under
this Plan and all other outstanding but unvested Awards granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
number of Shares that may be granted pursuant to Sections 3 and 9 below, (c) the
Exercise Prices of and number of Shares subject to outstanding Options, and (d)
the number of Shares subject to other outstanding Awards may, upon approval of
the Board in its discretion, be proportionately adjusted in compliance with
applicable securities laws; provided, however, that fractions of a Share will
not be issued but will either be replaced by a cash payment equal to the Fair
Market Value of such fraction of a Share or will be rounded up to the nearest
whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent or Subsidiary of the Company; provided
such consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. No person will be eligible to receive more than 3,000,000 Shares in
any calendar year under this Plan pursuant to the grant of Awards hereunder,
other than new employees of the Company or of a Parent or Subsidiary of the
Company (including new employees who are also officers and directors of the
Company or any Parent or Subsidiary of the Company), who are eligible to receive
up to a maximum of 4,500,000 Shares in the calendar year in which they commence
their employment. A person may be granted more than one Award under this Plan.
(1) Pursuant to the resolutions under which the Plan was adopted, this number
reflects the 3-for-2 stock split which became effective in May 2000.
<PAGE> 2
Handspring, Inc.
2000 Equity Incentive Plan
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Except for automatic grants
to Outside Directors pursuant to Section 9 hereof, and subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Except
for automatic grants to Outside Directors pursuant to Section 9 hereof, the
Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement
and any other agreement or document executed pursuant
to this Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of,
or as alternatives to, other Awards under this Plan
or any other incentive or compensation plan of the
Company or any Parent or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of
Awards;
(i) correct any defect, supply any omission or reconcile
any inconsistency in this Plan, any Award or any
Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable
for the administration of this Plan.
4.2 Committee Discretion. Except for automatic grants to
Outside Directors pursuant to Section 9 hereof, any determination made by the
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under this Plan to Participants who are not Insiders
of the Company.
5. OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and, except as otherwise
required by the terms of Section 9 hereof, will be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
may from time to time approve, and which will comply with and be subject to the
terms and conditions of this Plan.
2
<PAGE> 3
Handspring, Inc.
2000 Equity Incentive Plan
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options may be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement governing such Option; provided, however, that no Option will
be exercisable after the expiration of ten (10) years from the date the Option
is granted; and provided further that no ISO granted to a person who directly or
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary of
the Company ("TEN PERCENT STOCKHOLDER") will be exercisable after the expiration
of five (5) years from the date the ISO is granted. The Committee also may
provide for Options to become exercisable at one time or from time to time,
periodically or otherwise, in such number of Shares or percentage of Shares as
the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option will always be
subject to the following:
(a) If the Participant is Terminated for any reason
except death or Disability, then the Participant may
exercise such Participant's Options only to the
extent that such Options would have been exercisable
upon the Termination Date no later than three (3)
months after the Termination Date (or such shorter or
longer time period not exceeding five (5) years as
may be determined by the Committee, with any exercise
beyond three (3) months after the Termination Date
deemed to be an NQSO), but in any event, no later
than the expiration date of the Options.
(b) If the Participant is Terminated because of
Participant's death or Disability (or the Participant
dies within three (3) months after a Termination
other than for Cause or because of Participant's
Disability), then Participant's Options may be
exercised only to the extent that such Options would
have been exercisable by Participant on the
Termination Date and must be exercised by Participant
(or Participant's legal representative or authorized
assignee) no later than twelve (12) months after the
Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be
determined by the Committee, with any such exercise
beyond (a) three (3) months after the Termination
Date when the Termination is for any reason other
than the Participant's death or Disability, or (b)
twelve (12) months after the Termination Date when
the Termination is for Participant's death or
Disability, deemed to be an NQSO), but in any event
no later than the expiration date of the Options.
3
<PAGE> 4
Handspring, Inc.
2000 Equity Incentive Plan
(c) If a Participant is terminated for Cause, then the
Participant may exercise such Participant's Options
only to the extent that such Options would have been
exercisable upon the Termination Date no later than
three (3) months after the Termination Date (or such
shorter or longer time period as may be determined by
the Committee, with any exercise beyond three (3)
months after the Termination Date deemed to be an
NQSO), but in any event, no later than the expiration
date of the Options.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISO are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company, Parent
or Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value
of Shares on the date of grant with respect to which ISO are exercisable for the
first time by a Participant during any calendar year exceeds $100,000, then the
Options for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISO and the Options for the amount in excess of $100,000
that become exercisable in that calendar year will be NQSOs. In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date of this Plan to provide for a different limit on the Fair Market
Value of Shares permitted to be subject to ISO, such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision
in this Plan, no term of this Plan relating to ISO will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "PURCHASE PRICE"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer will terminate, unless otherwise determined by the Committee.
4
<PAGE> 5
Handspring, Inc.
2000 Equity Incentive Plan
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
to a Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8 of
this Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards
shall be subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set out
in advance in the Participant's individual Restricted Stock Purchase Agreement.
Restricted Stock Awards may vary from Participant to Participant and between
groups of Participants. Prior to the grant of a Restricted Stock Award, the
Committee shall: (a) determine the nature, length and starting date of any
Performance Period for the Restricted Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the payment of any Restricted Stock Award, the Committee shall determine the
extent to which such Restricted Stock Award has been earned. Performance Periods
may overlap and Participants may participate simultaneously with respect to
Restricted Stock Awards that are subject to different Performance Periods and
having different performance goals and other criteria.
6.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of
Shares (which may consist of Restricted Stock) for services rendered to the
Company or any Parent or Subsidiary of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent or Subsidiary
of the Company pursuant to an Award Agreement (the "STOCK BONUS AGREEMENT") that
will be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "PERFORMANCE STOCK BONUS
AGREEMENT") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
number of Shares to be awarded to the Participant. If the Stock Bonus is being
earned upon the satisfaction of performance goals pursuant to a Performance
Stock Bonus Agreement, then the Committee will: (a) determine the nature, length
and starting date of any Performance Period for each Stock Bonus; (b) select
from among the Performance Factors to be used to measure the performance, if
any; and (c) determine the number of Shares that may be awarded to the
Participant. Prior to the payment of any Stock Bonus, the Committee shall
determine the extent to which such Stock Bonuses have been earned. Performance
Periods may overlap and Participants may participate simultaneously with respect
to Stock Bonuses that are subject to different Performance Periods and different
performance goals and other criteria. The number of Shares may be fixed or may
vary in accordance with such performance goals and criteria as may be determined
by the Committee. The Committee may adjust the performance goals applicable to
the Stock Bonuses to take into account changes in law and accounting or tax
rules and to make such adjustments as the Committee deems necessary or
appropriate to reflect the impact of extraordinary or unusual items, events or
circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may
be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee may determine. Payment may be
5
<PAGE> 6
Handspring, Inc.
2000 Equity Incentive Plan
made in the form of cash or whole Shares or a combination thereof, either in a
lump sum payment or in installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been
owned by Participant for more than six (6) months and
have been paid for within the meaning of SEC Rule 144
(and, if such shares were purchased from the Company
by use of a promissory note, such note has been fully
paid with respect to such shares); or (2) were
obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of
the Code; provided, however, that Participants who
are not employees or directors of the Company will
not be entitled to purchase Shares with a promissory
note unless the note is adequately secured by
collateral other than the Shares;
(d) by waiver of compensation due or accrued to the
Participant for services rendered;
(e) with respect only to purchases upon exercise of an
Option, and provided that a public market for the
Company's stock exists:
(1) through a "same day sale" commitment from
the Participant and a broker-dealer that is
a member of the National Association of
Securities Dealers (an "NASD DEALER")
whereby the Participant irrevocably elects
to exercise the Option and to sell a portion
of the Shares so purchased to pay for the
Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such
Shares to forward the Exercise Price
directly to the Company; or
(2) through a "margin" commitment from the
Participant and a NASD Dealer whereby the
Participant irrevocably elects to exercise
the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin
account as security for a loan from the NASD
Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to
forward the Exercise Price directly to the
Company; or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
9. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.
9.1 Types of Options and Shares. Options granted under this
Plan and subject to this Section 9 shall be NQSOs.
9.2 Eligibility. Options subject to this Section 9 shall be
granted only to Outside Directors.
6
<PAGE> 7
Handspring, Inc.
2000 Equity Incentive Plan
9.3 Initial Grant. Each Outside Director who first becomes a
member of the Board on or after the Effective Date will automatically be granted
an Option for 37,500 Shares (an "INITIAL GRANT") on the date such Outside
Director first becomes a member of the Board. Each Outside Director who became a
member of the Board prior to the Effective Date and (a) who did not receive a
prior Option grant or (b) who is not a representative of a venture capital fund
will receive an Initial Grant immediately following the Effective Date.
9.4 Succeeding Grant. Immediately following each Annual
Meeting of stockholders, each Outside Director will automatically be granted an
Option for 11,250 Shares (a "SUCCEEDING GRANT"), provided the Outside Director
is a member of the Board on such date and has served continuously as a member of
the Board for a period of at least one year prior to the date of such Annual
Meeting.
9.5 Vesting and Exercisability. The date an Outside Director
receives an Initial Grant or a Succeeding Grant is referred to in this Plan as
the "START DATE" for such Option.
(a) Initial Grant. Each Initial Grant will vest and be
exercisable as to 25% of the Shares on the first one
year anniversary of the Start Date for such Initial
Grant, and thereafter as to 2.08333% of the Shares at
the end of each full succeeding month, so long as the
Outside Director continuously remains a director or a
consultant of the Company.
(b) Succeeding Grant. Each Succeeding Grant will vest and
be exercisable as to 25% of the Shares on the first
one year anniversary of the Start Date for such
Succeeding Grant, and thereafter as to 2.08333% of
the Shares at the end of each full succeeding month,
so long as the Outside Director continuously remains
a director or a consultant of the Company.
Notwithstanding any provision to the contrary, in the event of a Corporate
Transaction described in Section 18.1, the vesting of all options granted to
Outside Directors pursuant to this Section 9 will accelerate and such options
will become exercisable in full prior to the consummation of such event at such
times and on such conditions as the Committee determines, and must be exercised,
if at all, within three (3) months of the consummation of said event. Any
options not exercised within such three-month period shall expire.
9.6 Exercise Price. The exercise price of an Option pursuant
to an Initial Grant and Succeeding Grant shall be the Fair Market Value of the
Shares, at the time that the Option is granted.
10. WITHHOLDING TAXES.
10.1 Withholding Generally. Whenever Shares are to be issued
in satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
10.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.
7
<PAGE> 8
Handspring, Inc.
2000 Equity Incentive Plan
11. TRANSFERABILITY.
11.1 Except as otherwise provided in this Section 11, Awards
granted under this Plan, and any interest therein, will not be transferable or
assignable by Participant, and may not be made subject to execution, attachment
or similar process, otherwise than by will or by the laws of descent and
distribution or as determined by the Committee and set forth in the Award
Agreement with respect to Awards that are not ISOs.
11.2 All Awards other than NQSO's. All Awards other than
NQSO's shall be exercisable: (i) during the Participant's lifetime, only by (A)
the Participant, or (B) the Participant's guardian or legal representative; and
(ii) after Participant's death, by the legal representative of the Participant's
heirs or legatees.
11.3 NQSOs. Unless otherwise restricted by the Committee, an
NQSO shall be exercisable: (i) during the Participant's lifetime only by (A) the
Participant, (B) the Participant's guardian or legal representative, (C) a
Family Member of the Participant who has acquired the NQSO by "permitted
transfer;" and (ii) after Participant's death, by the legal representative of
the Participant's heirs or legatees. "Permitted transfer" means, as authorized
by this Plan and the Committee in an NQSO, any transfer effected by the
Participant during the Participant's lifetime of an interest in such NQSO but
only such transfers which are by gift or domestic relations order. A permitted
transfer does not include any transfer for value and neither of the following
are transfers for value: (a) a transfer of under a domestic relations order in
settlement of marital property rights or (b) a transfer to an entity in which
more than fifty percent of the voting interests are owned by Family Members or
the Participant in exchange for an interest in that entity.
12. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.
12.1 Voting and Dividends. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
12.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
12.3 Restrictions on Shares. At the discretion of the
Committee, the Company may reserve to itself and/or its assignee(s) in the Award
Agreement a right to repurchase a portion of or all Unvested Shares held by a
Participant following such Participant's Termination at any time within ninety
(90) days after the later of Participant's Termination Date and the date
Participant purchases Shares under this Plan, for cash and/or cancellation of
purchase money indebtedness, at the Participant's Exercise Price or Purchase
Price, as the case may be.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
8
<PAGE> 9
Handspring, Inc.
2000 Equity Incentive Plan
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. Except
for automatic grants to Outside Directors pursuant to Section 9 hereof, in the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the
9
<PAGE> 10
Handspring, Inc.
2000 Equity Incentive Plan
Company by tender offer or similar transaction (each, a "CORPORATE
TRANSACTION"), any or all outstanding Awards may be assumed, converted or
replaced by the successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. However, in the event a
Participant is Terminated by the Company without Cause within one (1) year from
the date of the Corporate Transaction, then the vesting of all outstanding
Awards for such Participant will accelerate as to an additional 25% of the
Shares that are unvested on the date of such Termination. In the alternative,
the successor or acquiring corporation may substitute equivalent Awards or
provide substantially similar consideration to Participants as was provided to
shareholders (after taking into account the existing provisions of the Awards).
The successor corporation may also issue, in place of outstanding unvested
Shares of the Company held by the Participants, substantially similar shares or
other property subject to repurchase restrictions no less favorable to the
Participant. In the event such successor corporation (if any) refuses to assume
or substitute Awards, as provided above, pursuant to a Corporate Transaction
described in this Subsection 18.1, such Awards will expire on such Corporate
Transaction at such time and on such conditions as the Committee will determine.
Notwithstanding anything in this Plan to the contrary, the Committee may, in its
sole discretion, provide that the vesting of any or all Awards granted pursuant
to this Plan will accelerate upon a Corporate Transaction described in this
Section 18. If the Committee exercises such discretion with respect to Options,
such Options will become exercisable in full prior to the consummation of such
event at such time and on such conditions as the Committee determines, and if
such Options are not exercised prior to the consummation of the Corporate
Transaction, they shall terminate at such time as determined by the Committee.
18.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any Corporate Transaction described in Section
18.1, any outstanding Awards will be treated as provided in the applicable
agreement or plan of merger, consolidation, dissolution, liquidation, or sale of
assets.
18.3 Assumption of Awards by the Company. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either; (a) granting an Award under this Plan in substitution
of such other company's award; or (b) assuming such award as if it had been
granted under this Plan if the terms of such assumed award could be applied to
an Award granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under this Plan if the other company had applied
the rules of this Plan to such grant. In the event the Company assumes an award
granted by another company, the terms and conditions of such award will remain
unchanged (except that the exercise price and the number and nature of Shares
issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective
on the date on which the registration statement filed by the Company with the
SEC under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "EFFECTIVE DATE").
This Plan shall be approved by the stockholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the date this Plan is adopted by the Board. Upon the
Effective Date, the Committee may grant Awards pursuant to this Plan; provided,
however, that: (a) no Option may be exercised prior to initial stockholder
approval of this Plan; (b) no Option granted pursuant to an increase in the
number of Shares subject to this Plan approved by the Board will be exercised
prior to the time such increase has been approved by the stockholders of the
Company; (c) in the event that initial stockholder approval is not obtained
within the time period provided herein, all Awards granted hereunder shall be
cancelled, any Shares issued pursuant to any Awards shall be cancelled and any
purchase of Shares issued hereunder shall be rescinded; and (d) in the event
that stockholder approval of such increase is not obtained within the time
period provided herein, all Awards granted pursuant to such increase will be
cancelled, any Shares issued pursuant to any Award granted pursuant to such
increase will be cancelled, and any purchase of Shares pursuant to such increase
will be rescinded.
10
<PAGE> 11
Handspring, Inc.
2000 Equity Incentive Plan
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This Plan
and all agreements thereunder shall be governed by and construed in accordance
with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will have
the following meanings:
"AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means (i) the commission of an act of theft,
embezzlement, fraud, dishonesty, (b) a breach of fiduciary duty to the Company
or a Parent or Subsidiary of the Company or (c) a failure to materially perform
the customary duties of employee's employment.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Compensation Committee of the Board.
"COMPANY" means Handspring, Inc. or any successor corporation.
"DISABILITY" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq
National Market on the date of determination as
reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national
11
<PAGE> 12
Handspring, Inc.
2000 Equity Incentive Plan
securities exchange on which the Common Stock is
listed or admitted to trading as reported in The Wall
Street Journal;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on the date of determination as reported in
The Wall Street Journal;
(d) in the case of an Award made on the Effective Date,
the price per share at which shares of the Company's
Common Stock are initially offered for sale to the
public by the Company's underwriters in the initial
public offering of the Company's Common Stock
pursuant to a registration statement filed with the
SEC under the Securities Act; or
(e) if none of the foregoing is applicable, by the
Committee in good faith.
"FAMILY MEMBER" includes any of the following:
(a) child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law of
the Participant, including any such person with such
relationship to the Participant by adoption;
(b) any person (other than a tenant or employee) sharing
the Participant's household;
(c) a trust in which the persons in (a) and (b) have more
than fifty percent of the beneficial interest;
(d) a foundation in which the persons in (a) and (b) or
the Participant control the management of assets; or
(e) any other entity in which the persons in (a) and (b)
or the Participant own more than fifty percent of the
voting interest.
"INSIDER" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"OPTION" means an award of an option to purchase Shares
pursuant to Section 5.
"OUTSIDE DIRECTOR" means a member of the Board who is not an
employee of the Company or any Parent or Subsidiary.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this
Plan.
"PERFORMANCE FACTORS" means the factors selected by the
Committee from among the following measures to determine whether the performance
goals established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
12
<PAGE> 13
Handspring, Inc.
2000 Equity Incentive Plan
(b) Earnings before income taxes and amortization and/or
earnings before income taxes and amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share growth;
(f) Total stockholder return and/or total stockholder
return growth;
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"PERFORMANCE PERIOD" means the period of service determined by
the Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"PLAN" means this Handspring, Inc. 2000 Equity Incentive Plan,
as amended from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, 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
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of
13
<PAGE> 14
Handspring, Inc.
2000 Equity Incentive Plan
the term set forth in the Option agreement. The Committee will have sole
discretion to determine whether a Participant has ceased to provide services and
the effective date on which the Participant ceased to provide services (the
"TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the
Award Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
14
<PAGE> 1
EXHIBIT 10.5
HANDSPRING, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
As Adopted April 26, 2000
1. ESTABLISHMENT OF PLAN. Handspring, Inc. (the "COMPANY") proposes to
grant options for purchase of the Company's Common Stock to eligible employees
of the Company and its Participating Subsidiaries (as hereinafter defined)
pursuant to this Employee Stock Purchase Plan (this "PLAN"). For purposes of
this Plan, "PARENT CORPORATION" and "SUBSIDIARY" shall have the same meanings as
"parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "CODE").
"PARTICIPATING SUBSIDIARIES" are Parent Corporations or Subsidiaries that the
Board of Directors of the Company (the "BOARD") designates from time to time as
corporations that shall participate in this Plan. The Company intends this Plan
to qualify as an "employee stock purchase plan" under Section 423 of the Code
(including any amendments to or replacements of such Section), and this Plan
shall be so construed. Any term not expressly defined in this Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein. A
total of 750,000(1) shares of the Company's Common Stock is reserved for
issuance under this Plan. In addition, on each January 1, the aggregate number
of shares of the Company's Common Stock reserved for issuance under the Plan
shall be increased automatically by a number of shares equal to 1% of the total
number of outstanding shares of the Company Common Stock on the immediately
preceding December 31; provided, that the Board or the Committee may in its sole
discretion reduce the amount of the increase in any particular year; and,
provided further, that the aggregate number of shares issued over the term of
this Plan shall not exceed 22,500,000 shares. Such number shall be subject to
adjustments effected in accordance with Section 14 of this Plan.
2. PURPOSE. The purpose of this Plan is to provide eligible employees
of the Company and Participating Subsidiaries with a convenient means of
acquiring an equity interest in the Company through payroll deductions, to
enhance such employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.
3. ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board (the "COMMITTEE"). Subject to the provisions of this Plan
and the limitations of Section 423 of the Code or any successor provision in the
Code, all questions of interpretation or application of this Plan shall be
determined by the Committee and its decisions shall be final and binding upon
all participants. Members of the Committee shall receive no compensation for
their services in connection with the administration of this Plan, other than
standard fees as established from time to time by the Board for services
rendered by Board members serving on Board committees. All expenses incurred in
connection with the administration of this Plan shall be paid by the Company.
4. ELIGIBILITY. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or a
Participating Subsidiary prior to the beginning of such Offering Period or prior
to such other time period as specified by the Committee, except that employees
who are employed on the Effective Date of the Registration Statement filed by
the Company with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "SECURITIES ACT") registering the
initial public offering of the Company's Common Stock shall be eligible to
participate in the first Offering Period under the Plan;
(b) employees who are customarily employed for twenty (20)
hours or less per week;
(c) employees who are customarily employed for five (5) months
or less in a calendar year;
(1) Pursuant to the resolutions under which the Plan was adopted, this number
reflects the 3-for-2 stock split which became effective in May 2000.
<PAGE> 2
Handspring, Inc.
2000 Employee Stock Purchase Plan
(d) employees who, together with any other person whose stock
would be attributed to such employee pursuant to Section 424(d) of the Code, own
stock or hold 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 any of its Participating Subsidiaries or who, as a result of being granted an
option under this Plan with respect to such Offering Period, would own stock or
hold 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 any of
its Participating Subsidiaries; and
(e) individuals who provide services to the Company or any of
its Participating Subsidiaries as independent contractors who are reclassified
as common law employees for any reason except for federal income and employment
tax purposes.
5. OFFERING DATES. The offering periods of this Plan (each, an
"OFFERING PERIOD") shall be of twenty-four (24) months duration commencing on
February 1 and August 1 of each year and ending on January 31 and July 31 of
each year; provided, however, that notwithstanding the foregoing, the first such
Offering Period shall commence on the first business day on which price
quotations for the Company's Common Stock are available on the Nasdaq National
Market (the "FIRST OFFERING DATE") and shall end on July 31, 2002. Except for
the first Offering Period, each Offering Period shall consist of four (4) six
month purchase periods (individually, a "PURCHASE PERIOD") during which payroll
deductions of the participants are accumulated under this Plan. The first
Offering Period shall consist of no more than five and no fewer than three
Purchase Periods, any of which may be greater or less than six months as
determined by the Committee. The first business day of each Offering Period is
referred to as the "OFFERING DATE". The last business day of each Purchase
Period is referred to as the "PURCHASE DATE". The Committee shall have the power
to change the Offering Dates, the Purchase Dates and the duration of Offering
Periods or Purchase Periods without stockholder approval if such change is
announced prior to the relevant Offering Period, or prior to such other time
period as specified by the Committee.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement to the Company prior to such Offering Date, or such other time period
as specified by the Committee. Notwithstanding the foregoing, the Committee may
set a later time for filing the subscription agreement authorizing payroll
deductions for all eligible employees with respect to a given Offering Period.
An eligible employee who does not deliver a subscription agreement to the
Company by such date after becoming eligible to participate in such Offering
Period shall not participate in that Offering Period or any subsequent Offering
Period unless such employee enrolls in this Plan by filing a subscription
agreement with the Company prior to such Offering Date, or such other time
period as specified by the Committee. Once an employee becomes a participant in
an Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws or is deemed to withdraw from this Plan or
terminates further participation in the Offering Period as set forth in Section
11 below. Such participant is not required to file any additional subscription
agreement in order to continue participation in this Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i)
eighty-five percent (85%) of the fair market value of a share of the Company's
Common Stock on the Offering Date (but in no event less than the par value of a
share of the Company's Common Stock), or (ii) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Purchase Date
(but in no event less than the par value of a share of the Company's Common
Stock), provided, however, that the number of shares of the Company's Common
Stock subject to any option granted pursuant to this Plan shall not exceed the
lesser of (x) the maximum number of shares set by the Committee pursuant to
Section 10(c) below with respect to the applicable Purchase Date, or (y) the
maximum number of shares which may be purchased pursuant to Section 10(b) below
with respect to the applicable Purchase Date. The fair market value of a share
of the Company's Common Stock shall be determined as provided in Section 8
below.
2
<PAGE> 3
Handspring, Inc.
2000 Employee Stock Purchase Plan
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
For purposes of this Plan, the term "FAIR MARKET VALUE" means,
as of any date, the value of a share of the Company's Common Stock determined as
follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on the date of
determination on the principal national securities exchange on which the Common
Stock is listed or admitted to trading as reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted
on the Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the date
of determination as reported in The Wall Street Journal; or
(d) if none of the foregoing is applicable, by the Board in
good faith, which in the case of the First Offering Date will be the price per
share at which shares of the Company's Common Stock are initially offered for
sale to the public by the Company's underwriters in the initial public offering
of the Company's Common Stock pursuant to a registration statement filed with
the SEC under the Securities Act.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE
OF SHARES.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made as
a percentage of the participant's compensation in one percent (1%) increments
not less than one percent (1%), nor greater than ten percent (10%) or such lower
or higher limit set by the Committee but not to exceed fifteen percent (15%).
Compensation shall mean all W-2 cash compensation, including, but not limited
to, base salary, wages, commissions, overtime, shift premiums and bonuses, plus
draws against commissions, provided, however, that for purposes of determining a
participant's compensation, any election by such participant to reduce his or
her regular cash remuneration under Sections 125 or 401(k) of the Code shall be
treated as if the participant did not make such election. Payroll deductions
shall commence on the first payday of the Offering Period and shall continue to
the end of the Offering Period unless sooner altered or terminated as provided
in this Plan.
(b) A participant may increase or decrease the rate of payroll
deductions during an Offering Period by filing with the Company a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing after the Company's receipt of
the authorization and shall continue for the remainder of the Offering Period
unless changed as described below. Such change in the rate of payroll deductions
may be made at any time during an Offering Period, but not more than one (1)
change may be made effective during any Purchase Period. A participant may
increase or decrease the rate of payroll deductions for any subsequent Offering
Period by filing with the Company a new authorization for payroll deductions
prior to the beginning of such Offering Period, or prior to such other time
period as specified by the Committee.
(c) A participant may reduce his or her payroll deduction
percentage to zero during an Offering Period by filing with the Company a
request for cessation of payroll deductions. Such reduction shall be effective
beginning with the next payroll period after the Company's receipt of the
request and no further payroll deductions will be made for the duration of the
Offering Period. Payroll deductions credited to the participant's account prior
to the effective date of the request shall be used to purchase shares of Common
Stock of the Company in accordance with Section (e) below. A participant may not
resume making payroll deductions during the Offering Period in which he or she
reduced his or her payroll deductions to zero.
3
<PAGE> 4
Handspring, Inc.
2000 Employee Stock Purchase Plan
(d) All payroll deductions made for a participant are credited
to his or her account under this Plan and are deposited with the general funds
of the Company. No interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(e) On each Purchase Date, so long as this Plan remains in
effect and provided that the participant has not submitted a signed and
completed withdrawal form before that date which notifies the Company that the
participant wishes to withdraw from that Offering Period under this Plan and
have all payroll deductions accumulated in the account maintained on behalf of
the participant as of that date returned to the participant, the Company shall
apply the funds then in the participant's account to the purchase of whole
shares of Common Stock reserved under the option granted to such participant
with respect to the Offering Period to the extent that such option is
exercisable on the Purchase Date. The purchase price per share shall be as
specified in Section 8 of this Plan. Any cash remaining in a participant's
account after such purchase of shares shall be refunded to such participant in
cash, without interest; provided, however that any amount remaining in such
participant's account on a Purchase Date which is less than the amount necessary
to purchase a full share of Common Stock of the Company shall be carried
forward, without interest, into the next Purchase Period or Offering Period, as
the case may be. In the event that this Plan has been oversubscribed, all funds
not used to purchase shares on the Purchase Date shall be returned to the
participant, without interest. No Common Stock shall be purchased on a Purchase
Date on behalf of any employee whose participation in this Plan has terminated
prior to such Purchase Date.
(f) As promptly as practicable after the Purchase Date, the
Company shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.
(g) During a participant's lifetime, his or her option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No participant shall be entitled to purchase stock under
this Plan at a rate which, when aggregated with his or her rights to purchase
stock under all other employee stock purchase plans of the Company or any
Subsidiary, exceeds $25,000 in fair market value, determined as of the Offering
Date (or such other limit as may be imposed by the Code) for each calendar year
in which the employee participates in this Plan. The Company shall automatically
suspend the payroll deductions of any participant as necessary to enforce such
limit provided that when the Company automatically resumes such payroll
deductions, the Company must apply the rate in effect immediately prior to such
suspension.
(b) No more than two hundred percent (200%) of the number of
shares determined by using eighty-five percent (85%) of the fair market value of
a share of the Company's Common Stock on the Offering Date as the denominator
may be purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Prior to
the commencement of any Offering Period or prior to such time period as
specified by the Committee, the Committee may, in its sole discretion, set a
maximum number of shares which may be purchased by any employee at any single
Purchase Date (hereinafter the "MAXIMUM SHARE AMOUNT"). Until otherwise
determined by the Committee, there shall be no Maximum Share Amount. In no event
shall the Maximum Share Amount exceed the amounts permitted under Section 10(b)
above. If a new Maximum Share Amount is set, then all participants must be
notified of such Maximum Share Amount prior to the commencement of the next
Offering Period. The Maximum Share Amount shall continue to apply with respect
to all succeeding Purchase Dates and Offering Periods unless revised by the
Committee as set forth above.
(d) If the number of shares to be purchased on a Purchase Date
by all employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company will make a
4
<PAGE> 5
Handspring, Inc.
2000 Employee Stock Purchase Plan
pro rata allocation of the remaining shares in as uniform a manner as shall be
reasonably practicable and as the Committee shall determine to be equitable. In
such event, the Company shall give written notice of such reduction of the
number of shares to be purchased under a participant's option to each
participant affected.
(e) Any payroll deductions accumulated in a participant's
account which are not used to purchase stock due to the limitations in this
Section 10 shall be returned to the participant as soon as practicable after the
end of the applicable Purchase Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period
under this Plan by signing and delivering to the Company a written notice to
that effect on a form provided for such purpose. Such withdrawal may be elected
at any time prior to the end of an Offering Period, or such other time period as
specified by the Committee.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 6 above for initial
participation in this Plan.
(c) If the Fair Market Value on the first day of the current
Offering Period in which a participant is enrolled is higher than the Fair
Market Value on the first day of any subsequent Offering Period, the Company
will automatically enroll such participant in the subsequent Offering Period.
Any funds accumulated in a participant's account prior to the first day of such
subsequent Offering Period will be applied to the purchase of shares on the
Purchase Date immediately prior to the first day of such subsequent Offering
Period, if any.
12. TERMINATION OF EMPLOYMENT. Termination of a participant's
employment for any reason, including retirement, death or the failure of a
participant to remain an eligible employee of the Company or of a Participating
Subsidiary, immediately terminates his or her participation in this Plan. In
such event, the payroll deductions credited to the participant's account will be
returned to him or her or, in the case of his or her death, to his or her legal
representative, without interest. For purposes of this Section 12, an employee
will not be deemed to have terminated employment or failed to remain in the
continuous employ of the Company or of a Participating Subsidiary in the case of
sick leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall deliver to the participant all payroll deductions credited to such
participant's account. No interest shall accrue on the payroll deductions of a
participant in this Plan.
14. CAPITAL CHANGES. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "RESERVES"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
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
Committee, whose determination 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
5
<PAGE> 6
Handspring, Inc.
2000 Employee Stock Purchase Plan
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, declare that this Plan shall terminate as of a date fixed by the
Committee and give each participant the right to purchase shares under this Plan
prior to such termination. In the event of (i) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the options under this Plan are assumed, converted or replaced by
the successor corporation, which assumption will be binding on all
participants), (ii) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (iii) the sale of all or
substantially all of the assets of the Company or (iv) the acquisition, sale, or
transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction, the Plan will continue with regard to Offering
Periods that commenced prior to the closing of the proposed transaction and
shares will be purchased based on the Fair Market Value of the surviving
corporation's stock on each Purchase Date, unless otherwise provided by the
Committee consistent with pooling of interests accounting treatment.
The Committee 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, or in the event of the Company being consolidated with or merged into any
other corporation.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this 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 22 below) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. REPORTS. Individual accounts will be maintained for each
participant in this Plan. Each participant shall receive promptly after the end
of each Purchase Period a report of his or her account setting forth the total
payroll deductions accumulated, the number of shares purchased, the per share
price thereof and the remaining cash balance, if any, carried forward to the
next Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company in
writing if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two (2)
years from the Offering Date or within one (1) year from the Purchase Date on
which such shares were purchased (the "NOTICE PERIOD"). The Company may, at any
time during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to this Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have
equal rights and privileges with respect to this Plan so that this Plan
qualifies as an "employee stock purchase plan" within the meaning of Section 423
or any successor provision of the Code and the related regulations. Any
provision of this Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the
6
<PAGE> 7
Handspring, Inc.
2000 Employee Stock Purchase Plan
Company, the Committee or the Board, be reformed to comply with the requirements
of Section 423. This Section 19 shall take precedence over all other provisions
in this Plan.
20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with this 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.
21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board, this Plan will become effective on the First Offering Date (as defined
above). This Plan shall be approved by the stockholders of the Company, in any
manner permitted by applicable corporate law, within twelve (12) months before
or after the date this Plan is adopted by the Board. No purchase of shares
pursuant to this Plan shall occur prior to such stockholder approval. This Plan
shall continue until the earlier to occur of (a) termination of this Plan by the
Board (which termination may be effected by the Board at any time), (b) issuance
of all of the shares of Common Stock reserved for issuance under this Plan, or
(c) ten (10) years from the adoption of this Plan by the Board.
22. 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 this Plan in the event of such participant's death
subsequent to the end of an Purchase Period but prior to delivery to him 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 this
Plan in the event of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant 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 this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares 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 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.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE 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, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange or automated quotation system 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.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 above within twelve (12) months of the adoption of such amendment (or
earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under
this Plan; or
(b) change the designation of the employees (or class of
employees) eligible for participation in this Plan.
Notwithstanding the foregoing, the Board may make such
amendments to the Plan as the Board determines to be advisable, if the
continuation of the Plan or any Offering Period would result in financial
7
<PAGE> 8
Handspring, Inc.
2000 Employee Stock Purchase Plan
accounting treatment for the Plan that is different from the financial
accounting treatment in effect on the date this Plan is adopted by the Board.
8
<PAGE> 1
EXHIBIT 10.14
BASIC LEASE INFORMATION
INDUSTRIAL NET
<TABLE>
<S> <C>
LEASE DATE: May 8, 2000
(same as date in first paragraph of Lease)
TENANT: Handspring, Inc. a Delaware corporation
TENANT'S NOTICE ADDRESS: 380 North Bernardo Avenue, Mountain View, CA
TENANT'S BILLING ADDRESS: 380 North Bernardo Avenue, Mountain View, CA
TENANT CONTACT: Seth Henderson PHONE NUMBER: (650) 230-5000
FAX NUMBER: (650) 230-2100
LANDLORD: Spieker Properties, L.P., a California limited
partnership
LANDLORD'S NOTICE ADDRESS: 2180 Sand Hill Road, Suite 100, Menlo Park, CA 94025
LANDLORD'S REMITTANCE ADDRESS: Spieker Properties
P.O. Box 45587
Dept. 10792
San Francisco, CA 94145-0587
PROJECT DESCRIPTION: That one (1) building commonly known as 380
North Bernardo Avenue in Mountain View,
California.
BUILDING DESCRIPTION: Approximately 28,069 rentable square feet at 380
North Bernardo Avenue in Mountain View, CA 94043.
PREMISES: Approximately 28,069 rentable square feet at 380
North Bernardo in Mountain View, CA 94043. The
Premises is outlined in red on Exhibit B
PERMITTED USE: General office use, light research and development,
storage and shipping of small volumes of product and
legal related uses in compliance with all applicable
laws and ordinances of the City of Mountain View.
PARKING DENSITY: 3.3 spaces per 1,000 rentable square feet of the Premises
SCHEDULED TERM COMMENCEMENT DATE: July 1, 2000
SCHEDULED LENGTH OF TERM: Ninety-six (96) months
SCHEDULED TERM EXPIRATION DATE: June 30, 2008
RENT:
BASE RENT: $140,345.00 per month
(subject to adjustment as provided in Paragraph
39.A. hereof)
ESTIMATED FIRST YEAR OPERATING EXPENSES: $10,063.20 per month
SECURITY DEPOSIT: $2,526,210.00 ($421,035.00 to be held in cash
and $2,105,175.00 to be held in the form of a
Letter of Credit-see Paragraphs 19 and 39.B)
TENANT'S NAICS CODE: 5112
TENANT'S PROPORTIONATE SHARE:
OF BUILDING: 100%
OF PROJECT: 100%
</TABLE>
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above and shall be construed to
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease, the latter shall control.
1
<PAGE> 2
LANDLORD TENANT
Spieker Properties, L.P., Handspring, Inc.
a California limited partnership a Delaware corporation
By: Spieker Properties, Inc.,
a Maryland corporation, By: /s/ BERNARD J. WHITNEY
its general partner -------------------------------
Bernard J. Whitney
Its: Chief Financial Officer
By: /s/ ERIC T. LUHRS
--------------------------
Eric T. Luhrs
Its: Vice President
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Basic Lease Information..................................................................1
Table of Contents........................................................................2
1. Premises.................................................................................4
2. Possession and Lease Commencement........................................................4
3. Term.....................................................................................4
4. Use......................................................................................4
5. Rules and Regulations....................................................................5
6. Rent.....................................................................................5
7. Operating Expenses.......................................................................5
8. Insurance and Indemnification............................................................7
9. Waiver of Subrogation....................................................................8
10. Landlord's Repairs and Maintenance.......................................................8
11. Tenant's Repairs and Maintenance.........................................................8
12. Alterations..............................................................................9
13. Signs....................................................................................9
14. Inspection/Posting Notices..............................................................10
15. Services and Utilities..................................................................10
16. Subordination...........................................................................10
17. Financial Statements....................................................................11
18. Estoppel Certificate....................................................................11
19. Security Deposit........................................................................11
20. Limitation of Tenant's Remedies.........................................................11
21. Assignment and Subletting...............................................................11
22. Authority of Tenant.....................................................................13
23. Condemnation............................................................................13
24. Casualty Damage.........................................................................13
25. Holding Over............................................................................14
26. Default.................................................................................14
27. Liens...................................................................................15
28. Substitution............................................................................16
29. Transfers by Landlord...................................................................16
30. Right of Landlord to Perform Tenant's Covenants.........................................16
31. Waiver..................................................................................16
32. Notices.................................................................................16
33. Attorney's Fees.........................................................................16
34. Successors and Assigns..................................................................16
35. Force Majeure...........................................................................16
36. Surrender of Premises...................................................................17
37. Hazardous Materials ....................................................................17
38. Miscellaneous...........................................................................17
39. Additional Provisions...................................................................18
40. Jury Trial Waiver.......................................................................20
Signatures..............................................................................21
Exhibits:
Exhibit A............................................................Rules and Regulations
Exhibit B........................................................................Site Plan
Exhibit C......................................................Lease Improvement Agreement
Exhibit D................................................Hazardous Materials Questionnaire
</TABLE>
Additional Exhibits as Required
3
<PAGE> 4
LEASE
THIS LEASE is made as of the 24th day of April, 2000, by and between Spieker
Properties, L.P., a California limited partnership (hereinafter called
"LANDLORD"), and Handspring, Inc., a Delaware corporation (hereinafter called
"TENANT").
1. PREMISES
Landlord leases to Tenant and Tenant leases from Landlord, upon the terms
and conditions hereinafter set forth, those premises (the "PREMISES") outlined
in red on EXHIBIT B and described in the Basic Lease Information. The Premises
shall be all or part of a building (the "BUILDING") and of a project (the
"PROJECT"), which may consist of more than one building and additional
facilities, as described in the Basic Lease Information. The Building and
Project are outlined in blue and green respectively on EXHIBIT B. Landlord and
Tenant acknowledge that physical changes may occur from time to time in the
Premises, Building or Project, and that the number of buildings and additional
facilities which constitute the Project may change from time to time, which may
result in an adjustment in Tenant's Proportionate Share, as defined in the Basic
Lease Information, as provided in Paragraph 7.A.
2. POSSESSION AND LEASE COMMENCEMENT
A. EXISTING IMPROVEMENTS. If this Lease pertains to a Premises in which the
interior improvements have already been constructed ("EXISTING IMPROVEMENTS"),
the provisions of this Paragraph 2.A. shall apply and the term commencement date
("TERM COMMENCEMENT DATE") shall be the earlier of the date on which : (1)
Tenant takes possession of some or all of the Premises; or (2) Landlord notifies
Tenant that Tenant may occupy the Premises. If for any reason Landlord cannot
deliver possession of the Premises to Tenant on the scheduled Term Commencement
Date, Landlord shall not be subject to any liability therefor, nor shall
Landlord be in default hereunder nor shall such failure affect the validity of
this Lease, and Tenant agrees to accept possession of the Premises at such time
as Landlord is able to deliver the same , which date shall then be deemed the
Term Commencement Date. Tenant shall not be liable for any Rent (defined below)
for any period prior to the Term Commencement Date. Tenant acknowledges that
Tenant has inspected and accepts the Premises in their present condition, broom
clean, "as is," and as suitable for, the Permitted Use (as defined below), and
for Tenant's intended operations in the Premises. Tenant agrees that the
Premises and other improvements are in good and satisfactory condition as of
when possession was taken. Tenant further acknowledges that no representations
as to the condition or repair of the Premises nor promises to alter, remodel or
improve the Premises have been made by Landlord or any agents of Landlord unless
such are expressly set forth in this Lease. Upon Landlord's request, Tenant
shall promptly execute and return to Landlord a "Start-Up Letter" in which
Tenant shall agree, among other things, to acceptance of the Premises and to the
determination of the Term Commencement Date, in accordance with the terms of
this Lease, but Tenant's failure or refusal to do so shall not negate Tenant's
acceptance of the Premises or affect determination of the Term Commencement
Date.
B. [INTENTIONALLY DELETED]
3. TERM
The term of this Lease (the "TERM") shall commence on the Term Commencement
Date and continue in full force and effect for the number of months specified as
the Length of Term in the Basic Lease Information or until this Lease is
terminated as otherwise provided herein. If the Term Commencement Date is a date
other than the first day of the calendar month, the Term shall be the number of
months of the Length of Term in addition to the remainder of the calendar month
following the Term Commencement Date.
4. USE
A. GENERAL. Tenant shall use the Premises for the permitted use specified in the
Basic Lease Information ("PERMITTED USE") and for no other use or purpose.
Tenant shall control Tenant's employees, agents, customers, visitors, invitees,
licensees, contractors, assignees and subtenants (collectively, "TENANT'S
PARTIES") in such a manner that Tenant and Tenant's Parties cumulatively do not
exceed the parking density specified in the Basic Lease Information (the
"PARKING DENSITY") at any time. So long as Tenant is occupying the Premises,
Tenant and Tenant's Parties shall have the nonexclusive right to use, in common
with other parties occupying the Building or Project, the parking areas,
driveways and other common areas of the Building and Project, subject to the
terms of this Lease and such rules and regulations as Landlord may from time to
time prescribe. Landlord reserves the right, without notice or liability to
Tenant, and without the same constituting an actual or constructive eviction, to
alter or modify the common areas from time to time, including the location and
configuration thereof, and the amenities and facilities which Landlord may
determine to provide from time to time; provided, however, that in such event
Landlord shall use commercially reasonable efforts to minimize any interference
with the ongoing operations of Tenant.
B. LIMITATIONS. Tenant shall not permit any odors, smoke, dust, gas, substances,
noise or vibrations to emanate from the Premises or from any portion of the
common areas as a result of Tenant's or any Tenant's Party's use thereof, nor
take any action which would constitute a nuisance or would disturb, obstruct or
endanger any other tenants or occupants of the Building or Project or elsewhere,
or interfere with their use of their respective premises or common areas.
Storage outside the Premises of materials, vehicles or any other items is
prohibited. Tenant shall not use or allow the Premises to be used for any
immoral, improper or unlawful purpose, nor shall Tenant cause or maintain or
permit any nuisance in, on or about the Premises. Tenant shall not commit or
suffer the commission of any waste in, on or about the Premises. Tenant shall
not allow any sale by auction upon the Premises, or place any loads upon the
floors, walls or ceilings which could endanger the structure, or place any
harmful substances in the drainage system of the Building or Project. No waste,
materials or refuse shall be dumped upon or permitted to remain outside the
Premises except in trash containers placed inside exterior enclosures designated
for that purpose by Landlord. Landlord shall not be responsible to Tenant for
the non-compliance by any other tenant or occupant of the Building or Project
with any of the above-referenced rules or any other terms or provisions of such
tenant's or occupant's lease or other contract.
C. COMPLIANCE WITH REGULATIONS. By entering the Premises, Tenant accepts the
Premises in the condition existing as of the date of such entry. Tenant shall at
its sole cost and expense strictly comply with all existing or future applicable
municipal, state and federal and other governmental statutes, rules,
requirements, regulations, laws and ordinances, including zoning ordinances and
regulations, and covenants, easements and restrictions of record governing and
relating to the use, occupancy or possession of the Premises, to Tenant's use
of the common areas, or to the use, storage, generation or disposal of Hazardous
Materials (hereinafter defined) (collectively "REGULATIONS"). Tenant shall at
its sole cost and expense obtain any and all licenses or permits necessary for
Tenant's use of the Premises. Tenant shall at its sole cost and expense promptly
comply with the requirements of any board of fire underwriters or other similar
body now or hereafter constituted. Tenant shall not do or permit anything to be
done in, on, under or about the Project or bring or keep anything which will in
any way increase the rate of any insurance upon the Premises, Building or
Project or upon any contents therein or
4
<PAGE> 5
cause a cancellation of said insurance or otherwise affect said insurance in any
manner. Tenant shall indemnify, defend (by counsel reasonably acceptable to
Landlord), protect and hold Landlord harmless from and against any loss, cost,
expense, damage, attorneys' fees or liability arising out of the failure of
Tenant to comply with any Regulation. Tenant's obligations pursuant to the
foregoing indemnity shall survive the expiration or earlier termination of this
Lease.
5. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the building rules and
regulations attached hereto as EXHIBIT A and any other rules and regulations and
any reasonable modifications or additions thereto which Landlord may from time
to time prescribe in writing for the purpose of maintaining the proper care,
cleanliness, safety, traffic flow and general order of the Premises or the
Building or Project. Tenant shall cause Tenant's Parties to comply with such
rules and regulations. Landlord shall not be responsible to Tenant for the
non-compliance by any other tenant or occupant of the Building or Project with
any of such rules and regulations, any other tenant's or occupant's lease or any
Regulations.
6. RENT
A. BASE RENT. Tenant shall pay to Landlord and Landlord shall receive, without
notice or demand throughout the Term, Base Rent as specified in the Basic Lease
Information, payable in monthly installments in advance on or before the first
day of each calendar month, in lawful money of the United States, without
deduction or offset whatsoever, at the Remittance Address specified in the Basic
Lease Information or to such other place as Landlord may from time to time
designate in writing. Base Rent for the first full month of the Term shall be
paid by Tenant upon Tenant's execution of this Lease. If the obligation for
payment of Base Rent commences on a day other than the first day of a month,
then Base Rent shall be prorated and the prorated installment shall be paid on
the first day of the calendar month next succeeding the Term Commencement Date.
The Base Rent payable by Tenant hereunder is subject to adjustment as provided
elsewhere in this Lease, as applicable. As used herein, the term "Base Rent"
shall mean the Base Rent specified in the Basic Lease Information as it may be
so adjusted from time to time.
B. ADDITIONAL RENT. All monies other than Base Rent required to be paid by
Tenant hereunder, including, but not limited to, Tenant's Proportionate Share of
Operating Expenses, as specified in Paragraph 7 of this Lease, charges to be
paid by Tenant under Paragraph 15, the interest and late charge described in
Paragraphs 26.D. and E., and any monies spent by Landlord pursuant to Paragraph
30, shall be considered additional rent ("ADDITIONAL RENT"). "RENT" shall mean
Base Rent and Additional Rent.
7. OPERATING EXPENSES
A. OPERATING EXPENSES. In addition to the Base Rent required to be paid
hereunder, Tenant shall pay as Additional Rent, Tenant's Proportionate Share of
the Building and/or Project (as applicable), as defined in the Basic Lease
Information, of Operating Expenses (defined below) in the manner set forth
below. Tenant shall pay the applicable Tenant's Proportionate Share of each such
Operating Expenses. Landlord and Tenant acknowledge that if the number of
buildings which constitute the Project increases or decreases, or if physical
changes are made to the Premises, Building or Project or the configuration of
any thereof, Landlord may at its discretion reasonably adjust Tenant's
Proportionate Share of the Building or Project to reflect the change. Landlord's
determination of Tenant's Proportionate Share of the Building and of the Project
shall be conclusive so long as it is reasonably and consistently applied.
"OPERATING EXPENSES" shall mean all expenses and costs of every kind and nature
which Landlord shall pay or become obligated to pay, because of or in connection
with the ownership, management, maintenance, repair, preservation, replacement
and operation of the Building or Project and its supporting facilities and such
additional facilities now and in subsequent years as may be determined by
Landlord to be necessary or desirable to the Building and/or Project (as
determined in a reasonable manner) other than those expenses and costs which are
specifically attributable to Tenant or which are expressly made the financial
responsibility of Landlord or specific tenants of the Building or Project
pursuant to this Lease. Except as expressly set forth herein, Operating Expenses
shall include, but are not limited to, the following:
(1) TAXES. All real property taxes and assessments, possessory interest
taxes, sales taxes, personal property taxes, business or license taxes
or fees, gross receipts taxes, service payments in lieu of such taxes or
fees, annual or periodic license or use fees, excises, transit charges,
and other impositions, general and special, ordinary and extraordinary,
unforeseen as well as foreseen, of any kind (including fees "in-lieu" of
any such tax or assessment) which are now or hereafter assessed, levied,
charged, confirmed, or imposed by any public authority upon the Building
or Project, its operations or the Rent (or any portion or component
thereof), or any tax, assessment or fee imposed in substitution,
partially or totally, of any of the above. Operating Expenses shall also
include any taxes, assessments, reassessments, or other fees or
impositions with respect to the development, leasing, management,
maintenance, alteration, repair, use or occupancy by Tenant of the
Premises, Building or Project or any portion thereof, including, without
limitation, by or for Tenant, and all increases therein or reassessments
thereof whether the increases or reassessments result from increased
rate and/or valuation (whether upon a transfer of the Building or
Project or any portion thereof or any interest therein or for any other
reason). Operating Expenses shall not include inheritance or estate
taxes imposed upon or assessed against the interest of any person in the
Project, or taxes computed upon the basis of the net income of any
owners of any interest in the Project. If it shall not be lawful for
Tenant to reimburse Landlord for all or any part of such taxes, the
monthly rental payable to Landlord under this Lease shall be revised to
net Landlord the same net rental after imposition of any such taxes by
Landlord as would have been payable to Landlord prior to the payment of
any such taxes.
(2) INSURANCE. All insurance premiums and costs, including, but not
limited to, any deductible amounts, premiums and other costs of
insurance incurred by Landlord, including for the insurance coverage set
forth in Paragraph 8.A. herein.
(3) COMMON AREA MAINTENANCE.
(a) Except as expressly set forth herein, repairs, replacements,
and general maintenance of and for the Building and Project and
public and common areas and facilities of and comprising the
Building and Project, including, but not limited to, the roof and
roof membrane, elevators, mechanical rooms, alarm systems, pest
extermination, landscaped areas, parking and service areas,
driveways, sidewalks, truck staging areas, rail spur areas, fire
sprinkler systems, sanitary and storm sewer lines, utility
services, heating/ventilation/air conditioning systems,
electrical, mechanical or other systems, telephone equipment and
wiring servicing, plumbing, lighting, and any other items or
areas which affect the operation or appearance of the Building or
Project, which determination shall be at Landlord's discretion,
except for: those items to the extent paid for by the proceeds of
insurance; and those items attributable solely or jointly to
specific tenants of the Building or Project.
(b) Repairs, replacements, and general maintenance shall include
the cost of any improvements made to or assets acquired for the
Project or Building that in Landlord's reasonably exercised
discretion may reduce any other Operating Expenses, including
present or future repair work, are reasonably necessary for the
health and safety of the occupants of the Building or Project, or
for the operation of the Building systems, services and
equipment, or are required to comply with any Regulation, such
costs or allocable portions thereof to be amortized over such
reasonable period as Landlord shall determine, together with
interest on the unamortized balance at the publicly announced
"prime rate" charged by Wells Fargo Bank, N.A. (San Francisco) or
its successor at the time such improvements or capital assets
5
<PAGE> 6
are constructed or acquired, plus two (2) percentage points, or
in the absence of such prime rate, then at the U.S. Treasury
six-month market note (or bond, if so designated) rate as
published by any national financial publication selected by
Landlord, plus four (4) percentage points, but in no event more
than the maximum rate permitted by law, plus reasonable financing
charges. Notwithstanding anything to the contrary herein, should
Tenant be responsible for costs of a capital nature occasioned by
Paragraph 4.C and such costs are not triggered by Tenants use or
occupancy of the Premises, then those costs shall be amortized in
accordance with the provisions of this Paragraph 7.A.3(b).
(c) Payment under or for any easement, license, permit, operating
agreement, declaration, restrictive covenant or instrument
relating to the Building or Project.
(d) All expenses and rental related to services and costs of
supplies, materials and equipment used in operating, managing and
maintaining the Premises, Building and Project, the equipment
therein and the adjacent sidewalks, driveways, parking and
service areas, including, without limitation, expenses related to
service agreements regarding security, fire and other alarm
systems, janitorial services to the extent not addressed in
Paragraph 11 hereof, window cleaning, elevator maintenance,
Building exterior maintenance, landscaping and expenses related
to the administration, management and operation of the Project,
including without limitation salaries, wages and benefits and
management office rent.
(e) The cost of supplying any services and utilities which
benefit all or a portion of the Premises, Building or Project to
the extent not addressed in Paragraph 15 hereof.
(f) Legal expenses and the cost of audits by certified public
accountants; provided, however, that legal expenses chargeable as
Operating Expenses shall not include the cost of negotiating
leases, collecting rents, evicting tenants nor shall it include
costs incurred in legal proceedings with or against any tenant or
to enforce the provisions of any lease.
(g) A management and accounting cost recovery fee equal to two
and one-half percent (2.5%) of Base Rent and Operating Expenses.
If the rentable area of the Building and/or Project is not fully occupied during
any fiscal year of the Term as determined by Landlord, an adjustment shall be
made in Landlord's discretion in computing the Operating Expenses for such year
so that Tenant pays an equitable portion of all variable items (e.g., utilities,
janitorial services and other component expenses that are affected by variations
in occupancy levels) of Operating Expenses, as reasonably determined by
Landlord; provided, however, that in no event shall Landlord be entitled to
collect in excess of one hundred percent (100%) of the total Operating Expenses
from all of the tenants in the Building or Project, as the case may be.
Notwithstanding anything in the definition of Operating Expenses in this Lease
to the contrary, Operating Expenses shall not include, nor shall Tenant be
responsible in any manner for paying for: (i) the cost of providing tenant
improvements or other specific costs incurred for the account of, separately
billed to and paid by specific tenants of the Building or Project, the initial
construction cost of the Building, or debt service on any mortgage or deed of
trust recorded with respect to the Project other than pursuant to Paragraph
7.A.(3)(b) above; (ii) Costs incurred by Landlord due to the violation by
Landlord of the terms and conditions of any lease of space in the Building or
the Project; (iii) costs occasioned by casualty or exercise of eminent domain;
(iv) costs to correct any construction defects in the Premises or Project; (v)
costs incurred in connection with the presence of Hazardous Materials in, on or
under the Premises or Project except to the extent specifically set forth in
Paragraph 37; (vi) Costs, including permit, license and inspection costs,
incurred with respect to the installation of tenant or other occupant
improvements made for tenants or other occupants in the Building or the Project
or incurred in renovating or otherwise improving, decorating, painting or
redecorating vacant space for or the premises of other tenants or other
occupants of the Building; and (vii) capital expenditures except on the basis
set forth in Paragraph 7.A.(3)(b).
The above enumeration of services and facilities shall not be deemed to impose
an obligation on Landlord to make available or provide such services or
facilities except to the extent if any that Landlord has specifically agreed
elsewhere in this Lease to make the same available or provide the same. Without
limiting the generality of the foregoing, Tenant acknowledges and agrees that it
shall be responsible for providing adequate security for its use of the
Premises, the Building and the Project and that Landlord shall have no
obligation or liability with respect thereto, except to the extent if any that
Landlord has specifically agreed elsewhere in this Lease to provide the same.
B. PAYMENT OF ESTIMATED OPERATING EXPENSES. "ESTIMATED OPERATING EXPENSES" for
any particular year shall mean Landlord's estimate of the Operating Expenses for
such fiscal year made with respect to such fiscal year as hereinafter provided.
Landlord shall have the right from time to time to revise its fiscal year and
interim accounting periods so long as the periods as so revised are reconciled
with prior periods in a reasonable manner. During the last month of each fiscal
year during the Term, or as soon thereafter as practicable, Landlord shall give
Tenant written notice of the Estimated Operating Expenses for the ensuing fiscal
year. Tenant shall pay Tenant's Proportionate Share of the Estimated Operating
Expenses with installments of Base Rent for the fiscal year to which the
Estimated Operating Expenses applies in monthly installments on the first day of
each calendar month during such year, in advance. Such payment shall be
construed to be Additional Rent for all purposes hereunder. If at any time
during the course of the fiscal year, Landlord determines that Operating
Expenses are projected to vary from the then Estimated Operating Expenses by
more than five percent (5%), Landlord may, by written notice to Tenant, revise
the Estimated Operating Expenses for the balance of such fiscal year, and
Tenant's monthly installments for the remainder of such year shall be adjusted
so that by the end of such fiscal year Tenant has paid to Landlord Tenant's
Proportionate Share of the revised Estimated Operating Expenses for such year,
such revised installment amounts to be Additional Rent for all purposes
hereunder.
C. COMPUTATION OF OPERATING EXPENSE ADJUSTMENT. "OPERATING EXPENSE ADJUSTMENT"
shall mean the difference between Estimated Operating Expenses and actual
Operating Expenses for any fiscal year determined as hereinafter provided.
Within one hundred twenty (120) days after the end of each fiscal year, or as
soon thereafter as practicable, Landlord shall deliver to Tenant a statement of
actual Operating Expenses for the fiscal year just ended, accompanied by a
computation of Operating Expense Adjustment. If such statement shows that
Tenant's payment based upon Estimated Operating Expenses is less than Tenant's
Proportionate Share of Operating Expenses, then Tenant shall pay to Landlord the
difference within twenty (20) days after receipt of such statement, such payment
to constitute Additional Rent for all purposes hereunder. If such statement
shows that Tenant's payments of Estimated Operating Expenses exceed Tenant's
Proportionate Share of Operating Expenses, then (provided that Tenant is not in
default under this Lease) Landlord shall pay to Tenant the difference within
twenty (20) days after delivery of such statement to Tenant. If this Lease has
been terminated or the Term hereof has expired prior to the date of such
statement, then the Operating Expense Adjustment shall be paid by the
appropriate party within twenty (20) days after the date of delivery of the
statement. Should this Lease commence or terminate at any time other than the
first day of the fiscal year, Tenant's Proportionate Share of the Operating
Expense Adjustment shall be prorated based on a month of 30 days and the number
of calendar months during such fiscal year that this Lease is in effect.
Notwithstanding anything to the contrary contained in Paragraph 7.A or 7.B,
Landlord's failure to provide any notices or statements within the time periods
specified in those paragraphs shall in no way excuse Tenant from its obligation
to pay Tenant's Proportionate Share of Operating Expenses. Notwithstanding the
foregoing, or anything to the contrary in this Lease, Tenant shall not be
responsible for the payment of any Operating
6
<PAGE> 7
Expense Adjustment, except for Taxes that shall have no time limit for
adjustment, to the extent Tenant has not received an invoice therefor within
twelve (12) months following the earlier of the Scheduled Term Expiration Date
or earlier termination of this Lease.
D. NET LEASE. This shall be a triple net Lease and Base Rent shall be paid to
Landlord absolutely net of all costs and expenses, except as specifically
provided to the contrary in this Lease. The provisions for payment of Operating
Expenses and the Operating Expense Adjustment are intended to pass on to Tenant
and reimburse Landlord for all costs and expenses of the nature described in
Paragraph 7.A. incurred in connection with the ownership, management,
maintenance, repair, preservation, replacement and operation of the Building
and/or Project and its supporting facilities and such additional facilities now
and in subsequent years as may be determined by Landlord to be reasonably
necessary or desirable to the Building and/or Project in accordance with the
terms of this Lease.
E. TENANT AUDIT. If Tenant shall dispute the amount set forth in any statement
provided by Landlord under Paragraph 7.B. or 7.C. above, Tenant shall have the
right, not later than thirty (30) days following receipt of such statement and
upon the condition that Tenant shall first deposit with Landlord the full amount
in dispute, to cause Landlord's books and records with respect to Operating
Expenses for such fiscal year to be audited by certified public accountants
selected by Tenant and subject to Landlord's reasonable right of approval. The
Operating Expense Adjustment shall be appropriately adjusted on the basis of
such audit. If such audit discloses a liability for a refund in excess of ten
percent (10%) of Tenant's Proportionate Share of the Operating Expenses
previously reported, the cost of such audit shall be borne by Landlord;
otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not
request an audit in accordance with the provisions of this Paragraph 7.E. within
thirty (30) days after receipt of Landlord's statement provided pursuant to
Paragraph 7.B. or 7.C., such statement shall be final and binding for all
purposes hereof. Tenant acknowledges and agrees that any information revealed in
the above described audit may contain proprietary and sensitive information and
that significant damage could result to Landlord if such information were
disclosed to any party other than Tenant's auditors. Tenant shall not in any
manner disclose, provide or make available any information revealed by the audit
to any person or entity without Landlord's prior written consent, which consent
may be withheld by Landlord in its sole and absolute discretion. The information
disclosed by the audit will be used by Tenant solely for the purpose of
evaluating Landlord's books and records in connection with this Paragraph 7.E.
8. INSURANCE AND INDEMNIFICATION
A. LANDLORD'S INSURANCE. All insurance maintained by Landlord shall be for the
sole benefit of Landlord and under Landlord's sole control.
(1) PROPERTY INSURANCE. Landlord agrees to maintain property insurance
insuring the Building against damage or destruction due to risk
including fire, vandalism, and malicious mischief in an amount not less
than the replacement cost thereof, in the form and with deductibles and
endorsements as selected by Landlord. At its election, Landlord may
instead (but shall have no obligation to) obtain "All Risk" coverage,
and may also obtain earthquake, pollution, and/or flood insurance in
amounts selected by Landlord.
(2) OPTIONAL INSURANCE. Landlord, at Landlord's option, may also (but
shall have no obligation to) carry (i) insurance against loss of rent,
in an amount equal to the amount of Base Rent and Additional Rent that
Landlord could be required to abate to all Building tenants in the event
of condemnation or casualty damage for a period of twelve (12) months;
and (ii) liability insurance and such other insurance as Landlord may
deem prudent or advisable, including, without limitation, liability
insurance in such amounts and on such terms as Landlord shall determine.
Landlord shall not be obligated to insure, and shall have no
responsibility whatsoever for any damage to, any furniture, machinery,
goods, inventory or supplies, or other personal property or fixtures
which Tenant may keep or maintain in the Premises, or any leasehold
improvements, additions or alterations within the Premises.
B. TENANT'S INSURANCE. Tenant shall procure at Tenant's sole cost and expense
and keep in effect from the date of this Lease and at all times until the end of
the Term the following:
(1) PROPERTY INSURANCE. Insurance on all personal property and fixtures
of Tenant and all improvements, additions or alterations made by or for
Tenant to the Premises on an "All Risk" basis, insuring such property
for the full replacement value of such property.
(2) LIABILITY INSURANCE. Commercial General Liability insurance covering
bodily injury and property damage liability occurring in or about the
Premises or arising out of the use and occupancy of the Premises and the
Project, and any part of either, and any areas adjacent thereto, and the
business operated by Tenant or by any other occupant of the Premises.
Such insurance shall include contractual liability coverage insuring all
of Tenant's indemnity obligations under this Lease. Such coverage shall
have a minimum combined single limit of liability of at least Two
Million Dollars ($2,000,000.00), and a minimum general aggregate limit
of Three Million Dollars ($3,000,000.00), with an "Additional Insured -
Managers or Lessors of Premises Endorsement" and the "Amendment of the
Pollution Exclusion Endorsement." All such policies shall be written to
apply to all bodily injury (including death), property damage or loss,
personal and advertising injury and other covered loss, however
occasioned, occurring during the policy term, shall be endorsed to add
Landlord and any party holding an interest to which this Lease may be
subordinated as an additional insured, and shall provide that such
coverage shall be "PRIMARY" and non-contributing with any insurance
maintained by Landlord, which shall be excess insurance only. Such
coverage shall also contain endorsements including employees as
additional insureds if not covered by Tenant's Commercial General
Liability Insurance. All such insurance shall provide for the
severability of interests of insureds; and shall be written on an
"OCCURRENCE" basis, which shall afford coverage for all claims based on
acts, omissions, injury and damage, which occurred or arose (or the
onset of which occurred or arose) in whole or in part during the policy
period.
(3) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE. Workers'
Compensation Insurance as required by any Regulation, and Employers'
Liability Insurance in amounts not less than One Million Dollars
($1,000,000) each accident for bodily injury by accident; One Million
Dollars ($1,000,000) policy limit for bodily injury by disease; and One
Million Dollars ($1,000,000) each employee for bodily injury by disease.
(4) COMMERCIAL AUTO LIABILITY INSURANCE. Commercial auto liability
insurance with a combined limit of not less than One Million Dollars
($1,000,000) for bodily injury and property damage for each accident.
Such insurance shall cover liability relating to any auto (including
owned, hired and non-owned autos).
(5) ALTERATIONS REQUIREMENTS. In the event Tenant shall desire to
perform any Alterations, Tenant shall deliver to Landlord, prior to
commencing such Alterations (i) evidence satisfactory to Landlord that
Tenant carries "Builder's Risk" insurance covering construction of such
Alterations in an amount and form approved by Landlord, (ii) such other
insurance as Landlord shall nondiscriminatorily require, and (iii) a
lien and completion bond or other security in form and amount
satisfactory to Landlord.
7
<PAGE> 8
(6) GENERAL INSURANCE REQUIREMENTS. All coverages described in this
Paragraph 8.B shall be endorsed to (i) provide Landlord with thirty (30)
days' notice of cancellation or change in terms; and (ii) waive all
rights of subrogation by the insurance carrier against Landlord. If at
any time during the Term the amount or coverage of insurance which
Tenant is required to carry under this Paragraph 8.B is, in Landlord's
reasonable judgment, materially less than the amount or type of
insurance coverage typically carried by owners or tenants of properties
located in the general area in which the Premises are located which are
similar to and operated for similar purposes as the Premises or if
Tenant's use of the Premises should change with or without Landlord's
consent, Landlord shall have the right to require Tenant to increase the
amount or change the types of insurance coverage required under this
Paragraph 8.B. All insurance policies required to be carried by Tenant
under this Lease shall be written by companies rated A X or better in
"Best's Insurance Guide" and authorized to do business in the State of
California. In any event deductible amounts under all insurance policies
required to be carried by Tenant under this Lease shall not exceed Five
Thousand Dollars ($5,000.00) per occurrence. Tenant shall deliver to
Landlord on or before the Term Commencement Date, and thereafter at
least thirty (30) days before the expiration dates of the expired
policies, certified copies of Tenant's insurance policies, or a
certificate evidencing the same issued by the insurer thereunder; and,
if Tenant shall fail to procure such insurance, or to deliver such
policies or certificates, Landlord may, at Landlord's option and in
addition to Landlord's other remedies in the event of a default by
Tenant hereunder, procure the same for the account of Tenant, and the
cost thereof shall be paid to Landlord as Additional Rent.
C. INDEMNIFICATION. Tenant shall indemnify, defend by counsel reasonably
acceptable to Landlord, protect and hold Landlord, Spieker Properties, Inc., and
each of their respective directors, shareholders, partners, lenders, members,
managers, contractors, affiliates, and employees (collectively, "LANDLORD
INDEMNITIES") harmless from and against any and all claims, liabilities, losses,
costs, loss of rents, liens, damages, injuries or expenses, including reasonable
attorneys' and consultants' fees and court costs, demands, causes of action, or
judgments, directly or indirectly arising out of or related to: (1) claims of
injury to or death of persons or damage to property or business loss occurring
or resulting directly or indirectly from the use or occupancy of the Premises,
Building or Project by Tenant or Tenant's Parties, or from activities or
failures to act of Tenant or Tenant's Parties; (2) claims arising from work or
labor performed, or for materials or supplies furnished to or at the request of
Tenant in connection with performance of any work done for the account of Tenant
within the Premises or Project; (3) claims arising from any breach or default on
the part of Tenant in the performance of any covenant contained in this Lease;
and (4) claims arising from the negligence or intentional acts or omissions of
Tenant or Tenant's Parties. The foregoing indemnity by Tenant shall not be
applicable to claims to the extent arising from the gross negligence or willful
misconduct of Landlord or its agents, contractors, employees or representatives.
Landlord shall not be liable to Tenant and Tenant hereby waives all claims
against Landlord for any injury to or death of or damage to any person or
property or business loss in or about the Premises, Building or Project by or
from any cause whatsoever (other than Landlord's gross negligence or willful
misconduct) and, without limiting the generality of the foregoing, whether
caused by water leakage of any character from the roof, walls, basement or other
portion of the Premises, Building or Project, or caused by gas, fire, oil or
electricity in, on or about the Premises, Building or Project, acts of God or of
third parties, or any matter outside of the reasonable control of Landlord. The
provisions of this Paragraph shall survive the expiration or earlier termination
of this Lease.
D. Landlord shall indemnify, defend by counsel reasonably acceptable to Tenant,
protect and hold Tenant harmless from and against any and all claims,
liabilities, losses, costs, damages, injuries or expenses, including reasonable
attorneys' and consultants' fees and court costs, demands, causes of action, or
judgments arising out of or relating to the gross negligence or willful
misconduct of Landlord or Landlord's agents, employees or invitees.
Notwithstanding the foregoing or anything to the contrary contained in this
Lease, Landlord shall in no event be liable to Tenant and Tenant hereby waives
all claims against Landlord for any injury or damage to any person or property
in or about the Premises, Building or Project, including without limitation the
common areas, whether caused by theft, fire, rain or water leakage of any
character from the roof, walls, plumbing, sprinklers, pipes, basement or any
other portion of the Premises, Building or Project, or caused by gas, fire, oil
or electricity in, on or about the Premises, Building or Project, or from any
other systems except in each case to the extent caused by the gross negligence
or willful misconduct of Landlord, or by acts of God (including without
limitation flood or earthquake), acts of a public enemy, riot, strike,
insurrection, war, court order, requisition or order of governmental body or
authority or from any other cause whatsoever, or for any damage or inconvenience
which may arise through repair, subject to and except as expressly otherwise
provided in Paragraph 9 or 10 of this Lease. In addition, Landlord shall in no
event be liable for (i) injury to Tenant's business or any loss of income or
profit therefrom or from consequential damages, or (ii) sums up to the amount of
insurance proceeds received by Tenant. The foregoing indemnity by Landlord shall
not be applicable to claims to the extent arising from the negligence or willful
misconduct of Tenant or Tenant's Parties. The foregoing indemnity by Landlord
shall survive the expiration or earlier termination of this Lease.
9. WAIVER OF SUBROGATION
Landlord and Tenant each waives any claim, loss or cost it might have
against the other for any injury to or death of any person or persons, or damage
to or theft, destruction, loss, or loss of use of any property (a "LOSS"), to
the extent the same is insured against (or is required to be insured against
under the terms hereof) under any property damage insurance policy covering the
Building, the Premises, Landlord's or Tenant's fixtures, personal property,
leasehold improvements, or business, regardless of whether the negligence of the
other party caused such Loss.
10. LANDLORD'S REPAIRS AND MAINTENANCE
Landlord shall maintain in good repair, reasonable wear and tear excepted,
at its sole cost and expense, the structural soundness of the roof, foundations,
and exterior walls of the Building. The term "exterior walls" as used herein
shall not include windows, glass or plate glass, doors, dock bumpers or dock
plates, special storefronts or office entries. Subject to Article 9 hereof, any
damage caused by or repairs necessitated by any negligence or act of Tenant or
Tenant's Parties may be repaired by Landlord at Landlord's option and Tenant's
expense. Tenant shall immediately give Landlord written notice of any defect or
need of repairs in such components of the Building for which Landlord is
responsible, after which Landlord shall have a reasonable opportunity and the
right to enter the Premises at all reasonable times to repair same. Landlord's
liability with respect to any defects, repairs, or maintenance for which
Landlord is responsible under any of the provisions of this Lease shall be
limited to the cost of such repairs or maintenance, and there shall be no
abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of repairs,
alterations or improvements in or to any portion of the Premises, the Building
or the Project or to fixtures, appurtenances or equipment in the Building,
except as provided in Paragraph 24.By taking possession of the Premises, Tenant
accepts them "as is," as being in good order, condition and repair and the
condition in which Landlord is obligated to deliver them and suitable for the
Permitted Use and Tenant's intended operations in the Premises, whether or not
any notice of acceptance is given.
11. TENANT'S REPAIRS AND MAINTENANCE
Tenant shall at all times during the Term at Tenant's expense maintain all parts
of the Premises and such portions of the Building as are within the exclusive
control of Tenant in a first-class, good, clean and secure condition and
promptly make all necessary repairs and replacements, as determined by Landlord,
including but not limited to, all windows, glass, doors, walls, including
demising walls, and wall finishes, floors and floor covering, heating,
ventilating and air conditioning systems, ceiling insulation, truck doors,
hardware, dock
8
<PAGE> 9
bumpers, dock plates and levelers, plumbing work and fixtures, downspouts,
entries, skylights, smoke hatches, roof vents, electrical and lighting systems,
and fire sprinklers, with materials and workmanship of the same character, kind
and quality as the original. Tenant shall at Tenant's expense also perform
regular removal of trash and debris. If Tenant uses rail and if required by the
railroad company, Tenant agrees to sign a joint maintenance agreement governing
the use of the rail spur, if any. Tenant shall, at Tenant's own expense, enter
into a regularly scheduled preventative maintenance/service contract with a
maintenance contractor for servicing all hot water, heating and air conditioning
systems and equipment within or serving the Premises. The maintenance contractor
and the contract must be approved by Landlord. The service contract must include
all services suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective and a copy thereof
delivered to Landlord within thirty (30) days after the Term Commencement Date.
Landlord may, upon notice to Tenant, if Tenant fails to enter into a service
contract as required hereunder, enter into such a service contract on behalf of
Tenant or perform the work and in either case charge Tenant the cost thereof
along with a reasonable amount for Landlord's overhead. Notwithstanding anything
to the contrary contained herein, but subject to Article 9, Tenant shall, at its
expense, promptly repair any damage to the Premises or the Building or Project
resulting from or caused by any negligence or act of Tenant or Tenant's Parties.
Nothing herein shall expressly or by implication render Tenant Landlord's agent
or contractor to effect any repairs or maintenance required of Tenant under this
Paragraph 11, as to all of which Tenant shall be solely responsible. To the
extent that such repairs, maintenance or improvements is required to be
performed pursuant to this Lease, Landlord shall perform and construct, and
Tenant shall have no responsibility to perform or construct any repair,
maintenance or improvements to the Premises (not including any repairs,
maintenance or improvements to any personal property of Tenant) (a) occasioned
by fire, acts of God or other casualty described in Paragraph 24 hereof or by
the exercise of eminent domain, or (b) which could be treated as a capital
expenditure in accordance with Paragraph 7(3)(b) hereof. Tenant shall, however,
pay for its share of the repairs described in (b) of the proceeding sentence to
the extent that such costs are expressly included in the definition of Operating
Expenses. Notwithstanding anything to the contrary in this Paragraph 11, should
Tenant be required to make repairs to the heating, ventilating and air
conditioning systems, Landlord shall reimburse Tenant for such repairs, if any,
up to a maximum amount of seven thousand dollars ($7,000). Said repairs, if any,
shall be completed prior to July 31, 2000. Tenant shall deliver to Landlord
copies of any invoices along with a written request for reimbursement and
Landlord shall reimburse Tenant within thirty (30) days of Tenants written
request.
12. ALTERATIONS
A. Tenant shall not make, or allow to be made, any alterations, physical
additions, improvements or partitions, including without limitation the
attachment of any fixtures or equipment, in, about or to the Premises
("ALTERATIONS") costing in excess of Fifteen Thousand Dollars ($15,000) in any
given Lease year (excluding any Alteration affecting the structure of the
Premises which shall always require consent), without obtaining the prior
written consent of Landlord, which consent shall not be unreasonably withheld
with respect to proposed Alterations which: (a) comply with all applicable
Regulations; (b) are, in Landlord's reasonable opinion, compatible with the
Building or the Project and its mechanical, plumbing, electrical,
heating/ventilation/air conditioning systems, and will not cause the Building or
Project or such systems to be required to be modified to comply with any
Regulations (including, without limitation, the Americans With Disabilities
Act); and (c) will not interfere with the use and occupancy of any other portion
of the Building or Project by any other tenant or its invitees. Specifically,
but without limiting the generality of the foregoing, Landlord shall have the
right of written consent for all plans and specifications for the proposed
Alterations, construction means and methods, all appropriate permits and
licenses, any contractor or subcontractor to be employed on the work of
Alterations, and the time for performance of such work, and may impose rules and
regulations for contractors and subcontractors performing such work. Tenant
shall also supply to Landlord any documents and information reasonably requested
by Landlord in connection with Landlord's consideration of a request for
approval hereunder. Tenant shall cause all Alterations to be accomplished in a
first-class, good and workmanlike manner, and to comply with all applicable
Regulations and Paragraph 27 hereof. Tenant shall at Tenant's sole expense,
perform any additional work required under applicable Regulations due to the
Alterations hereunder. No review or consent by Landlord of or to any proposed
Alteration or additional work shall constitute a waiver of Tenant's obligations
under this Paragraph 12. Tenant shall reimburse Landlord for all costs which
Landlord may incur in connection with granting approval to Tenant for any such
Alterations, including any costs or expenses which Landlord may incur in
electing to have outside architects and engineers review said plans and
specifications. All such Alterations shall remain the property of Tenant until
the expiration or earlier termination of this Lease, at which time they shall be
and become the property of Landlord; provided, however, that Landlord may, at
Landlord's option, require that Tenant, at Tenant's expense, remove any or all
Alterations made by Tenant and restore the Premises by the expiration or earlier
termination of this Lease, to their condition existing prior to the construction
of any such Alterations. All such removals and restoration shall be accomplished
in a first-class and good and workmanlike manner so as not to cause any damage
to the Premises or Project whatsoever. If Tenant fails to remove such
Alterations or Tenant's trade fixtures or furniture or other personal property,
Landlord may keep and use them or remove any of them and cause them to be stored
or sold in accordance with applicable law, at Tenant's sole expense. In addition
to and wholly apart from Tenant's obligation to pay Tenant's Proportionate Share
of Operating Expenses, Tenant shall be responsible for and shall pay prior to
delinquency any taxes or governmental service fees, possessory interest taxes,
fees or charges in lieu of any such taxes, capital levies, or other charges
imposed upon, levied with respect to or assessed against its fixtures or
personal property, on the value of Alterations within the Premises, and on
Tenant's interest pursuant to this Lease, or any increase in any of the
foregoing based on such Alterations. To the extent that any such taxes are not
separately assessed or billed to Tenant, Tenant shall pay the amount thereof as
invoiced to Tenant by Landlord.
B. In compliance with Paragraph 27 hereof, at least ten (10) business days
before beginning construction of any Alteration, Tenant shall give Landlord
written notice of the expected commencement date of that construction to permit
Landlord to post and record a notice of non-responsibility. Upon substantial
completion of construction, if the law so provides, Tenant shall cause a timely
notice of completion to be recorded in the office of the recorder of the county
in which the Building is located.
13. SIGNS
Tenant shall not place, install, affix, paint or maintain any signs, notices,
graphics or banners whatsoever or any window decor which is visible in or from
public view or corridors, the common areas or the exterior of the Premises or
the Building, in or on any exterior window or window fronting upon any common
areas or service area or upon any truck doors or man doors without Landlord's
prior written approval which Landlord shall have the right to withhold in its
absolute and sole discretion; provided that Tenant's name shall be included in
any Building-standard door and directory signage, if any, in accordance with
Landlord's Building signage program, including without limitation, payment by
Tenant of any fee charged by Landlord for maintaining such signage, which fee
shall constitute Additional Rent hereunder. Any installation of signs, notices,
graphics or banners on or about the Premises or Project approved by Landlord
shall be subject to any Regulations and to any other reasonable requirements
imposed by Landlord. Tenant shall remove all such signs or graphics by the
expiration or any earlier termination of this Lease. Such installations and
removals shall be made in such manner as to avoid injury to or defacement of the
Premises, Building or Project and any other improvements contained therein, and
Tenant shall repair any injury or defacement including without limitation
discoloration caused by such installation or removal.
9
<PAGE> 10
14. INSPECTION/POSTING NOTICES
After reasonable notice, except in emergencies where no such notice shall be
required, Landlord and Landlord's agents and representatives, shall have the
right to enter the Premises to inspect the same, to clean, to perform such work
as may be permitted or required hereunder, to make repairs, improvements or
alterations to the Premises, Building or Project or to other tenant spaces
therein, to deal with emergencies, to post such notices as may be permitted or
required by law to prevent the perfection of liens against Landlord's interest
in the Project or to exhibit the Premises to prospective tenants, purchasers,
encumbrancers or to others, or for any other purpose as Landlord may deem
necessary or desirable; provided, however, that Landlord shall use reasonable
efforts not to unreasonably interfere with Tenant's business operations. So long
as Landlord uses commercially reasonable efforts not to unreasonably interfere
with Tenant's business operations, Tenant shall not be entitled to any abatement
of Rent by reason of the exercise of any such right of entry and Tenant waives
any claim for damages for any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and
any other loss occasioned thereby. Landlord shall at all times have and retain a
key with which to unlock all of the doors in, upon and about the Premises,
excluding Tenant's vaults and safes or special security areas (designated in
advance), and Landlord shall have the right to use any and all means which
Landlord may deem necessary or proper to open said doors in an emergency, in
order to obtain entry to any portion of the Premises, and any entry to the
Premises or portions thereof obtained by Landlord by any of said means, or
otherwise, shall not be construed to be a forcible or unlawful entry into, or a
detainer of, the Premises, or an eviction, actual or constructive, of Tenant
from the Premises or any portions thereof. At any time within six (6) months
prior to the expiration of the Term or following any earlier termination of this
Lease or agreement to terminate this Lease, Landlord shall have the right to
erect on the Premises, Building and/or Project a suitable sign indicating that
the Premises are available for lease.
15. SERVICES AND UTILITIES
A. Tenant shall (where practicable) contract for and pay directly when due, for
all water, gas, heat, air conditioning, light, power, telephone, sewer,
sprinkler charges, cleaning, waste disposal and other utilities and services
used on or from the Premises, together with any taxes, penalties, surcharges or
the like pertaining thereto, and maintenance charges for utilities and shall
furnish all electric light bulbs, ballasts and tubes. If any such services are
not separately billed or metered to Tenant, Tenant shall pay an equitable
proportion, as determined in good faith by Landlord, of all charges billed or
metered with other premises. All sums payable under this Paragraph 15 shall
constitute Additional Rent hereunder.
B. Tenant acknowledges that Tenant has inspected and accepts the water,
electricity, heat and air conditioning and other utilities and services being
supplied or furnished to the Premises as of the date Tenant takes possession of
the Premises, if any, as being sufficient in their present condition, "as is,"
for the Permitted Use, and for Tenant's intended operations in the Premises.
Landlord shall have no obligation to provide additional or after-hours
electricity, heating or air conditioning, but if Landlord elects to provide such
services at Tenant's request, Tenant shall pay upon demand to Landlord a
reasonable charge for such services as determined by Landlord. Tenant agrees to
keep and cause to be kept closed all window covering when necessary because of
the sun's position, and Tenant also agrees at all times to cooperate fully with
Landlord and to abide by all of the regulations and requirements which Landlord
may prescribe for the proper functioning and protection of electrical, heating,
ventilating and air conditioning systems. Wherever heat-generating machines,
excess lighting or equipment are used in the Premises which affect the
temperature otherwise maintained by the air conditioning system, Landlord
reserves the right to install supplementary air conditioning units in the
Premises and the cost thereof, including the cost of installation and the cost
of operation and maintenance thereof, shall be paid by Tenant to Landlord upon
demand by Landlord.
C. Tenant shall not without written consent of Landlord use any apparatus,
equipment or device in the Premises, including without limitation, computers,
electronic data processing machines, copying machines, and other machines, using
excess lighting or using electric current, water, or any other resource in
excess of or which will in any way increase the amount of electricity, water, or
any other resource being furnished or supplied for the use of the Premises for
reasonable and normal office use, in each case as of the date Tenant takes
possession of the Premises and as reasonably determined by Landlord, or which
will require additions or alterations to or interfere with the Building power
distribution systems; nor connect with electric current, except through existing
electrical outlets in the Premises or water pipes, any apparatus, equipment or
device for the purpose of using electrical current, water, or any other
resource. If Tenant shall require water or electric current or any other
resource in excess of that being furnished or supplied for the use of the
Premises as of the date Tenant takes possession of the Premises, if any, as
determined by Landlord, Tenant shall first procure the written consent of
Landlord which Landlord may refuse, to the use thereof, and Landlord may cause a
special meter to be installed in the Premises so as to measure the amount of
water, electric current or other resource consumed for any such other use.
Tenant shall pay directly to Landlord upon demand as an addition to and separate
from payment of Operating Expenses the cost of all such additional resources,
energy, utility service and meters (and of installation, maintenance and repair
thereof and of any additional circuits or other equipment necessary to furnish
such additional resources, energy, utility or service). Landlord shall in no
case be liable for any damages directly or indirectly resulting from nor shall
the Rent or any monies owed Landlord under this Lease herein reserved be abated
by reason of: (a) the installation, use or interruption of use of any equipment
used in connection with the furnishing of any such utilities or services, or any
change in the character or means of supplying or providing any such utilities or
services or any supplier thereof; (b) the failure to furnish or delay in
furnishing any such utilities or services when such failure or delay is caused
by acts of God or the elements, labor disturbances of any character, or
otherwise, or because of any interruption of service due to Tenant's use of
water, electric current or other resource in excess of that being supplied or
furnished for the use of the Premises as of the date Tenant takes possession of
the Premises; or (c) the inadequacy, limitation, curtailment, rationing or
restriction on use of water, electricity, gas or any other form of energy or any
other service or utility whatsoever serving the Premises or Project otherwise;
or (d) the partial or total unavailability of any such utilities or services to
the Premises or the Building or the diminution in the quality or quantity
thereof, whether by Regulation or otherwise; or (e) any interruption in Tenant's
business operations as a result of any such occurrence; nor shall any such
occurrence constitute an actual or constructive eviction of Tenant or a breach
of an implied warranty by Landlord. Landlord shall further have no obligation to
protect or preserve any apparatus, equipment or device installed by Tenant in
the Premises, including without limitation by providing additional or
after-hours heating or air conditioning. Landlord shall be entitled to cooperate
voluntarily and in a reasonable manner with the efforts of national, state or
local governmental agencies or utility suppliers in reducing energy or other
resource consumption. The obligation to make services available hereunder shall
be subject to the limitations of any such voluntary, reasonable program. In
addition, Landlord reserves the right to change the supplier or provider of any
such utility or service from time to time. Landlord may, but shall not be
obligated to, upon notice to Tenant, contract with or otherwise obtain any
electrical or other such service for or with respect to the Premises or Tenant's
operations therein from any supplier or provider of any such service. Tenant
shall cooperate with Landlord and any supplier or provider of such services
designated by Landlord from time to time to facilitate the delivery of such
services to Tenant at the Premises and to the Building and Project, including
without limitation allowing Landlord and Landlord's suppliers or providers, and
their respective agents and contractors, reasonable access to the Premises for
the purpose of installing, maintaining, repairing, replacing or upgrading such
service or any equipment or machinery associated therewith.
16. SUBORDINATION
Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, this Lease shall be and is hereby
declared to be subject and subordinate at all times to: (a) all ground leases or
underlying leases which may now exist or hereafter be executed affecting the
Premises and/or the land upon which the Premises and Project are situated, or
both; and (b) any
10
<PAGE> 11
mortgage or deed of trust which may now exist or be placed upon the Building,
the Project and/or the land upon which the Premises or the Project are situated,
or said ground leases or underlying leases, or Landlord's interest or estate in
any of said items which is specified as security. Notwithstanding the foregoing,
Landlord shall have the right to subordinate or cause to be subordinated any
such ground leases or underlying leases or any such liens to this Lease. If any
ground lease or underlying lease terminates for any reason or any mortgage or
deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for
any reason, Tenant shall, notwithstanding any subordination, attorn to and
become the Tenant of the successor in interest to Landlord provided that Tenant
shall not be disturbed in its possession under this Lease by such successor in
interest so long as Tenant is not in default under this Lease. Within ten (10)
days after request by Landlord, Tenant shall execute and deliver any reasonable
additional documents evidencing Tenant's attornment or the subordination of this
Lease with respect to any such ground leases or underlying leases or any such
mortgage or deed of trust, in the form requested by Landlord or by any ground
landlord, mortgagee, or beneficiary under a deed of trust, subject to such
nondisturbance requirement. If requested in writing by Tenant, Landlord shall
use commercially reasonable efforts to obtain a subordination, nondisturbance
and attornment agreement for the benefit of Tenant reflecting the foregoing from
any ground landlord, mortgagee or beneficiary, at Tenant's expense, subject to
such other terms and conditions as the ground landlord, mortgagee or beneficiary
may require.
17. FINANCIAL STATEMENTS
At the request of Landlord from time to time, Tenant shall provide to Landlord
Tenant's and any guarantor's current financial statements or other information
discussing financial worth of Tenant and any guarantor, which Landlord shall use
solely for purposes of this Lease and in connection with the ownership,
management, financing and disposition of the Project.
18. ESTOPPEL CERTIFICATE
Tenant agrees from time to time, within ten (10) days after request of Landlord,
to deliver to Landlord, or Landlord's designee, an estoppel certificate stating
that this Lease is in full force and effect, that this Lease has not been
modified (or stating all modifications, written or oral, to this Lease), the
date to which Rent has been paid, the unexpired portion of this Lease, that
there are no current defaults by Landlord or Tenant under this Lease (or
specifying any such defaults), that the leasehold estate granted by this Lease
is the sole interest of Tenant in the Premises and/or the land at which the
Premises are situated, and such other matters pertaining to this Lease as may be
reasonably requested by Landlord or any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or Project or any interest therein.
Failure by Tenant to execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant that the statements
included are true and correct without exception. Tenant agrees that if Tenant
fails to execute and deliver such certificate within such ten- (10) day period,
Landlord may execute and deliver such certificate on Tenant's behalf and that
such certificate shall be binding on Tenant. Landlord and Tenant intend that any
statement delivered pursuant to this Paragraph may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of the Building or
Project or any interest therein. The parties agree that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of this Lease, and shall be an event of default
(without any cure period that might be provided under Paragraph 26.A(3) of this
Lease) if Tenant fails to fully comply or makes any material misstatement in any
such certificate.
19. SECURITY DEPOSIT
Tenant agrees to deposit with Landlord upon execution of this Lease, a security
deposit as stated in the Basic Lease Information (the "SECURITY DEPOSIT"), which
sum shall be held and owned by Landlord, without obligation to pay interest, as
security for the performance of Tenant's covenants and obligations under this
Lease. Landlord is hereby granted a security interest in the Security Deposit in
accordance with applicable provisions of the California Commercial Code The
Security Deposit is not an advance rental deposit or a measure of damages
incurred by Landlord in case of Tenant's default. Upon the occurrence of any
event of default by Tenant, Landlord may from time to time, without prejudice to
any other remedy provided herein or by law, use such fund as a credit to the
extent necessary to credit against any arrears of Rent or other payments due to
Landlord hereunder, and any other damage, injury, expense or liability caused by
such event of default, and Tenant shall pay to Landlord, on demand, the amount
so applied in order to restore the Security Deposit to its original amount. Any
remaining balance of such deposit shall be returned by Landlord to Tenant at
such time after termination of this Lease that all of Tenant's obligations under
this Lease have been fulfilled, reduced by such amounts as may be required by
Landlord to remedy defaults on the part of Tenant in the payment of Rent or
other obligations of Tenant under this Lease, to repair damage to the Premises,
Building or Project caused by Tenant or any Tenant's Parties and to clean the
Premises. Landlord may use and commingle the Security Deposit with other funds
of Landlord. Tenant hereby waives the provisions of Section 1950.7 of the
California Civil Code, and all other provisions of any Regulations, now or
hereinafter in force, which restricts the amount or types of claim that a
landlord may make upon a security deposit or imposes upon a landlord (or its
successors) any obligation with respect to the handling or return of security
deposits.
20. LIMITATION OF TENANT'S REMEDIES
The obligations and liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease are not personal obligations of Landlord or of the
individual or other partners of Landlord or its or their partners, directors,
officers, or shareholders, and Tenant agrees to look solely to Landlord's
interest in the Project for the recovery of any amount from Landlord, and shall
not look to other assets of Landlord nor seek recourse against the assets of the
individual or other partners of Landlord or its or their partners, directors,
officers or shareholders. Any lien obtained to enforce any such judgment and any
levy of execution thereon shall be subject and subordinate to any lien, mortgage
or deed of trust on the Project. Under no circumstances shall Tenant have the
right to offset against or recoup Rent or other payments due and to become due
to Landlord hereunder except as expressly provided in this Lease, which Rent and
other payments shall be absolutely due and payable hereunder in accordance with
the terms hereof. In no case shall Landlord be liable to Tenant for any lost
profits, damage to business, or any form of special, indirect or consequential
damage on account of any breach of this Lease or otherwise, notwithstanding
anything to the contrary contained in this Lease.
21. ASSIGNMENT AND SUBLETTING
A. (1) GENERAL. This Lease has been negotiated to be and is granted as
an accommodation to Tenant. Accordingly, this Lease is personal to
Tenant, and Tenant's rights granted hereunder do not include the right
to assign this Lease or sublease the Premises, or to receive any excess,
either in installments or lump sum, over the Rent which is expressly
reserved by Landlord as hereinafter provided, except as otherwise
expressly hereinafter provided. Tenant shall not assign or pledge this
Lease or sublet the Premises or any part thereof, whether voluntarily or
by operation of law, or permit the use or occupancy of the Premises or
any part thereof by anyone other than Tenant, or suffer or permit any
such assignment, pledge, subleasing or occupancy, without Landlord's
prior written consent which shall not be unreasonably withheld or
delayed on the terms and conditions provided herein. If Tenant desires
to assign this Lease or sublet any or all of the Premises, Tenant shall
give Landlord written notice (the "TRANSFER NOTICE") at least forty-five
(45) days prior to the anticipated effective date of the proposed
assignment or sublease, which shall contain all of the information
reasonably requested by Landlord to address Landlord's decision criteria
specified hereinafter. Landlord shall then have a period of fifteen (15)
days following receipt of the Transfer Notice to notify Tenant in
writing that Landlord elects either: (i) to terminate this Lease as to
the space so affected as of the date so requested by Tenant; or (ii) to
consent to the proposed assignment or sublease, subject, however, to
Landlord's prior written consent of the proposed
11
<PAGE> 12
assignee or subtenant and of any related documents or agreements
associated with the assignment or sublease. If Landlord should fail to
notify Tenant in writing of such election within said period, Landlord
shall be deemed to have waived option (i) above, but written consent by
Landlord of the proposed assignee or subtenant shall still be required.
If Landlord does not exercise option (i) above, Landlord's consent to a
proposed assignment or sublease shall not be unreasonably withheld. With
respect to a proposed sublease, in the event Landlord fails to respond
to Tenant's written request for consent within the above described
fifteen (15) day period, Tenant may provide to Landlord a second written
request for consent with resect to the same proposed sublease ("Tenant's
Second Consent Request"). If Landlord fails to respond to Tenant's
Second Consent Request within fifteen (15) business days following
landlord's receipt thereof, and the proposed sublease is for less than
50% of the Premises, then Landlord's failure to respond shall be deemed
to be Landlord's consent to such subtenant. If Landlord fails to respond
to Tenant's Second Consent Request within fifteen (15) business days
following landlord's receipt thereof, and the proposed sublease is for
greater than 50% of the Premises, then Landlord's failure to respond
shall be deemed to be Landlord's disapproval to such subtenant Consent
to any assignment or subletting shall not constitute consent to any
subsequent transaction to which this Paragraph 21 applies.
(2) CONDITIONS OF LANDLORD'S CONSENT. Without limiting the other
instances in which it may be reasonable for Landlord to withhold
Landlord's consent to an assignment or subletting, Landlord and Tenant
acknowledge that it shall be reasonable for Landlord to withhold
Landlord's consent in the following instances: if the proposed assignee
does not agree to be bound by and assume the obligations of Tenant under
this Lease in form and substance satisfactory to Landlord in the
reasonable exercise of Landlord's discretion; the use of the Premises by
such proposed assignee or subtenant would not be a Permitted Use or
would violate any exclusivity or other arrangement which Landlord has
with any other tenant or occupant or any Regulation or would increase
the Occupancy Density or Parking Density of the Building or Project, or
would otherwise result in an undesirable tenant mix for the Project as
reasonably determined by Landlord; the proposed assignee or subtenant is
not of sound financial condition as determined by Landlord in Landlord's
reasonable discretion; the proposed assignee or subtenant is a
governmental agency; the proposed assignee or subtenant does not have a
good reputation as a tenant of property or a good business reputation;
the proposed assignee or subtenant is a person with whom Landlord is
negotiating to lease space in the Project; the assignment or subletting
would entail any Alterations which would lessen the value of the
leasehold improvements in the Premises or use of any Hazardous Materials
or other noxious use or use which may disturb other tenants of the
Project; or Tenant is in default of any obligation of Tenant under this
Lease beyond any applicable cure period, or Tenant has defaulted under
this Lease on three (3) or more occasions during any twelve (12) months
preceding the date that Tenant shall request consent. Failure by or
refusal of Landlord to consent to a proposed assignee or subtenant shall
not cause a termination of this Lease. Upon a termination under
Paragraph 21.A.(1)(i), Landlord may lease the Premises to any party,
including parties with whom Tenant has negotiated an assignment or
sublease, without incurring any liability to Tenant. At the option of
Landlord, a surrender and termination of this Lease shall operate as an
assignment to Landlord of some or all subleases or subtenancies.
Landlord shall exercise this option by giving notice of that assignment
to such subtenants on or before the effective date of the surrender and
termination. In connection with each request for assignment or
subletting, Tenant shall pay to Landlord Landlord's standard fee for
approving such requests, as well as all reasonable out-of-pocket costs
incurred by Landlord or any mortgagee or ground lessor in approving each
such request and effecting any such transfer, including, without
limitation, reasonable attorneys' fees
BONUS RENT. Subject to Paragraph 21.A(1) above, any Rent or other consideration
realized by Tenant under any such sublease or assignment in excess of the Rent
payable hereunder (excluding consideration for the use of Tenant's telephone
system, furniture or other services or equipment provided by Tenant to the
proposed sublessee during the term of the proposed sublease, provided that such
exclusions are made in good faith and are not above the market value for such
equipment and/or services, as such market value is reasonably determined by
Landlord and excluding any consideration paid for purchase of Tenant or Tenant's
assets exclusive of that portion of the consideration paid which is attributable
to the value of Tenant's interest in the Lease, as reasonably determined by
Landlord and Tenant), after amortization of a reasonable brokerage commission,
reasonable attorneys' fees and the actual cost of tenant improvements made
solely in connection with such assignment or sublease in the portion of the
Premises with respect thereto, each as incurred by Tenant, shall be divided and
paid twenty-five percent (25%) to Tenant, seventy-five percent (75%) to
Landlord. In any subletting or assignment undertaken by Tenant, Tenant shall
diligently seek to obtain the maximum rental amount available in the marketplace
for comparable space available for primary leasing.
B. CORPORATION. If Tenant is a corporation, a transfer of corporate shares by
sale, assignment, bequest, inheritance, operation of law or other disposition
(including such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings) resulting in a change in the
present control of such corporation or any of its parent corporations by the
person or persons owning a majority of said corporate shares, shall constitute
an assignment for purposes of this Lease.
C. UNINCORPORATED ENTITY. If Tenant is a partnership, joint venture,
unincorporated limited liability company or other unincorporated business form,
a transfer of the interest of persons, firms or entities responsible for
managerial control of Tenant by sale, assignment, bequest, inheritance,
operation of law or other disposition, so as to result in a change in the
present control of said entity and/or of the underlying beneficial interests of
said entity and/or a change in the identity of the persons responsible for the
general credit obligations of said entity shall constitute an assignment for all
purposes of this Lease.
D. LIABILITY. No assignment or subletting by Tenant, permitted or otherwise,
shall relieve Tenant of any obligation under this Lease or any guarantor of this
Lease of any liability under its guaranty or alter the primary liability of the
Tenant named herein for the payment of Rent or for the performance of any other
obligations to be performed by Tenant, including obligations contained in
Paragraph 25 with respect to any assignee or subtenant. Landlord may collect
rent or other amounts or any portion thereof from any assignee, subtenant, or
other occupant of the Premises, permitted or otherwise, and apply the net rent
collected to the Rent payable hereunder, but no such collection shall be deemed
to be a waiver of this Paragraph 21, or the acceptance of the assignee,
subtenant or occupant as tenant, or a release of Tenant from the further
performance by Tenant of the obligations of Tenant under this Lease or any
guarantor of this Lease of any liability under its guaranty. Any assignment or
subletting which conflicts with the provisions hereof shall be void.
E. PERMITTED TRANSFERS. An "Affiliate" means any entity that (i) controls, is
controlled by, or is under common control with Tenant, (ii) results from the
transfer of all or substantially all of Tenant's assets or stock, or (iii)
results from the merger or consolidation of Tenant with another entity.
"Control" means the direct or indirect ownership of more than fifty percent
(50%) of the voting securities of an entity or possession of the right to vote
more than fifty percent (50%) of the voting interest in the ordinary direction
of the entity's affairs. Notwithstanding anything to the contrary contained in
this Lease, Landlord's consent is not required for and Landlord's recapture
rights shall not apply to any assignment of this Lease or sublease of all or a
portion of the Premises to an Affiliate so long as the following conditions are
met: (a) at least ten (10) business days before any such assignment or sublease,
Landlord receives written notice of such assignment or sublease (as well as any
documents or information reasonably requested by Landlord regarding the proposed
intended transfer and the transferee); (b) Tenant is not then and has not been
in default under this Lease; (c) if the transfer is an assignment or any other
transfer to an Affiliate other than a sublease, the intended assignee assumes in
writing all of Tenant's obligations under this Lease relating to the Premises in
form satisfactory to Landlord or, if the transfer is a sublease, the intended
sublessee accepts the sublease in form satisfactory to Landlord; (d) the
intended transferee has a tangible net worth, as evidenced by financial
statements delivered to Landlord and certified by an independent certified
public accountant in accordance with generally accepted accounting principles
that are
12
<PAGE> 13
consistently applied, at least equal to Two Hundred Fifty Million Dollars
($250,000,000); (e) the Premises shall continue to be operated solely for the
use specified in the Basic Lease Information; and (f) Tenant shall pay to
Landlord all costs reasonably incurred by Landlord or any mortgagee or ground
lessor for such assignment or subletting, including, without limitation,
reasonable attorneys' fees. No transfer to an Affiliate in accordance with this
subparagraph shall relieve Tenant named herein of any obligation under this
Lease or alter the primary liability of Tenant named herein for the payment of
Rent or for the performance of any other obligation to be performed by Tenant,
including the obligations contained in Paragraph 25 with respect to any
Affiliate.
22. AUTHORITY
Landlord represents and warrants that it has full right and authority to enter
into this Lease and to perform all of Landlord's obligations hereunder and that
all persons signing this Lease on its behalf are authorized to do. Tenant and
the person or persons, if any, signing on behalf of Tenant, jointly and
severally represent and warrant that Tenant has full right and authority to
enter into this Lease, and to perform all of Tenant's obligations hereunder, and
that all persons signing this Lease on its behalf are authorized to do so.
23. CONDEMNATION
A. CONDEMNATION RESULTING IN TERMINATION. If the whole or any substantial part
of the Premises should be taken or condemned for any public use under any
Regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the Permitted
Use of the Premises, either party shall have the right to terminate this Lease
at its option. If any material portion of the Building or Project is taken or
condemned for any public use under any Regulation, or by right of eminent
domain, or by private purchase in lieu thereof, Landlord may terminate this
Lease at its option. In either of such events, the Rent shall be abated during
the unexpired portion of this Lease, effective when the physical taking of said
Premises shall have occurred.
B. CONDEMNATION NOT RESULTING IN TERMINATION. If a portion of the Project of
which the Premises are a part should be taken or condemned for any public use
under any Regulation, or by right of eminent domain, or by private purchase in
lieu thereof, and the taking prevents or materially interferes with the
Permitted Use of the Premises, and this Lease is not terminated as provided in
Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion
of this Lease shall be reduced, beginning on the date when the physical taking
shall have occurred, to such amount as may be fair and reasonable under all of
the circumstances, but only after giving Landlord credit for all sums received
or to be received by Tenant by the condemning authority. Notwithstanding
anything to the contrary contained in this Paragraph, if the temporary use or
occupancy of any part of the Premises shall be taken or appropriated under power
of eminent domain during the Term, this Lease shall be and remain unaffected by
such taking or appropriation and Tenant shall continue to pay in full all Rent
payable hereunder by Tenant during the Term; in the event of any such temporary
appropriation or taking, Tenant shall be entitled to receive that portion of any
award which represents compensation for the use of or occupancy of the Premises
during the Term.
C. AWARD. Landlord shall be entitled to (and Tenant shall assign to Landlord)
any and all payment, income, rent, award or any interest therein whatsoever
which may be paid or made in connection with such taking or conveyance and
Tenant shall have no claim against Landlord or otherwise for any sums paid by
virtue of such proceedings, whether or not attributable to the value of any
unexpired portion of this Lease, except as expressly provided in this Lease.
Notwithstanding the foregoing, any compensation specifically and separately
awarded Tenant for Tenant's personal property and moving costs, shall be and
remain the property of Tenant.
D. WAIVER OF CCPSECTION 1265.130. Each party waives the provisions of California
Civil Code Procedure Section 1265.130 allowing either party to petition the
superior court to terminate this Lease as a result of a partial taking.
24. CASUALTY DAMAGE
A. GENERAL. If the Premises or Building should be damaged or destroyed by fire,
tornado, or other casualty (collectively, "CASUALTY"), Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days after
Landlord's receipt of such notice, Landlord shall notify Tenant the amount of
time, in Landlord's reasonable estimation, it will take to materially restore
the Premises ("Landlord's Casualty Notice"). Landlord's reasonable determination
shall be binding on Tenant.
B. WITHIN 180 DAYS. If the Premises or Building should be damaged by Casualty to
such extent that material restoration can in Landlord's reasonable estimation be
reasonably completed within one hundred eighty (180) days after the date of such
notice and receipt of required permits for such restoration, this Lease shall
not terminate except as set forth in subsection D below. Provided that insurance
proceeds are received by Landlord to fully repair the damage, Landlord shall
proceed to rebuild and repair the Premises diligently and in the manner
determined by Landlord, except that Landlord shall not be required to rebuild,
repair or replace any part of any Alterations which may have been placed on or
about the Premises or paid for by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent of rental abatement insurance proceeds received by Landlord during
the time and to the extent the Premises are unfit for occupancy.
C. GREATER THAN 180 DAYS. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs cannot in Landlord's
estimation be reasonably completed within one hundred eighty (180) days after
the date of such notice and receipt of required permits for such rebuilding or
repair, then Landlord shall have the option of either: (1) terminating this
Lease effective upon the date of the occurrence of such damage, in which event
the Rent shall be abated during the unexpired portion of this Lease; or (2)
electing to rebuild or repair the Premises diligently and in the manner
determined by Landlord. Landlord shall notify Tenant of its election within
thirty (30) days after Landlord's receipt of notice of the damage or
destruction. Notwithstanding the above, Landlord shall not be required to
rebuild, repair or replace any part of any Alterations which may have been
placed, on or about the Premises or paid for by Tenant. If the Premises are
untenantable in whole or in part following such damage, the Rent payable
hereunder during the period in which they are untenantable shall be abated
proportionately, but only to the extent of rental abatement insurance proceeds
received by Landlord during the time and to the extent the Premises are unfit
for occupancy.
D. GREATER THAN 270 DAYS. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs cannot in Landlord's
estimation be reasonably completed within two hundred seventy (270) days after
receipt by Tenant of Landlord's Casualty Notice, then either party shall have
the right to cancel this Lease by giving the other party written notice within
ten (10) days from the date of Landlord's Casualty Notice or notice that
Landlord has elected not to rebuild or repair the Premises. Said cancellation
shall be effective thirty (30) days from the first day that either party gives
its notice to cancel. If neither party elects to so cancel this Lease, Landlord
shall proceed to rebuild and repair the Premises diligently and in the manner
determined by Landlord, except that Landlord shall not be required to rebuild,
repair or replace any part of any Alterations which may have been placed on or
about the Premises by Tenant. If the Premises are untenantable in whole or in
part following such damage, the Rent payable hereunder during the period in
which they are untenantable shall be abated proportionately, but only to the
extent of rental abatement proceeds received by Landlord during the time and to
the extent the Premises are unfit for occupancy.
E. TENANT'S FAULT. Notwithstanding anything herein to the contrary, if the
Premises or any other portion of the Building are damaged by Casualty resulting
from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's
Parties, Base Rent and
13
<PAGE> 14
Additional Rent shall not be diminished during the repair of such damage and
Tenant shall be liable to Landlord for the cost and expense of the repair and
restoration of the Building caused thereby to the extent such cost and expense
is not covered by insurance proceeds.
F. INSURANCE PROCEEDS. Notwithstanding anything herein to the contrary, if the
Premises or Building are damaged or destroyed and are not fully covered by the
insurance proceeds received by Landlord (excluding any applicable deductible) or
if the holder of any indebtedness secured by a mortgage or deed of trust
covering the Premises requires that the insurance proceeds be applied to such
indebtedness, then in either case Landlord shall have the right to terminate
this Lease by delivering written notice of termination to Tenant within thirty
(30) days after the date of notice to Landlord that said damage or destruction
is not fully covered by insurance or such requirement is made by any such
holder, as the case may be, whereupon this Lease shall terminate.
G. WAIVER. This Paragraph 24 shall be Tenant's sole and exclusive remedy in the
event of damage or destruction to the Premises or the Building. As a material
inducement to Landlord entering into this Lease, Tenant hereby waives any rights
it may have under Sections 1932, 1933(4), 1941 or 1942 of the Civil Code of
California with respect to any destruction of the Premises, Landlord's
obligation for tenantability of the Premises and Tenant's right to make repairs
and deduct the expenses of such repairs, or under any similar law, statute or
ordinance now or hereafter in effect.
H. TENANT'S PERSONAL PROPERTY. In the event of any damage or destruction of the
Premises or the Building, under no circumstances shall Landlord be required to
repair any injury or damage to, or make any repairs to or replacements of,
Tenant's personal property.
25. HOLDING OVER
Unless Landlord expressly consents in writing to Tenant's holding over, Tenant
shall be unlawfully and illegally in possession of the Premises, whether or not
Landlord accepts any rent from Tenant or any other person while Tenant remains
in possession of the Premises without Landlord's written consent. If Tenant
shall retain possession of the Premises or any portion thereof without
Landlord's consent following the expiration of this Lease or sooner termination
for any reason, then Tenant shall pay to Landlord for each day of such retention
the greater of one hundred and fifty percent (150%) of the amount of daily
rental as of the last month prior to the date of expiration or earlier
termination or 150.0% of the then current market rent for similar space in
Mountain View, whichever is greater. Tenant shall also indemnify, defend,
protect and hold Landlord harmless from any loss, liability or cost, including
consequential and incidental damages and reasonable attorneys' fees, incurred by
Landlord resulting from delay by Tenant in surrendering the Premises, including,
without limitation, any claims made by the succeeding tenant founded on such
delay. Acceptance of Rent by Landlord following expiration or earlier
termination of this Lease, or following demand by Landlord for possession of the
Premises, shall not constitute a renewal of this Lease, and nothing contained in
this Paragraph 25 shall waive Landlord's right of reentry or any other right.
Additionally, if upon expiration or earlier termination of this Lease, or
following demand by Landlord for possession of the Premises, Tenant has not
fulfilled its obligation with respect to repairs and cleanup of the Premises or
any other Tenant obligations as set forth in this Lease, then Landlord shall
have the right to perform any such obligations as it deems necessary at Tenant's
sole cost and expense, and any time required by Landlord to complete such
obligations shall be considered a period of holding over and the terms of this
Paragraph 25 shall apply. The provisions of this Paragraph 25 shall survive any
expiration or earlier termination of this Lease.
26. DEFAULT
A. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an
event of default on the part of Tenant:
(1) ABANDONMENT. Abandonment of the Premises for a continuous period in
excess of five (5) days. Tenant waives any right to notice Tenant may
have under Section 1951.3 of the Civil Code of the State of California,
the terms of this Paragraph 26.A. being deemed such notice to Tenant as
required by said Section 1951.3.
(2) NONPAYMENT OF RENT. Failure to pay any installment of Rent or any
other amount due and payable hereunder upon the date when said payment
is due, as to which time is of the essence.
(3) OTHER OBLIGATIONS. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in
subparagraphs (1) and (2) of this Paragraph 26.A., and in Paragraphs 8,
16, 18 and 25, such failure continuing for fifteen (15) days after
written notice of such failure, as to which time is of the
essence;provided, however, that if it would reasonably take more than
fifteen (15) days to cure such default, Tenant shall not be in default
hereunder if Tenant commences a cure within such fifteen (15) day period
and diligently prosecutes such cure to completion within a forty five
day period. Notwithstanding anything to the contrary contained in this
Lease, the following shall constitute an event of default under this
Paragraph 26.A(3) without any such notice or lapse of time: (i) failure
to provide an estoppel certificate when and as required under Paragraph
18 hereof; (ii) failure to maintain insurance required under Paragraph 8
hereof; (iii) failure to vacate the Premises upon the expiration or
earlier termination of this Lease; (iv) failure to comply with any
obligation under this Lease pertaining to Hazardous Materials; (v) any
other matter provided for in another subparagraph of this Paragraph 26.A
or for which another time limit is provided elsewhere in this Lease.
(4) GENERAL ASSIGNMENT. A general assignment by Tenant for the benefit
of creditors.
(5) BANKRUPTCY. The filing of any voluntary petition in bankruptcy by
Tenant, or the filing of an involuntary petition by Tenant's creditors,
which involuntary petition remains undischarged for a period of thirty
(30) days. If under applicable law, the trustee in bankruptcy or Tenant
has the right to affirm this Lease and continue to perform the
obligations of Tenant hereunder, such trustee or Tenant shall, in such
time period as may be permitted by the bankruptcy court having
jurisdiction, cure all defaults of Tenant hereunder outstanding as of
the date of the affirmance of this Lease and provide to Landlord such
adequate assurances as may be necessary to ensure Landlord of the
continued performance of Tenant's obligations under this Lease.
(6) RECEIVERSHIP. The employment of a receiver to take possession of
substantially all of Tenant's assets or the Premises, if such
appointment remains undismissed or undischarged for a period of fifteen
(15) days after the order therefor.
(7) ATTACHMENT. The attachment, execution or other judicial seizure of
all or substantially all of Tenant's assets or Tenant's leasehold of the
Premises, if such attachment or other seizure remains undismissed or
undischarged for a period of fifteen (15) days after the levy thereof.
(8) INSOLVENCY. The admission by Tenant in writing of its inability to
pay its debts as they become due.
B. REMEDIES UPON DEFAULT.
(1) TERMINATION. In the event of the occurrence of any event of default,
Landlord shall have the right to give a written termination notice to
Tenant, and on the date specified in such notice, Tenant's right to
possession shall terminate, and this Lease
14
<PAGE> 15
shall terminate unless on or before such date all Rent in arrears and
all costs and expenses incurred by or on behalf of Landlord hereunder
shall have been paid by Tenant and all other events of default of this
Lease by Tenant at the time existing shall have been fully remedied to
the satisfaction of Landlord. At any time after such termination,
Landlord may recover possession of the Premises or any part thereof and
expel and remove therefrom Tenant and any other person occupying the
same, including any subtenant or subtenants notwithstanding Landlord's
consent to any sublease, by any lawful means, and again repossess and
enjoy the Premises without prejudice to any of the remedies that
Landlord may have under this Lease, or at law or equity by any reason of
Tenant's default or of such termination. Landlord hereby reserves the
right, but shall not have the obligation, to recognize the continued
possession of any subtenant. The delivery or surrender to Landlord by or
on behalf of Tenant of keys, entry codes, or other means to bypass
security at the Premises shall not terminate this Lease.
(2) CONTINUATION AFTER DEFAULT. Even though an event of default may have
occurred, this Lease shall continue in effect for so long as Landlord
does not terminate Tenant's right to possession under Paragraph 26.B.(1)
hereof. Landlord shall have the remedy described in California Civil
Code Section 1951.4 ("Landlord may continue this Lease in effect after
Tenant's breach and abandonment and recover Rent as it becomes due, if
Tenant has the right to sublet or assign, subject only to reasonable
limitations"), or any successor code section. Accordingly, if Landlord
does not elect to terminate this Lease on account of any event of
default by Tenant, Landlord may enforce all of Landlord's rights and
remedies under this Lease, including the right to recover Rent as it
becomes due. Acts of maintenance, preservation or efforts to lease the
Premises or the appointment of a receiver under application of Landlord
to protect Landlord's interest under this Lease or other entry by
Landlord upon the Premises shall not constitute an election to terminate
Tenant's right to possession.
(3) INCREASED SECURITY DEPOSIT. If Tenant is in default under Paragraph
26.A.(2) hereof and such default remains uncured for ten (10) days after
such occurrence or such default occurs more than three times in any
twelve (12) month period, Landlord may require that Tenant increase the
Security Deposit to the amount of three times the current month's Rent
at the time of the most recent default.
C. DAMAGES AFTER DEFAULT. Should Landlord terminate this Lease pursuant to the
provisions of Paragraph 26.B.(1) hereof, Landlord shall have the rights and
remedies of a Landlord provided by Section 1951.2 of the Civil Code of the State
of California, or any successor code sections. Upon such termination, in
addition to any other rights and remedies to which Landlord may be entitled
under applicable law or at equity, Landlord shall be entitled to recover from
Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts
which had been earned at the time of termination, (2) the worth at the time of
award of the amount by which the unpaid Rent and other amounts that would have
been earned after the date of termination until the time of award exceeds the
amount of such Rent loss that Tenant proves could have been reasonably avoided;
(3) the worth at the time of award of the amount by which the unpaid Rent and
other amounts for the balance of the Term after the time of award exceeds the
amount of such Rent loss that the Tenant proves could be reasonably avoided; and
(4) any other amount and court costs necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease or which, in the ordinary course of things, would be likely to
result therefrom. The "worth at the time of award" as used in (1) and (2) above
shall be computed at the Applicable Interest Rate (defined below). The "worth at
the time of award" as used in (3) above shall be computed by discounting such
amount at the Federal Discount Rate of the Federal Reserve Bank of San Francisco
at the time of award plus one percent (1%). If this Lease provides for any
periods during the Term during which Tenant is not required to pay Base Rent or
if Tenant otherwise receives a Rent concession, then upon the occurrence of an
event of default, Tenant shall owe to Landlord the full amount of such Base Rent
or value of such Rent concession, plus interest at the Applicable Interest Rate,
calculated from the date that such Base Rent or Rent concession would have been
payable.
D. LATE CHARGE. In addition to its other remedies, Landlord shall have the right
without notice or demand to add to the amount of any payment required to be made
by Tenant hereunder, and which is not paid and received by Landlord on or before
the first day of each calendar month, an amount equal to five percent (5%) of
the delinquent amount, or $150.00, whichever amount is greater, for each month
or portion thereof that the delinquency remains outstanding to compensate
Landlord for the loss of the use of the amount not paid and the administrative
costs caused by the delinquency, the parties agreeing that Landlord's damage by
virtue of such delinquencies would be extremely difficult and impracticable to
compute and the amount stated herein represents a reasonable estimate thereof.
Any waiver by Landlord of any late charges or failure to claim the same shall
not constitute a waiver of other late charges or any other remedies available to
Landlord.
E. INTEREST. Interest shall accrue on all sums not paid when due hereunder at
the lesser of eighteen percent (18%) per annum or the maximum interest rate
allowed by law ("APPLICABLE INTEREST RATE") from the due date until paid.
F. REMEDIES CUMULATIVE. All of Landlord's rights, privileges and elections or
remedies are cumulative and not alternative, to the extent permitted by law and
except as otherwise provided herein.
REPLACEMENT OF STATUTORY NOTICE REQUIREMENTS. When this Lease requires service
of a notice, that notice shall replace rather than supplement any equivalent or
similar statutory notice, including any notice required by California Code of
Civil Procedure Section 1161 or any similar or successor statute. When a statute
requires service of a notice in a particular manner, service of that notice (or
a similar notice required by this Lease) in the manner required by this
Paragraph 26 shall replace and satisfy the statutory service-of-notice
procedures, including those required by California Code of Civil Procedure
Section 1162 or any similar or successor statute.
27. LIENS
Tenant shall at all times keep the Premises and the Project free from liens
arising out of or related to work or services performed, materials or supplies
furnished or obligations incurred by or on behalf of Tenant or in connection
with work made, suffered or done by or on behalf of Tenant in or on the Premises
or Project. If Tenant shall not, within ten (10) days following the imposition
of any such lien, cause the same to be released of record by payment or posting
of a proper bond, Landlord shall have, in addition to all other remedies
provided herein and by law, the right, but not the obligation, to cause the same
to be released by such means as Landlord shall deem proper, including payment of
the claim giving rise to such lien. All sums paid by Landlord on behalf of
Tenant and all expenses incurred by Landlord in connection therefor shall be
payable to Landlord by Tenant on demand with interest at the Applicable Interest
Rate as Additional Rent. Landlord shall have the right at all times to post and
keep posted on the Premises any notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord, the Premises, the
Project and any other party having an interest therein, from mechanics' and
materialmen's liens, and Tenant shall give Landlord not less than ten (10)
business days prior written notice of the commencement of any work in the
Premises or Project which could lawfully give rise to a claim for mechanics' or
materialmen's liens to permit Landlord to post and record a timely notice of
non-responsibility, as Landlord may elect to proceed or as the law may from time
to time provide, for which purpose, if Landlord shall so determine, Landlord may
enter the Premises. Tenant shall not remove any such notice posted by Landlord
without Landlord's consent, and in any event not before completion of the work
which could lawfully give rise to a claim for mechanics' or materialmen's liens.
15
<PAGE> 16
28. SUBSTITUTION [INTENTIONALLY DELETED]
29. TRANSFERS BY LANDLORD
In the event of a sale or conveyance by Landlord of the Building or a
foreclosure by any creditor of Landlord, the same shall operate to release
Landlord from any liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, to the extent required to be
performed after the passing of title to Landlord's successor-in-interest;
provided that Landlord delivers the Security Deposit (including the Letter of
Credit) to such creditor or transferee. In such event, Tenant agrees to look
solely to the responsibility of the successor-in-interest of Landlord under this
Lease with respect to the performance of the covenants and duties of "Landlord"
to be performed after the passing of title to Landlord's successor-in-interest.
This Lease shall not be affected by any such sale and Tenant agrees to attorn to
the purchaser or assignee. Landlord's successor(s)-in-interest shall not have
liability to Tenant with respect to the failure to perform any of the
obligations of "Landlord," to the extent required to be performed prior to the
date such successor(s)-in-interest became the owner of the Building.
30. RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS
All covenants and agreements to be performed by Tenant under any of the terms of
this Lease shall be performed by Tenant at Tenant's sole cost and expense and
without any abatement of Rent. If Tenant shall fail to pay any sum of money,
other than Base Rent, required to be paid by Tenant hereunder or shall fail to
perform any other act on Tenant's part to be performed hereunder, including
Tenant's obligations under Paragraph 11 hereof, and such failure shall continue
for fifteen (15) days after notice thereof by Landlord, in addition to the other
rights and remedies of Landlord, Landlord may make any such payment and perform
any such act on Tenant's part. In the case of an emergency, no prior
notification by Landlord shall be required. Landlord may take such actions
without any obligation and without releasing Tenant from any of Tenant's
obligations. All sums so paid by Landlord and all incidental costs incurred by
Landlord and interest thereon at the Applicable Interest Rate, from the date of
payment by Landlord, shall be paid to Landlord on demand as Additional Rent.
31. WAIVER
If either Landlord or Tenant waives the performance of any term, covenant or
condition contained in this Lease, such waiver shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or
condition contained herein, or constitute a course of dealing contrary to the
expressed terms of this Lease. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord's knowledge of such preceding
breach at the time Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord, based upon full knowledge of the circumstances.
32. NOTICES
Each provision of this Lease or of any applicable governmental laws, ordinances,
regulations and other requirements with reference to sending, mailing, or
delivery of any notice or the making of any payment by Landlord or Tenant to the
other shall be deemed to be complied with when and if the following steps are
taken:
A. RENT. All Rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at Landlord's Remittance Address set
forth in the Basic Lease Information, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance herewith.
Tenant's obligation to pay Rent and any other amounts to Landlord under the
terms of this Lease shall not be deemed satisfied until such Rent and other
amounts have been actually received by Landlord.
B. OTHER. All notices, demands, consents and approvals which may or are required
to be given by either party to the other hereunder shall be in writing and
either personally delivered, sent by commercial overnight courier, mailed,
certified or registered, postage prepaid or sent by facsimile with confirmed
receipt (and with an original sent by commercial overnight courier), and in each
case addressed to the party to be notified at the Notice Address for such party
as specified in the Basic Lease Information or to such other place as the party
to be notified may from time to time designate by at least fifteen (15) days
notice to the notifying party. Notices shall be deemed served upon receipt or
refusal to accept delivery. Tenant appoints as its agent to receive the service
of all default notices and notice of commencement of unlawful detainer
proceedings the person in charge of or apparently in charge of occupying the
Premises at the time, and, if there is no such person, then such service may be
made by attaching the same on the main entrance of the Premises.
C. REQUIRED NOTICES. Tenant shall immediately notify Landlord in writing of any
notice of a violation or a potential or alleged violation of any Regulation that
relates to the Premises or the Project, or of any inquiry, investigation,
enforcement or other action that is instituted or threatened by any governmental
or regulatory agency against Tenant or any other occupant of the Premises, or
any claim that is instituted or threatened by any third party that relates to
the Premises or the Project.
33. ATTORNEYS' FEES
If Landlord places the enforcement of this Lease, or any part thereof, or the
collection of any Rent due, or to become due hereunder, or recovery of
possession of the Premises in the hands of an attorney, Tenant shall pay to
Landlord, upon demand, Landlord's reasonable attorneys' fees and court costs,
whether incurred at trial, appeal or review. In any action which Landlord or
Tenant brings to enforce its respective rights hereunder, the unsuccessful party
shall pay all costs incurred by the prevailing party including reasonable
attorneys' fees, to be fixed by the court, and said costs and attorneys' fees
shall be a part of the judgment in said action.
34. SUCCESSORS AND ASSIGNS
This Lease shall be binding upon and inure to the benefit of Landlord, its
successors and assigns, and shall be binding upon and inure to the benefit of
Tenant, its successors, and to the extent assignment is approved by Landlord as
provided hereunder, Tenant's assigns.
35. FORCE MAJEURE
If performance by a party of any portion of this Lease is made impossible by any
prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts
of God, inability to obtain services, labor, or materials or reasonable
substitutes for those items, government actions, civil commotions, fire or other
casualty, or other causes beyond the reasonable control of the party obligated
to perform, performance by that party for a period equal to the period of that
prevention, delay, or stoppage is excused. Tenant's obligation to pay Rent,
however, is not excused by this Paragraph 35.
16
<PAGE> 17
36. SURRENDER OF PREMISES
Tenant shall, upon expiration or sooner termination of this Lease, surrender the
Premises to Landlord in the same condition as existed on the date Tenant
originally took possession thereof, reasonable wear and tear, casualty and
condemnation excepted, including, but not limited to, all interior walls
cleaned, all holes in walls repaired, all carpets cleaned, all HVAC equipment in
operating order and in good repair, and all floors broom clean, and free of any
Tenant-introduced marking or painting, all to the reasonable satisfaction of
Landlord. Tenant shall remove all of its debris from the Project. At or before
the time of surrender, Tenant shall comply with the terms of Paragraph 12.A.
hereof with respect to Alterations to the Premises and all other matters
addressed in such Paragraph. If the Premises are not so surrendered at the
expiration or sooner termination of this Lease, the provisions of Paragraph 25
hereof shall apply. All keys to the Premises or any part thereof shall be
surrendered to Landlord upon expiration or sooner termination of the Term.
Tenant shall give written notice to Landlord at least thirty (30) days prior to
vacating the Premises and shall meet with Landlord for a joint inspection of the
Premises at the time of vacating, but nothing contained herein shall be
construed as an extension of the Term or as a consent by Landlord to any holding
over by Tenant. In the event of Tenant's failure to give such notice or
participate in such joint inspection, Landlord's inspection at or after Tenant's
vacating the Premises shall conclusively be deemed correct for purposes of
determining Tenant's responsibility for repairs and restoration. Any delay
caused by Tenant's failure to carry out its obligations under this Paragraph 36
beyond the term hereof, shall constitute unlawful and illegal possession of
Premises under Paragraph 25 hereof.
37. HAZARDOUS MATERIALS
A. GENERAL RESTRICTIONS. Tenant shall conduct its business and shall cause each
Tenant Party to act in such a manner as to (a) not release or permit the release
of any Hazardous Material in, under, on or about the Premises or Project, or (b)
not use, store, generate, treat, discharge, disperse, handle, manufacture,
transport or dispose of (collectively, "Handle") any Hazardous Materials (other
than incidental amounts of customary cleaning and office supplies) in or about
the Premises or Project without the prior written consent of Landlord, which
consent Landlord may withhold in its sole and absolute discretion ("Hazardous
Materials Consent Requirements"). "Hazardous Material" means any hazardous,
explosive, radioactive or toxic substance, material or waste which is or becomes
regulated by any local, state or federal governmental authority or agency,
including, without limitation, any material or substance which is (i) defined or
listed as a "hazardous waste," "extremely hazardous waste," "restricted
hazardous waste," "hazardous substance," "hazardous material," "pollutant" or
"contaminant" under any Regulation, (ii) petroleum or petroleum derivative,
(iii) a flammable explosive, (iv) a radioactive material or waste, (v) a
polychlorinated biphenyl, (vi) asbestos or asbestos containing material, (vii)
infectious waste, or (viii) a carcinogen.
B. REQUIRED DISCLOSURES. Prior to Tenant (and at least five (5) days prior to
any assignee or any subtenant of Tenant) taking possession of any part of the
Premises, and on each anniversary of the Term Commencement Date (each such date
is hereinafter referred to as a "Disclosure Date"), until and including the
first Disclosure Date occurring after the expiration or sooner termination of
this Lease, Tenant shall disclose to Landlord in writing the names and amounts
of all Hazardous Materials, or any combination thereof, which were Handled on,
in, under or about the Premises or Project for the twelve (12) month period
prior to such Disclosure Date, or which Tenant intends to Handle on, under or
about the Premises during the twelve (12) month period following the Disclosure
Date by executing and delivering to Landlord a "Hazardous Materials
Questionnaire", in the form attached hereto as EXHIBIT D (as updated and
modified by Landlord, from time to time). Tenant's disclosure obligations under
this Paragraph 37.B shall include a requirement that, to the extent any
information contained in a Hazardous Materials Questionnaire previously
delivered by Tenant shall become inaccurate in any material respect, Tenant
shall immediately deliver to Landlord a new updated Hazardous Materials
Questionnaire.
C. ADDITIONAL OBLIGATIONS. If any Hazardous Materials shall be released into the
environment comprising or surrounding the Project in connection with the acts,
omissions or operations of Tenant or any Tenant Party, Tenant shall at its sole
expense promptly prepare a remediation plan therefor consistent with applicable
Regulations and recommended industry practices (and approved by Landlord and all
governmental agencies having jurisdiction) to fully remediate such release, and
thereafter shall prosecute the remediation plan so approved to completion with
all reasonable diligence and to the satisfaction of Landlord and applicable
governmental agencies. If any Hazardous Materials are Handled in, under, on or
about the Premises during the Term, or if Landlord determines in good faith that
any release of any Hazardous Material by Tenant or any Tenant Parties or the
violation of Hazardous Materials Regulations by Tenant or any Tenant Parties may
have occurred in, on, under or about the Premises during the Term, Landlord may
require Tenant to at Tenant's sole expense, (i) retain a qualified environmental
consultant reasonably satisfactory to Landlord to conduct a reasonable
investigation (an "Environmental Assessment") of a nature and scope reasonably
approved in writing in advance by Landlord with respect to the existence of any
Hazardous Materials in, on, under or about the Premises and providing a review
of all Hazardous Materials activities of Tenant and the Tenant Parties, and (ii)
provide to Landlord a reasonably detailed, written report, prepared in
accordance with the institutional real estate standards, of the Environmental
Assessment.
D. INDEMNITY. Tenant shall indemnify, defend (by counsel reasonably acceptable
to Landlord), protect and hold Landlord harmless from and against any and all
claims, liabilities, losses, costs, loss of rents, liens, damages, injuries or
expenses (including attorneys' and consultants' fees and court costs), demands,
causes of action, or judgments directly or indirectly arising out of or related
to the use, generation, storage, release, or disposal of Hazardous Materials by
Tenant or any of Tenant's Parties in, on, under or about the Premises, the
Building or the Project or surrounding land or environment, which indemnity
shall include, without limitation, damages for personal or bodily injury,
property damage, damage to the environment or natural resources occurring on or
off the Premises, losses attributable to diminution in value or adverse effects
on marketability, the cost of any investigation, monitoring, government
oversight, repair, removal, remediation, restoration, abatement, and disposal,
and the preparation of any closure or other required plans, whether such action
is required or necessary prior to or following the expiration or earlier
termination of this Lease. Neither the consent by Landlord to the use,
generation, storage, release or disposal of Hazardous Materials nor the strict
compliance by Tenant with all laws pertaining to Hazardous Materials shall
excuse Tenant from Tenant's obligation of indemnification pursuant to this
Paragraph 37.D. Tenant's obligations pursuant to the foregoing indemnity shall
survive the expiration or earlier termination of this Lease.
E. LANDLORD INDEMNITY. Landlord shall indemnify, defend and hold Tenant harmless
from and against any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses, including without limitation reasonable attorneys'
fees and costs, arising out of any Hazardous Material in, on or about the
Project or the Premises which was created, handled, placed, stored, used,
transported or disposed of or otherwise exists in, on or about the Premises in
violation of applicable Regulations, excluding, however, any Hazardous Material
whose presence was caused by Tenant or any Tenant's Parties. Landlord's
obligations pursuant to the foregoing indemnity shall survive the expiration or
earlier termination of this Lease.
38. MISCELLANEOUS
A. GENERAL. The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their respective successors, executors,
administrators and permitted assigns, according to the context hereof.
B. TIME. Time is of the essence regarding this Lease and all of its provisions.
17
<PAGE> 18
C. CHOICE OF LAW. This Lease shall in all respects be governed by the laws of
the State of California.
D. ENTIRE AGREEMENT. This Lease, together with its Exhibits, addenda and
attachments and the Basic Lease Information, contains all the agreements of the
parties hereto and supersedes any previous negotiations. There have been no
representations made by the Landlord or understandings made between the parties
other than those set forth in this Lease and its Exhibits, addenda and
attachments and the Basic Lease Information.
E. MODIFICATION. This Lease may not be modified except by a written instrument
signed by the parties hereto. Tenant accepts the area of the Premises as
specified in the Basic Lease Information as the approximate area of the Premises
for all purposes under this Lease, and acknowledges and agrees that no other
definition of the area (rentable, usable or otherwise) of the Premises shall
apply. Tenant shall in no event be entitled to a recalculation of the square
footage of the Premises, rentable, usable or otherwise, and no recalculation, if
made, irrespective of its purpose, shall reduce Tenant's obligations under this
Lease in any manner, including without limitation the amount of Base Rent
payable by Tenant or Tenant's Proportionate Share of the Building and of the
Project.
F. SEVERABILITY. If, for any reason whatsoever, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be and
remain in full force and effect.
G. RECORDATION. Tenant shall not record this Lease or a short form memorandum
hereof.
H. EXAMINATION OF LEASE. Submission of this Lease to Tenant does not constitute
an option or offer to lease and this Lease is not effective otherwise until
execution and delivery by both Landlord and Tenant.
I. ACCORD AND SATISFACTION. No payment by Tenant of a lesser amount than the
total Rent due nor any endorsement on any check or letter accompanying any check
or payment of Rent shall be deemed an accord and satisfaction of full payment of
Rent, and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies. All offers by
or on behalf of Tenant of accord and satisfaction are hereby rejected in
advance.
J. EASEMENTS. Landlord may grant easements on the Project and dedicate for
public use portions of the Project without Tenant's consent; provided that no
such grant or dedication shall materially interfere with Tenant's Permitted Use
of the Premises. Upon Landlord's request, Tenant shall execute, acknowledge and
deliver to Landlord documents, instruments, maps and plats necessary to
effectuate Tenant's covenants hereunder.
K. DRAFTING AND DETERMINATION PRESUMPTION. The parties acknowledge that this
Lease has been agreed to by both the parties, that both Landlord and Tenant have
consulted with attorneys with respect to the terms of this Lease and that no
presumption shall be created against Landlord because Landlord drafted this
Lease.Except as otherwise specifically set forth in this Lease, with respect to
any consent, determination or estimation of Landlord required or allowed in this
Lease or requested of Landlord, Landlord's consent, determination or estimation
shall be given or made solely by Landlord in Landlord's good faith opinion,
whether or not objectively reasonable. Except as expressly set forth in this
Lease, if Landlord fails to respond to any request for its consent within the
time period, if any, specified in this Lease, Landlord shall be deemed to have
disapproved such request.
L. EXHIBITS. The Basic Lease Information, and the Exhibits, addenda and
attachments attached hereto are hereby incorporated herein by this reference and
made a part of this Lease as though fully set forth herein.
M. NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off of light, air
or view by any structure which may be erected on lands adjacent to or in the
vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.
N. NO THIRD PARTY BENEFIT. This Lease is a contract between Landlord and Tenant
and nothing herein is intended to create any third party benefit.
O. QUIET ENJOYMENT. Upon payment by Tenant of the Rent, and upon the observance
and performance of all of the other covenants, terms and conditions on Tenant's
part to be observed and performed, Tenant shall peaceably and quietly hold and
enjoy the Premises for the term hereby demised without hindrance or interruption
by Landlord or any other person or persons lawfully or equitably claiming by,
through or under Landlord, subject, nevertheless, to all of the other terms and
conditions of this Lease. Landlord shall not be liable for any hindrance,
interruption, interference or disturbance by other tenants or third persons, nor
shall Tenant be released from any obligations under this Lease because of such
hindrance, interruption, interference or disturbance.
P. COUNTERPARTS. This Lease may be executed in any number of counterparts, each
of which shall be deemed an original.
Q. MULTIPLE PARTIES. If more than one person or entity is named herein as
Tenant, such multiple parties shall have joint and several responsibility to
comply with the terms of this Lease.
R. PRORATIONS. Any Rent or other amounts payable to Landlord by Tenant hereunder
for any fractional month shall be prorated based on a month of 30 days. As used
herein, the term "fiscal year" shall mean the calendar year or such other fiscal
year as Landlord may deem appropriate.
39. ADDITIONAL PROVISIONS
A. ADDENDUM 1: PARAGRAPH 6, BASE RENT. Base Rent, net of Estimated
Operating Expenses per Paragraph 7 of this Lease, for the Premises at
380 North Bernardo Avenue in Mountain View, California shall be as
follows:
MONTHS 1-12: Base Rent shall be $140,345.00 per month. In addition to Base
Rent, Tenant shall also pay Tenant's proportionate share of
Estimated Operating Expenses as set forth in Paragraph 7 of the
Lease Agreement. Operating Expenses are initially estimated to be
$10,063.20 per month. Operating Expenses are estimated a year in
advance and collected on a monthly basis. Any adjustments (up or
down) will be made at the end of the calendar year.
MONTHS 13-24: Base Rent shall be $145,959.00 per month. In addition to Base
Rent, Tenant shall also pay Tenant's proportionate share of
Estimated Operating Expenses as set forth in Paragraph 7 of the
Lease Agreement.
MONTHS 25-36: Base Rent shall be $151,797.00 per month. In addition to Base
Rent, Tenant shall also pay Tenant's proportionate share of
Estimated Operating Expenses as set forth in Paragraph 7 of the
Lease Agreement.
18
<PAGE> 19
MONTHS 37-48: Base Rent shall be $157,869.00 per month. In addition to Base
Rent, Tenant shall also pay Tenant's proportionate share of
Estimated Operating Expenses as set forth in Paragraph 7 of the
Lease Agreement.
MONTHS 49-60: Base Rent shall be $164,184.00 per month. In addition to Base
Rent, Tenant shall also pay Tenant's proportionate share of
Estimated Operating Expenses as set forth in Paragraph 7 of the
Lease Agreement.
MONTHS 61-72: Base Rent shall be $170,751.00 per month. In addition to Base
Rent, Tenant shall also pay Tenant's proportionate share of
Estimated Operating Expenses as set forth in Paragraph 7 of the
Lease Agreement.
MONTHS 73-84: Base Rent shall be $177,581.00 per month. In addition to Base
Rent, Tenant shall also pay Tenant's proportionate share of
Estimated Operating Expenses as set forth in Paragraph 7 of the
Lease Agreement.
MONTHS 85-96: Base Rent shall be $184,684.00 per month. In addition to Base
Rent, Tenant shall also pay Tenant's proportionate share of
Estimated Operating Expenses as set forth in Paragraph 7 of the
Lease Agreement.
B. LETTER OF CREDIT
(1) DELIVERY OF LETTER OF CREDIT. Tenant shall, on execution of this
Lease, deliver to Landlord and cause to be in effect during the Lease
Term an unconditional, irrevocable letter of credit ("LOC") in the
amount specified for the Security Deposit in the Basic Lease
Information, as it may be increased as provided in this Lease (the "LOC
AMOUNT") for an initial term of one (1) year and thereafter shall renew
automatically from year to year through 30 days beyond the expiration
date of this Lease or any extension thereto. The LOC shall be in a form
acceptable to Landlord and shall be (i) issued by an LOC bank selected
by Tenant and acceptable to Landlord The text of the LOC shall expressly
state that the LOC shall survive the termination of this Lease. An LOC
bank is a bank that accepts deposits, maintains accounts, has a local
office that will negotiate a letter of credit, and the deposits of which
are insured by the Federal Deposit Insurance Corporation. Tenant shall
pay all expenses, points, or fees incurred by Tenant in obtaining the
LOC. The LOC shall not be mortgaged, assigned or encumbered in any
manner whatsoever by Tenant without the prior written consent of
Landlord. Tenant acknowledges that Landlord has the right to transfer or
mortgage its interest in the Project, the Building and in this Lease and
Tenant agrees that in the event of any such transfer or mortgage,
Landlord shall have the right to transfer or assign the LOC and/or the
LOC Security Deposit (as defined below) to the transferee or mortgagee,
and in the event of such transfer, Tenant shall look solely to such
transferee or mortgagee for the return of the LOC and/or the LOC
Security Deposit. Tenant shall, within ten (10) business days of request
by Landlord, execute such further instruments or assurances as Landlord
may reasonably deem necessary to evidence or confirm Landlord's transfer
or assignment of the LOC Security Deposit and/or the LOC to such
transferee or mortgagee.
(2) REPLACEMENT OF LETTER OF CREDIT. Tenant may, from time to time,
replace any existing LOC with a new LOC if the new LOC (a) becomes
effective at least thirty (30) days before expiration of the LOC that it
replaces; (b) is in the required LOC amount; (c) is issued by an LOC
bank acceptable to Landlord; and (d) otherwise complies with the
requirements of this Paragraph 39 B.
(3) LANDLORD'S RIGHT TO DRAW ON LETTER OF CREDIT. Landlord shall hold
the LOC as security for the performance of Tenant's obligations under
this Lease. If, after notice and failure to cure within any applicable
period provided in this Lease, Tenant defaults on any provision of this
Lease, Landlord may, without prejudice to any other remedy it has, draw
on all or any portion of the LOC necessary to (a) pay Rent or other sum
in default; (b) pay or reimburse Landlord for any amount that Landlord
may spend or become obligated to spend in exercising Landlord's rights
under Paragraph 30 (Right of Landlord to Perform Tenant's Covenant);
and/or (c) compensate Landlord for any expense, loss, or damage that
Landlord may suffer because of Tenant's default. The use, application or
retention of the LOC, or any portion thereof, by Landlord shall not
prevent Landlord from exercising any other right or remedy provided by
this Lease or by law, it being intended that Landlord shall not first be
required to proceed against the LOC and shall not operate as a
limitation on any recovery to which Landlord may otherwise be entitled.
If Tenant fails to renew or replace the LOC at least thirty (30) days
before its expiration, Landlord may, without prejudice to any other
remedy it has, draw on the entire amount of the LOC.
(4) LOC SECURITY DEPOSIT. Any amount of the LOC that is drawn on by
Landlord but not applied by Landlord shall be held by Landlord as a
security deposit (the "LOC SECURITY DEPOSIT") in accordance with
Paragraph 19 of this Lease.
(5) RESTORATION OF LETTER OF CREDIT AND LOC SECURITY DEPOSIT. If
Landlord draws on all or any portion of the LOC and/or applies all or
any portion of such draw, Tenant shall, within five (5) business days
after demand by Landlord, either (a) deposit cash with Landlord in an
amount that, when added to the amount remaining under the LOC and the
amount of any LOC Security Deposit, shall equal the LOC Amount then
required under this Paragraph 39 B; or (b) reinstate the LOC to the full
LOC Amount.
(6) REDUCTION OF LETTER OF CREDIT. The LOC Amount may be reduced at the
times and to the corresponding amounts specified in this Paragraph
39(B)(6) if the following conditions are satisfied to Landlord's sole
satisfaction in each case: (i) Tenant is not and has not been in
material default under the terms of this Lease beyond any applicable
cure period, (ii) Tenant provides to Landlord ten (10) days prior
written notice of any such reduction; (iii) the LOC provides that the
issuing bank shall notify Landlord in writing at least five (5) business
days prior to any such reduction, (iv) Tenant requests such reduction in
writing and delivers to Landlord Tenant's Financial Information (as
defined below) with such written request, and (v) each of the conditions
precedent described below is satisfied to Landlord's satisfaction. For
purposes of this Subparagraph 39(B)(6), "Tangible Net Worth" shall be
determined by Landlord in its sole discretion and shall mean assets less
intangible assets and total liabilities, with intangible assets
including nonmaterial benefits such as goodwill, patents, copyrights,
and trademarks, and "Tenant's Financial Information" shall mean Tenant's
financial statements prepared in accordance with generally accepted
accounting principles and audited by a nationally recognized public
accounting firm acceptable to Landlord, and any other financial
information requested by Landlord.
If: (i) Tenant has a Tangible Net Worth in excess of Three Hundred
Million and No/100 Dollars ($300,000,000.00) which amount shall be
determined by Landlord to its satisfaction prior to any reduction in the
LOC Amount. Tenant shall deliver to Landlord for review Tenant's
Financial Information as provided above; and (ii) Tenant's Financial
Information reflects four (4) consecutive calendar quarters of
profitability, as determined by Landlord during the time period
immediately preceding Tenant's request for reduction in the LOC Amount,
then the following reductions in the LOC Amount may be made in
accordance with the terms of this Paragraph __._:
19
<PAGE> 20
a. At any time after the end of the twenty-fourth (24th)
month following the Term Commencement Date, the LOC
Amount may be reduced to an amount equal to one
million six hundred thousand and No/100 Dollars
($1,600,000.00);
b. At any time after the end of the thirty-sixth (36th)
month following the Term Commencement Date, the LOC
Amount may be reduced to an amount equal to one
million two hundred thousand and No/100 Dollars
($1,200,000.00);
c. At any time after the end of the forty-eighth (48th)
month following the Term Commencement Date, the LOC
Amount may be reduced to an amount equal to eight
hundred thousand and No/100 Dollars ($800,000.00);
d. At any time after the end of the sixtieth (60th) month
following the Term Commencement Date, the LOC Amount
may be reduced to an amount equal to four hundred
thousand and No/100 Dollars ($400,000.00).
e. At any time after the end of the seventy-second (72nd)
month following the Term Commencement Date, the LOC
Amount may be reduced to amount equal to zero Dollars
($0.00).
In the event that any of the above described reductions to the LOC is made and,
subsequently, Tenant fails to meet the corresponding profitability and Tangible
Net Worth condition precedent for a period of thirty (30) days following
delivery by Landlord of written notice of any such failure, Tenant shall within
forty-eight (48) hours, increase the face amount of the LOC to an amount equal
to the original LOC Amount. If Tenant fails to increase the LOC Amount as
provided above, such failure shall constitute a default hereunder (which default
shall not be subject to any cure rights afforded anywhere in this Lease) and
Landlord shall be entitled to draw on the LOC for the full LOC Amount and hold
such LOC Amount as a Security Deposit in accordance with the terms of this
Lease.
40. JURY TRIAL WAIVER
EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR PERSONAL
REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES TRIAL BY
JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN WHICH
THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION OF THE
COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY
STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS
LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 40. THE
PROVISIONS OF THIS PARAGRAPH 40 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS LEASE.
41. BROKER'S FEES
Tenant and Landlord each represent to the other that they have dealt with no
real estate brokers, finders, agents or salesmen other than BT Commercial Real
Estate ("Tenant's Broker"), representing Tenant, in connection with this
transaction. Each party agrees to hold the other party harmless from and against
all claims for brokerage commissions, finder's fees or other compensation made
by any other agent, broker, salesman or finder as a consequence of said party's
actions or dealings with such agent, broker, salesman, or finder. Landlord shall
pay the brokerage commission due and payable to Tenant's Broker with respect to
this transaction pursuant to a separate agreement.
20
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and the year first above written.
LANDLORD
Spieker Properties, L.P.,
a California limited partnership
By: Spieker Properties, Inc.,
a Maryland corporation,
its general partner
By: /s/ ERIC T. LUHRS
-------------------------------------
Eric T. Luhrs
Its: Vice President
Date: 5/10 , 00
-------------- ----
TENANT
Handspring, Inc.
a Delaware corporation
By: /s/ BERNARD J. WHITNEY
-------------------------------------
Bernard J. Whitney
Its: Chief Financial Officer
Date: ,
-------------- ----
21
<PAGE> 22
EXHIBIT A
INDUSTRIAL LEASE
RULES AND REGULATIONS
1. Driveways, sidewalks, halls, passages, exits, entrances, elevators,
escalators and stairways shall not be obstructed by tenants or used by
tenants for any purpose other than for ingress to and egress from their
respective premises. The driveways, sidewalks, halls, passages, exits,
entrances, elevators and stairways are not for the use of the general public
and Landlord shall in all cases retain the right to control and prevent
access thereto by all persons whose presence, in the judgment of Landlord,
shall be prejudicial to the safety, character, reputation and interests of
the Building, the Project and its tenants, provided that nothing herein
contained shall be construed to prevent such access to persons with whom any
tenant normally deals in the ordinary course of such tenant's business
unless such persons are engaged in illegal activities. No tenant, and no
employees or invitees of any tenant, shall go upon the roof of any Building,
except as authorized by Landlord.
2. No sign, placard, banner, picture, name, advertisement or notice, visible
from the exterior of the Premises or the Building or the common areas of the
Building shall be inscribed, painted, affixed, installed or otherwise
displayed by Tenant either on its Premises or any part of the Building or
Project without the prior written consent of Landlord in Landlord's sole and
absolute discretion. Landlord shall have the right to remove any such sign,
placard, banner, picture, name, advertisement, or notice without notice to
and at the expense of Tenant, which were installed or displayed in violation
of this rule. If Landlord shall have given such consent to Tenant at any
time, whether before or after the execution of Tenant's Lease, such consent
shall in no way operate as a waiver or release of any of the provisions
hereof or of the Lease, and shall be deemed to relate only to the particular
sign, placard, banner, picture, name, advertisement or notice so consented
to by Landlord and shall not be construed as dispensing with the necessity
of obtaining the specific written consent of Landlord with respect to any
other such sign, placard, banner, picture, name, advertisement or notice.
All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person or vendor
approved by Landlord and shall be removed by Tenant at the time of vacancy
at Tenant's expense.
3. The directory of the Building or Project will be provided exclusively for
the display of the name and location of tenants only and Landlord reserves
the right to charge for the use thereof and to exclude any other names
therefrom.
4. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, awnings, hangings or decorations shall be attached to, hung or
placed in, or used in connection with, any window or door on the Premises
without the prior written consent of Landlord. In any event with the prior
written consent of Landlord, all such items shall be installed inboard of
Landlord's standard window covering and shall in no way be visible from the
exterior of the Building. All electrical ceiling fixtures hung in offices or
spaces along the perimeter of the Building must be fluorescent or of a
quality, type, design, and bulb color approved by Landlord. No articles
shall be placed or kept on the windowsills so as to be visible from the
exterior of the Building. No articles shall be placed against glass
partitions or doors which Landlord considers unsightly from outside Tenant's
Premises.
5. Each tenant shall be responsible for all persons for whom it allows to enter
the Building or the Project and shall be liable to Landlord for all acts of
such persons.
Landlord and its agents shall not be liable for damages for any error
concerning the admission to, or exclusion from, the Building or the Project
of any person.
During the continuance of any invasion, mob, riot, public excitement or
other circumstance rendering such action advisable in Landlord's opinion,
Landlord reserves the right (but shall not be obligated) to prevent access
to the Building and the Project during the continuance of that event by any
means it considers appropriate for the safety of tenants and protection of
the Building, property in the Building and the Project.
6. Tenant shall not alter any lock or access device or install a new or
additional lock or access device or bolt on any door of its Premises,
without the prior written consent of Landlord. If Landlord shall give its
consent, Tenant shall in each case furnish Landlord with a key for any such
lock. Tenant, upon the termination of its tenancy, shall deliver to Landlord
the keys for all doors which have been furnished to Tenant, and in the event
of loss of any keys so furnished, shall pay Landlord therefor.
7. The restrooms, toilets, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown into them. The
expense of any breakage, stoppage, or damage resulting from violation of
this rule shall be borne by the tenant who, or whose employees or invitees,
shall have caused the breakage, stoppage, or damage.
8. Tenant shall not use or keep in or on the Premises, the Building or the
Project any kerosene, gasoline, or inflammable or combustible fluid or
material except in strict accordance with the terms of the Lease.
9. Tenant shall not use, keep or permit to be used or kept in its Premises any
foul or noxious gas or substance. Tenant shall not allow the Premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations or
interfere in any way with other tenants or those having business therein,
nor shall any animals or birds be brought or kept in or about the Premises,
the Building, or the Project.
10. Except with the prior written consent of Landlord, Tenant shall not sell, or
permit the sale, at retail, of newspapers, magazines, periodicals, theater
tickets or any other goods or merchandise in or on the Premises, nor shall
Tenant carry on, or permit or allow any employee or other person to carry
on, the business of stenography, typewriting or any similar business in or
from the Premises for the service or accommodation of occupants of any other
portion of the Building, or the business of a public barber shop, beauty
parlor, nor shall the Premises be used for any illegal, improper, immoral or
objectionable purpose, or any business or activity other than that
specifically provided for in such Tenant's Lease. Tenant shall not accept
hairstyling, barbering, shoeshine, nail, massage or similar services in the
Premises or common areas except as authorized by Landlord.
11. If Tenant requires telegraphic, telephonic, telecommunications, data
processing, burglar alarm or similar services, it shall first obtain, and
comply with, Landlord's instructions in their installation. The cost of
purchasing, installation and maintenance of such services shall be borne
solely by Tenant.
12. Landlord will direct electricians as to where and how telephone, telegraph
and electrical wires are to be introduced or installed. No boring or cutting
for wires will be allowed without the prior written consent of Landlord. The
location of burglar alarms, telephones, call boxes and other office
equipment affixed to the Premises shall be subject to the prior written
approval of Landlord.
22
<PAGE> 23
13. Tenant shall not install any radio or television antenna, satellite dish,
loudspeaker or any other device on the exterior walls or the roof of the
Building, without Landlord's consent. Tenant shall not interfere with radio
or television broadcasting or reception from or in the Building, the Project
or elsewhere.
14. Tenant shall not mark, or drive nails, screws or drill into the partitions,
woodwork or drywall or in any way deface the Premises or any part thereof.
Tenant shall not lay linoleum, tile, carpet or any other floor covering so
that the same shall be affixed to the floor of its Premises in any manner
except as approved in writing by Landlord. The expense of repairing any
damage resulting from a violation of this rule or the removal of any floor
covering shall be borne by the tenant by whom, or by whose contractors,
employees or invitees, the damage shall have been caused.
15. Tenant shall not place a load upon any floor of its Premises which exceeds
the load per square foot which such floor was designed to carry or which is
allowed by law.
Business machines and mechanical equipment belonging to Tenant which cause
noise or vibration that may be transmitted to the structure of the Building
or to any space therein to such a degree as to be objectionable to Landlord
or to any tenants in the Building shall be placed and maintained by Tenant,
at Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration. The persons employed to move such equipment in
or out of the Building must be acceptable to Landlord.
16. Each tenant shall store all its trash and garbage within the interior of the
Premises or as otherwise directed by Landlord from time to time. Tenant
shall not place in the trash boxes or receptacles any personal trash or any
material that may not or cannot be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage in the city, without
violation of any law or ordinance governing such disposal.
17. Canvassing, soliciting, distribution of handbills or any other written
material and peddling in the Building and the Project are prohibited and
each tenant shall cooperate to prevent the same. No tenant shall make
room-to-room solicitation of business from other tenants in the Building or
the Project, without the written consent of Landlord.
18. Landlord shall have the right, exercisable without notice and without
liability to any tenant, to change the name and address of the Building and
the Project.
19. Landlord reserves the right to exclude or expel from the Project any person
who, in Landlord's judgment, is under the influence of alcohol or drugs or
who commits any act in violation of any of these Rules and Regulations.
20. Without the prior written consent of Landlord, Tenant shall not use the name
of the Building or the Project or any photograph or other likeness of the
Building or the Project in connection with, or in promoting or advertising,
Tenant's business except that Tenant may include the Building's or Project's
name in Tenant's address.
21. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
22. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
23. Landlord reserves the right to designate the use of the parking spaces on
the Project. Tenant or Tenant's guests shall park between designated parking
lines only, and shall not occupy two parking spaces with one car. No trucks,
truck tractors, trailers or fifth wheel are allowed to be parked anywhere at
any time within the Project other than in Tenant's own truck dock well.
Vehicles in violation of the above shall be subject to tow-away, at vehicle
owner's expense. Vehicles parked on the Project overnight without prior
written consent of the Landlord shall be deemed abandoned and shall be
subject to tow-away at vehicle owner's expense. No tenant of the Building
shall park in visitor or reserved parking areas or loading areas. Any tenant
found parking in such designated visitor or reserved parking areas or
loading areas or unauthorized areas shall be subject to tow-away at vehicle
owner's expense. The parking areas shall not be used to provide car wash,
oil changes, detailing, automotive repair or other services unless otherwise
approved or furnished by Landlord. Tenant will from time to time, upon the
request of Landlord, supply Landlord with a list of license plate numbers of
vehicles owned or operated by its employees or agents.
24. No Tenant is allowed to unload, unpack, pack or in any way manipulate any
products, materials or goods in the common areas of the Project including
the parking and driveway areas of the Project. All products, goods and
materials must be manipulated, handled, kept, and stored within the Tenant's
Premises and not in any exterior areas, including, but not limited to,
exterior dock platforms, against the exterior of the Building, parking areas
and driveway areas of the Project. Tenant also agrees to keep the exterior
of the Premises clean and free of nails, wood, pallets, packing materials,
barrels and any other debris produced from their operation. All products,
materials and goods are to enter and exit the Premises by being loaded or
unloaded through dock high doors into trucks and or trailers, over dock high
loading platforms into trucks and or trailers or loaded or unloaded into
trucks and or trailers within the Premises through grade level door access.
25. Tenant shall be responsible for the observance of all of the foregoing Rules
and Regulations by Tenant's employees, agents, clients, customers, invitees
and guests.
26. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify, alter or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of any premises in the
Project.
27. Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of any
other tenant or tenants, nor prevent Landlord from thereafter enforcing any
such Rules and Regulations against any or all tenants of the Building.
Landlord reserves the right to make such other and reasonable rules and
regulations as in its judgment may from time to time be needed for safety and
security, for care and cleanliness of the Building and the Project and for the
preservation of good order therein. Tenant agrees to abide by all such Rules and
Regulations herein stated and any additional rules and regulations which are
adopted.
23
<PAGE> 24
EXHIBIT B
SITE PLAN
Diagram of Property
24
<PAGE> 25
EXHIBIT C
LEASE IMPROVEMENT AGREEMENT
NONE
25
<PAGE> 26
EXHIBIT D
HAZARDOUS MATERIALS QUESTIONNAIRE
This questionnaire is designed to solicit information regarding Tenant's
proposed use, generation, treatment, storage, transfer or disposal of hazardous
or toxic materials, substances or wastes. If this Questionnaire is attached to
or provided in connection with a lease, the reference herein to any such items
shall include all items defined as "Hazardous Materials," "Hazardous
Substances," "Hazardous Wastes," "Toxic Materials," "Toxic Substances, "Toxic
Wastes," or such similar definitions contained in the lease. Please complete the
questionnaire and return it to Landlord for evaluation. If your use of materials
or substances, or generation of wastes is considered to be significant, further
information may be requested regarding your plans for hazardous and toxic
materials management. Your cooperation in this matter is appreciated. If you
have any questions, do not hesitate to call us for assistance.
1. PROPOSED TENANT
Name (Corporation, Individual, Corporate or Individual DBA, or Public
Agency): Handspring, Inc.
-------------------------------------------------------------------
---------------------------------------------------------------------------
Standard Industrial Classification Code (SIC):
-----------------------------
Street Address: 189 N. Bernardo Avenue
--------------------------------------------------
City, State, Zip Code: Mountain View, CA 94043-5203
--------------------------------------------------
Contact Person & Title: Seth Henderson, Manager of Corporate Facilities
--------------------------------------------------
Telephone Number: (650) 230-5177
--- ----------------------
Facsimile Number: (650) 230-5205
--- ----------------------
2. LOCATION AND ADDRESS OF PROPOSED LEASE
Street Address: 380 N. Bernardo Avenue
--------------------------------------------------
City, State, Zip Code: (see above)
--------------------------------------------------
Bordering Streets: Between Central and Middlefield
--------------------------------------------------
Streets to which Premises has Access: Only N. Bernardo
-------------------------------------
3. DESCRIPTION OF PREMISES
Floor Area: 28,069 SF
--------------------------------------------------
Number of Parking Spaces: 3.3/1000 SF
--------------------------------------------------
Date of Original Construction:
--------------------------------------------
Past Uses of Premises: Manufacturing, Open Office
--------------------------------------------------
Dates and Descriptions of Significant Additions, Alterations or
Improvements:
--------------------------------------------------------------
---------------------------------------------------------------------------
Proposed Additions, Alterations or Improvements, if any:
Typical TI including ceiling tile, flooring -- 06/00
---------------------------------------------------------------------------
D-1
<PAGE> 27
4. DESCRIPTION OF PROPOSED PREMISES USE
Describe proposed use and operation of Premises including (i) services to
be performed, (ii) nature and types of manufacturing or assembly processes,
if any, and (iii) the materials or products to be stored at the Premises.
Open Other Application
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Will the operation of your business at the Premises involve the use,
generation, treatment, storage, transfer or disposal of hazardous wastes or
materials? Do they now? Yes [ ] No [X] If the answer is "yes," or if your
SIC code number is between 2000 to 4000, please complete Section V.
5. PERMIT DISCLOSURE
Does or will the operation of any facet of your business at the Premises
require any permits, licenses or plan approvals from any of the following
agencies?
U.S. Environmental Protection Agency Yes [ ] No [X]
City or County Sanitation District Yes [ ] No [X]
State Department of Health Services Yes [ ] No [X]
U.S. Nuclear Regulatory Commission Yes [ ] No [X]
Air Quality Management District Yes [ ] No [X]
Bureau of Alcohol, Firearms and Tobacco Yes [ ] No [X]
City or County Fire Department Yes [X] No [ ]
Regional Water Quality Control Board Yes [ ] No [X]
Other Governmental Agencies (if yes, Yes [X] No [ ]
identify: City of MV Building Dept.)
---------------------------
If the answer to any of the above is "yes," please indicate permit or
license numbers, issuing agency and expiration date or renewal date, if
applicable.
Permit for Building Tenant Improvements
---------------------------------------------------------------------------
Reviewed by City of Mountain View Building
---------------------------------------------------------------------------
Department, Fire Department
---------------------------------------------------------------------------
If your answer to any of the above is "yes," please complete Sections VI
and VII.
6. HAZARDOUS MATERIALS DISCLOSURE
Will any hazardous or toxic materials or substances be stored on the
Premises? Yes [ ] No [X] If the answer is "yes," please describe the
materials or substances to be stored, the quantities thereof and the
proposed method of storage of the same (i.e., drums, aboveground or
underground storage tanks, cylinders, other), and whether the material is a
Solid (S), Liquid (L) or Gas (G):
D-2
<PAGE> 28
<TABLE>
<CAPTION>
Material/ Quantity to be Amount to be Stored Maximum Period of
Substance Stored on Premises Storage Method on a Monthly Basis Premises Storage
--------- ------------------ -------------- ------------------ ----------------
<S> <C> <C> <C> <C>
--------- ---------------- ------------- ----------------- -----------------
--------- ---------------- ------------- ----------------- -----------------
--------- ---------------- ------------- ----------------- -----------------
</TABLE>
Attach additional sheets if necessary.
Is any modification of the Premises improvements required or planned to
mitigate the release of toxic or hazardous materials substance or wastes
into the environment? Yes [ ] No [ ] If the answer is "yes," please
describe the proposed Premises modifications:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
7. HAZARDOUS WASTE DISCLOSURE
Will any hazardous waste, including recyclable waste, be generated by the
operation of your business at the Premises? Yes [ ] No [X] If the answer is
"yes," please list the hazardous waste which is expected to be generated
(or potentially will be generated) at the Premises, its hazard class and
volume/frequency of generation on a monthly basis.
<TABLE>
<CAPTION>
Maximum Period of
Waste Name Hazard Class Volume/Month Premises Storage
---------- ------------ ------------ ----------------
<S> <C> <C> <C>
--------- ---------------- ------------- -----------------
--------- ---------------- ------------- -----------------
</TABLE>
Attach additional sheets if necessary.
If the answer is "yes," please also indicate if any such wastes are to be
stored within the Premises and the proposed method of storage (i.e., drums,
aboveground or underground storage tanks, cylinders, other).
<TABLE>
<CAPTION>
Waste Name Storage Method
---------- --------------
<S> <C>
---------------------- -----------------------
</TABLE>
Attach additional sheets if necessary.
If the answer is "yes," please also describe the method(s) of disposal for
each waste. Indicate where disposal will take place including the methods,
equipment and companies to be used to transport the waste:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Is any treatment or processing of hazardous wastes to be conducted at the
Premises? Yes [ ] No [ ] If the answer is "yes," please describe proposed
treatment/processing methods:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
D-3
<PAGE> 29
Which agencies are responsible for monitoring and evaluating compliance
with respect to the storage and disposal of hazardous materials or wastes
at or from the Premises? (Please list all agencies):
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Have there been any agency enforcement actions regarding Tenant (or any
affiliate thereof), or any existing Tenant's (or any affiliate's)
facilities, or any past, pending or outstanding administrative orders or
consent decrees with respect to Tenant or any affiliate thereof? Yes [ ]
No [X] If the answer is "yes," have there been any continuing compliance
obligations imposed on Tenant or its affiliates as a result of the decrees
or orders? Yes [ ] No [ ] If the answer is "yes," please describe:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Has Tenant or any of its affiliates been the recipient of requests for
information, notice and demand letters, cleanup and abatement orders, or
cease and desist orders or other administrative inquiries? Yes [ ] No [ ]
If the answer is "yes," please describe:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Are there any pending citizen lawsuits, or have any notices of violations
been provided to Tenant or its affiliates or with respect to any existing
facilities pursuant to the citizens suit provisions of any statute? Yes [ ]
No [ ] If the answer is "yes," please describe:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Have there been any previous lawsuits against the company regarding
environmental concerns? Yes [ ] No [ ] If the answer is "yes," please
describe how these lawsuits were resolved:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Has an environmental audit ever been conducted at any of your company's
existing facilities? Yes [ ] No [ ] If the answer is "yes," please
describe:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
D-4
<PAGE> 30
Does your company carry environmental impairment insurance? Yes [ ] No [X]
If the answer is "yes," what is the name of the carrier and what are the
effective periods and monetary limits of such coverage?
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
8. EQUIPMENT LOCATED OR TO BE LOCATED AT THE PREMISES
Is (or will there be) any electrical transformer or other equipment
containing polychlorinated biphenyls located at the Premises? Yes [ ]
No [X] If the answer is "yes," please specify the size, number and location
(or proposed location):
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Is (or will there be) any tank for storage of a petroleum product located
at the Premises? Yes [ ] No [X] If the answer is "yes," please specify
capacity and contents of tank; permits, licenses and/or approvals received
or to be received therefor and any spill prevention control or conformance
plan to be taken in connection therewith:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
9. ONGOING ACTIVITIES (APPLICABLE TO TENANTS IN POSSESSION)
Has any hazardous material, substance or waste spilled, leaked, discharged,
leached, escaped or otherwise been released into the environment at the
Premises? Yes [ ] No [X] If the answer is "yes," please describe including
(i) the date and duration of each such release, (ii) the material,
substance or waste released, (iii) the extent of the spread of such release
into or onto the air, soil and/or water, (iv) any action to clean up the
release, (v) any reports or notifications made of filed with any federal,
state, or local agency, or any quasi-governmental agency (please provide
copies of such reports or notifications) and (vi) describe any legal,
administrative or other action taken by any of the foregoing agencies or by
any other person as a result of the release:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
This Hazardous Materials Questionnaire is certified as being true and accurate
and has been completed by the party whose signature appears below on behalf of
Tenant as of the date set forth below.
DATED: 05-08-00
-----------------------
Signature /s/ SETH W. HENDERSON
------------------------------------
Print Name Seth W. Henderson
-----------------------------------
Title Manager of Corporate Facilities
----------------------------------------
D-5
<PAGE> 31
EXHIBIT E
HAZARDOUS MATERIALS
D-6
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF HANDSPRING, INC.
<TABLE>
<CAPTION>
Jurisdiction of Percentage
Incorporation Owned by
Name or Organization Handspring
---- --------------- ----------
<S> <C> <C>
Handspring Singapore Pte Ltd............ Singapore 100%
Handspring K.K.......................... Japan 100%
Handspring International Ltd. .......... British Virgin Islands 100%
Handspring UK Ltd. ..................... UK 100%
Handspring B.V. ........................ Netherlands 100%
Handspring International Sarl........... Switzerland 100%
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated May 16, 2000 relating to the financial statements and financial
statement schedule of Handspring, Inc., which appear in such Registration
Statement. We also consent to the references to us under the headings "Experts"
and "Selected Consolidated Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Jose, California
May 16, 2000
<PAGE> 1
EXHIBIT 23.3
[DATAQUEST GARTNER MARKET DYNAMICS LETTERHEAD]
May 9, 2000
Credit Suisse First Boston
2400 Hanover Street
Palo Alto, CA 94304
Credit Suisse First Boston:
You have our approval to use the requested quotes as stated below for
inclusion in an S-1 filing.
"Widespread deployment of these technologies in wireless networks will
increasingly enable the delivery of higher bandwidth applications such as
streaming video and audio to handheld communications devices. Dataquest
estimates that the number of wireless data subscribers worldwide will grow from
approximately 14 million at the end of 1998 to approximately 102 million at the
end of 2003."
Please note the following text as a point of indemnification agreement:
The GartnerGroup information contained therein represents GartnerGroup's
estimates and no representation shall be made that GartnerGroup's information
represents facts. Furthermore, Client agrees to indemnify and hold harmless
GartnerGroup, its officers, employees and agents, from and against any and all
claims, suits, actions, causes of action, and all liabilities, judgments,
losses, costs, damages and expenses in connection therewith (including, but not
limited to, all costs and expenses of investigation and all fees and expenses of
counsel), arising, directly or indirectly, out of any breach of the foregoing or
any untrue statement or alleged untrue statement of a material fact contained in
the Offering Memorandum or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or any violations by Client of any rule or regulation
promulgated under the Securities Act of 1933, as amended (or similar statute),
as the term may be in effect from time to time relating to any action or
inaction required of Client in connection with the Offering Memorandum.
<PAGE> 2
With respect to any indemnity sought against Client hereunder,
GartnerGroup shall promptly notify Client of the claim in writing, and Client,
upon the request of GartnerGroup, shall assume the defense thereof on behalf of
GartnerGroup, including the employment of counsel and payment of expenses.
GartnerGroup also shall have the right to participate in such defense and to
employ its own counsel, but the fees and expenses of such counsel shall be at
the expense of GartnerGroup unless (1) Client and GartnerGroup shall mutually
agree to the employment of such counsel, or (2) the named parties in any such
action (including any impleaded parties) include both GartnerGroup and Client
and GartnerGroup shall have been advised by such counsel that there may be one
or more legal defenses available to GartnerGroup which are different from or
additional to those available to Client (it being understood, however, that
Client shall not, in connection with any one such claim to separate but
substantially similar or related claims in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys for GartnerGroup, which
firms shall be designated in writing).
GartnerGroup shall cooperate with reasonable requests of Client in the
defense and disposition of any claim for which indemnification applies.
Client shall not in any such defense, except with GartnerGroup's written
consent, consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by claimant or
plaintiff of a release of GartnerGroup from all liability.
Please acknowledge by e-mail or fax receipt and agreement with the above
statement. If there are any questions, please let me know.
Sincerely yours,
/s/ David Hankin
David Hankin
Senior VP and Managing Director, Dataquest
<PAGE> 1
EXHIBIT 23.4
[INTERNATIONAL DATA CORPORATION LETTERHEAD]
May 9, 2000
Credit Suisse First Boston
2400 Hanover Street
Palo Alto, CA 94304
Credit Suisse First Boston has permission to use the following statistics as
stated below.
"IDC estimates that worldwide shipments of smart handheld devices will grow from
approximately 8.2 million units in 1999 to approximately 35.5 million units in
2003". Source: IDC, analyst Jill House, 2000.
Sincerely,
/s/ Alexa McCloughan
Alexa McCloughan
Senior Vice President
[ADDRESS]
[LOGO]
<PAGE> 1
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned hereby constitutes
and appoints Donna L. Dubinsky, Jeffrey C. Hawkins and Bernard J. Whitney and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective amendments,
to this Registration Statement, and to sign any registration statement for the
same offering covered by the Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and
all post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, making such changes in this
Registration Statement as such person or persons so acting deems appropriate,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his, her or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ KIM B. CLARK
--------------------------------------
Kim B. Clark
<PAGE> 1
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned hereby constitutes
and appoints Donna L. Dubinsky, Jeffrey C. Hawkins and Bernard J. Whitney and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective amendments,
to this Registration Statement, and to sign any registration statement for the
same offering covered by the Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and
all post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, making such changes in this
Registration Statement as such person or persons so acting deems appropriate,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his, her or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ MITCHELL E. KERTZMAN
--------------------------------------
Mitchell E. Kertzman
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> OTHER 9-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-2000
<PERIOD-START> JUL-29-1998 JUL-01-1999
<PERIOD-END> JUN-30-1999 APR-01-2000
<CASH> 7,533 17,407
<SECURITIES> 6,234 0
<RECEIVABLES> 0 13,736
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 616 1,688
<PP&E> 1,104 6,526
<DEPRECIATION> 70 1,493
<TOTAL-ASSETS> 15,631 38,651
<CURRENT-LIABILITIES> 1,275 26,534
<BONDS> 0 0
17,792 27,962
0 0
<COMMON> 69 74
<OTHER-SE> (3,685) (15,983)
<TOTAL-LIABILITY-AND-EQUITY> 15,631 38,651
<SALES> 0 50,111
<TOTAL-REVENUES> 0 50,111
<CGS> 0 34,171
<TOTAL-COSTS> 0 34,171
<OTHER-EXPENSES> 8,835 57,041
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (8,389) (40,764)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (8,389) (40,764)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (8,389) (40,764)
<EPS-BASIC> (0.71) (1.34)
<EPS-DILUTED> (0.71) (1.34)
</TABLE>
