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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HANDSPRING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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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>
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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:
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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>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act 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
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TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------
Common stock, $0.001 par value per share............. $300,000,000 $79,200
- ---------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.
------------------------
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.
- --------------------------------------------------------------------------------
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING OFFERS TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 31, 2000
Shares
[Logo]
HANDSPRING, INC.
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 $ and $ per share. We have applied to list our common stock on
The Nasdaq Stock Market's National Market under the symbol " ".
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 7.
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<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
heldheld 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
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TABLE OF CONTENTS
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PAGE
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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>
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PAGE
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BUSINESS............................ 29
MANAGEMENT.......................... 40
RELATED PARTY TRANSACTIONS.......... 49
PRINCIPAL STOCKHOLDERS.............. 51
DESCRIPTION OF CAPITAL STOCK........ 53
SHARES ELIGIBLE FOR FUTURE SALE..... 55
UNDERWRITING........................ 57
NOTICE TO CANADIAN RESIDENTS........ 59
LEGAL MATTERS....................... 60
EXPERTS............................. 60
WHERE YOU MAY FIND MORE
INFORMATION....................... 60
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 is based on
the following assumptions:
- the conversion of all our outstanding shares of preferred stock into
shares of common stock immediately upon the closing of this offering;
- the exercise of an outstanding right to purchase 596,895 shares of common
stock at an exercise price of $2.513 per share immediately upon the
closing of this offering;
- no exercise of the underwriters' over-allotment option;
- our reincorporation into Delaware, upon approval of our stockholders,
prior to the closing of this offering; and
- a 3-for-1 stock split of our common stock in March 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.
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<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 2,000 developers have
registered with Handspring to create 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 6.8 million units in 1998 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 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 require 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 synchronize their Visors' data with their
desktop computers by pressing one button.
- FLEXIBLE PLATFORM. Our Springboard expansion slot allows users to add and
remove modules to customize the functions of their Visor handheld
computers. To encourage widespread
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module development, our Springboard expansion slot was designed to
provide developers with great flexibility in the size, form and
functionality of the modules they create.
- 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 and
product accessories.
- 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. We plan to work closely
with these partners to provide an outstanding retail point of purchase presence,
and to enable an efficient channel for broad consumer availability of our
products. We recently announced the establishment of offices in Europe and Japan
in order to start building our business in those markets.
We were incorporated in California as JD Technology, Inc. in July 1998 and
changed our name to Handspring, Inc. in November 1998. We expect to be
reincorporated in Delaware in April 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 www.handspring.com. The
information on the Web site is not part of this prospectus.
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THE OFFERING
Common stock offered.................... shares
Common stock to be outstanding after the
offering................................ shares
Use of proceeds......................... For general corporate purposes,
including working capital.
Proposed Nasdaq National Market
Symbol..................................
The number of shares of our common stock to be outstanding after this
offering is based on the number outstanding on January 1, 2000, and excludes:
- 11,735,049 shares subject to options outstanding as of January 1, 2000 at
a weighted average exercise price of $0.42 per share, and
- 3,441,027 shares that are available for issuance under our stock option
plans.
After January 1, 2000, we adopted stock option and purchase plans with a
total of shares available for issuance and increased the shares
available for issuance under an existing option plan by 3,000,000 shares.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
PERIOD FROM PERIOD FROM
JULY 29, 1998 JULY 29, 1998 SIX MONTHS
(DATE OF INCEPTION) TO (DATE OF INCEPTION) TO ENDED
JUNE 30, 1999 DECEMBER 31, 1998 JANUARY 1, 2000
---------------------- ---------------------- ---------------
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CONSOLIDATED STATEMENT OF OPERATION DATA:
Revenue....................................... $ -- $ -- $ 15,790
Cost of revenue............................... -- -- 10,822
Amortization of deferred stock compensation... 3,646 1,590 10,952
Total costs and operating expenses............ 8,835 2,409 36,768
Loss from operations.......................... (8,835) (2,409) (20,978)
Net loss...................................... (8,357) (2,267) (20,487)
Basic and diluted net loss per share.......... $ (1.06) $ (0.32) $ (1.10)
Shares used in calculating basic and diluted
net loss per share.......................... 7,848 7,189 18,609
</TABLE>
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JANUARY 1, 2000
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments........ $ 21,782 $23,282
Working capital............................................. 10,138 11,638
Total assets................................................ 29,570 31,070
Long-term liabilities....................................... 96 96
Mandatory redeemable convertible preferred stock............ 27,962 -- --
Total stockholders' equity (deficit)........................ (13,096) 16,366
</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 an outstanding right to purchase 596,895 shares of common stock at
an exercise price of $2.513 per share immediately upon the closing of this
offering. 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 $ per
share, after deducting the estimated underwriting discounts and commissions and
offering expenses payable by us.
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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 January 1, 2000 was approximately $28.8
million. We had net losses of approximately $8.4 million for the period from
July 29, 1998 (date of inception) to June 30,
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1999 and $20.5 million in the first six 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 January 1, 2000, we
had a total of $34.4 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.
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 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
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on our Web site. While we carry business interruption insurance, it might not be
sufficient to cover any serious or prolonged emergencies.
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
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
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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, 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.
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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. The
absence of dedicated capacity under our manufacturing agreement means that, with
little or no notice, Flextronics could refuse to continue to manufacture all or
some of the units of our devices that we require or change the terms under which
it manufactures our device products. If Flextronics were to stop manufacturing
our devices, we may be unable to replace the lost manufacturing capacity on a
timely basis and our results of operations could be harmed. In addition, if
Flextronics 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.
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. 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.
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
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<PAGE> 13
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 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.
WE EXPECT TO INCREASE OUR RELIANCE ON RETAILERS TO SELL OUR PRODUCTS, AND
DISRUPTIONS IN THIS CHANNEL WOULD HARM OUR ABILITY TO GENERATE REVENUES FROM THE
SALE OF OUR HANDHELD COMPUTERS.
We sell the substantial majority of our products directly through our
handspring.com Web site. We recently entered into agreements with Best Buy,
CompUSA (and Wynit, Inc., a supplier to CompUSA) and Staples to resell our
products in their stores. 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;
- conflict may develop between our retail distribution channel and direct
sales through our handspring.com Web site; and
- gross margins would decrease as sales through the retailers increase.
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
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<PAGE> 14
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, including Casio,
Compaq, Hewlett-Packard and Sharp;
- 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.
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.
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 February 26, 2000, we increased the number of our employees
from two to 114. 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
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<PAGE> 15
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 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 may assert patent,
copyright, trademark and other intellectual property rights to technologies
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<PAGE> 16
that are important to our business. We may receive notices of claims that our
products infringe or may infringe these 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.
In addition, suits against Palm involving the Palm OS operating system,
which we license from Palm, could adversely affect us. This result could disrupt
our operations and cost us money. See "We depend heavily upon our license from
Palm and others and our failure to maintain these third party licenses could
seriously harm our business."
Palm is a defendant in several patent infringement lawsuits involving the
Palm OS operating system, which we license from Palm. 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.
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. We expect to introduce products for sale in selected
international markets in 2000. To the extent that our revenue from international
operations represents an increasing 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.
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<PAGE> 17
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-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
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<PAGE> 18
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 % 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.
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 January 1, 2000, upon
completion of this offering we will have outstanding approximately
shares of common stock, assuming the exercise of an outstanding right to
purchase 596,895 shares of common stock and no exercise of the underwriters'
over-allotment option. Of these shares, only the 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 75,050,571
shares will be eligible for sale in the public market at various times, subject
to volume limitations under Rule 144 of the Securities Act of 1933 and various
vesting agreements. In addition, the 11,735,049 shares subject to outstanding
options and 3,441,027 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.
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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 $ 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.
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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.
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USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of
shares of common stock in this offering will be approximately $
million, or approximately $ million if the underwriters exercise their
over-allotment option in full, at an assumed initial public offering price of
$ 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.
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CAPITALIZATION
The following table sets forth our capitalization as of January 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 and the exercise of an outstanding
right to purchase 596,895 shares of common stock at an exercise price of
$2.513 per share immediately prior to the closing of this offering; 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
$ per share, after deducting the estimated underwriting discounts and
commissions and offering expenses payable by us.
<TABLE>
<CAPTION>
JANUARY 1, 2000
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
Long-term liabilities................................ $ 96 $ 96 $
Mandatory redeemable convertible preferred stock,
$0.001 par value per share, 9,300,000 shares
authorized, 9,005,430 shares issued and
outstanding, actual, no shares authorized,
issued or outstanding, pro forma and 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, 47,437,386 shares issued and outstanding,
actual, 75,050,571 shares issued and
outstanding, pro forma, 1,000,000,000 shares
authorized, shares issued and
outstanding pro forma as adjusted............... 1,150 30,612
Additional paid-in capital......................... 48,999 48,999
Deferred stock compensation........................ (34,401) (34,401)
Accumulated deficit................................ (28,844) (28,844)
-------- --------
Total stockholders' equity (deficit)............ (13,096) 16,366
-------- --------
Total capitalization............................ $ 14,962 $ 16,462
======== ========
</TABLE>
The common stock to be outstanding after the offering, as of January 1,
2000, excludes:
- 11,735,049 shares of our common stock subject to options outstanding as
of January 1, 2000 at a weighted average exercise price of $0.42 per
share; and
- 3,441,027 additional shares of our common stock that are available for
issuance under our stock option and purchase plans.
After January 1, 2000, we adopted stock option and purchase plans with a
total of shares available for issuance and increased the shares
available for issuance under an existing option plan by 3,000,000 shares.
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<PAGE> 23
DILUTION
Our pro forma net tangible book value as of January 1, 2000 was
approximately $ million, or $ 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, assuming the conversion of all outstanding
shares of preferred stock into shares of common stock and the exercise of an
outstanding right to purchase 596,895 shares of common stock at an exercise
price of $2.513 per share 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
January 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 $ 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
January 1, 2000 would have been approximately $ million or $ per share
of common stock. This amount represents an immediate increase in pro forma net
tangible book value of $ per share to the existing stockholders and an
immediate dilution in pro forma net tangible book value of $ 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............. $
Pro forma net tangible book value per share as of January
1, 2000................................................ $
Increase per share attributable to new investors..........
-------
Pro forma net tangible book value per share after the
offering.................................................. $
-------
Dilution per share to new investors.........................
=======
</TABLE>
The following table summarizes on a pro forma basis as of January 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 $ 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............. % $ % $
New investors.....................
-------- --- ------- ---
Total........................... 100%
======== === ======= ===
</TABLE>
The above information assumes no exercise of the underwriters'
over-allotment option and excludes exercises of stock options after January 1,
2000. As of January 1, 2000, there were outstanding options to purchase a total
of 11,735,049 shares of our common stock at a weighted average exercise price of
$0.42 per share. To the extent any of these options are exercised, there will be
further dilution to new investors.
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<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 the selected consolidated statement of
operations data for the period from July 29, 1998 (date of inception) to June
30, 1999 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
December 31, 1998 and the six-month period ended January 1, 2000, and the
consolidated balance sheet data at January 1, 2000, 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 SIX MONTHS
(DATE OF INCEPTION) (DATE OF INCEPTION) TO ENDED
TO JUNE 30, 1999 DECEMBER 31, 1998 JANUARY 1, 2000
------------------- ---------------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenue.............................. $ -- $ -- $ 15,790
------- ------- --------
Costs and operating expenses:
Cost of revenue................... -- -- 10,822
Research and development.......... 2,738 367 4,618
Selling, general and
administrative.................. 2,451 452 10,376
Amortization of deferred stock
compensation.................... 3,646 1,590 10,952
------- ------- --------
Total costs and operating
expenses..................... 8,835 2,409 36,768
------- ------- --------
Loss from operations.............. (8,835) (2,409) (20,978)
Interest and other income, net....... 478 142 491
------- ------- --------
Net loss............................. $(8,357) $(2,267) $(20,487)
======= ======= ========
Basic and diluted net loss per
share............................. $ (1.06) $ (0.32) $ (1.10)
======= ======= ========
Shares used in calculating basic and
diluted net loss per share........ 7,848 7,189 18,609
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, JANUARY 1,
1999 2000
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments...... $13,767 $ 21,782
Working capital........................................... 12,526 10,138
Total assets.............................................. 15,063 29,570
Long-term liabilities..................................... -- 96
Redeemable convertible preferred stock.................... 17,972 27,962
Total stockholders' (deficit)............................. (4,198) (13,096)
</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. Since then we have sold our products through our Web site. In late
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. As a result of our limited operations during our first fiscal year, we
have not provided a discussion of our results for that year. We first recognized
revenue in the second quarter of fiscal 2000. The following discussion compares
the period from inception to December 31, 1998 with the six-month period ended
January 1, 2000. For the purpose of this discussion, when we refer to the period
ended December 31, 1998, we are referring to the period from inception to
December 31, 1998.
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 recognize revenue
from product sales, net of any discounts, when the products are shipped to
customers. Outbound shipping charges are included in net revenue. We began
shipping products in October 1999 for orders received through our handspring.com
Web site, resulting in revenue of $15.8 million during the six months ended
January 1, 2000.
Cost of revenue. Cost of revenue consists primarily of materials, labor,
royalty expenses, warranty expenses and freight. Cost of revenue was $10.8
million during the six months ended January 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 $367,000 during the period ended December
31, 1998 to $4.6 million during the six months ended January 1, 2000. The
increase is primarily associated with the hiring of personnel devoted to the
development of new products. We
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<PAGE> 26
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, trade show exhibit 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 $452,000 during the period ended December 31, 1998 to
$10.4 million during the six months ended January 1, 2000 due to a general
increase in the level of operations, including more personnel and larger
facilities.
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 $49.0 million at January 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 at least through fiscal
2004. We recognized $1.6 million of this expense during the period ended
December 31, 1998 and $11.0 million during the six months ended January 1, 2000.
Subsequent to January 1, 2000, we granted options to purchase 3,840,200
shares of our common stock at exercise prices ranging from $1.33 to $20.00 per
share. The amortization of deferred stock compensation to be recorded in the
third quarter of fiscal 2000 including amortization on these options granted
subsequent to January 1, 2000, amounts to $24.4 million.
Interest and other income, net. Interest and other income, net increased
from $142,000 during the period ended December 31, 1998 to $491,000 during the
six months ended January 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 six months ended January 1, 2000 as
compared with the period ended December 31, 1998.
QUARTERLY RESULTS OF OPERATIONS
The following table shows unaudited consolidated statements of operations
data for each of the six fiscal quarters ended January 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 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. These data should be read together with our consolidated financial
statements and the notes to those
25
<PAGE> 27
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,
SEPTEMBER 30, 1998 1998 1999 1999 1999 2000
---------------------- ------------ --------- -------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenue..................... $-- $ -- $ -- $ -- $ -- $ 15,790
--- ------- ------- ------- ------- --------
Costs and operating
expenses:
Cost of revenue........... -- -- -- -- -- 10,822
Research and
development............ -- 367 770 1,601 2,472 2,146
Selling, general and
administrative......... 9 443 446 1,553 3,656 6,720
Amortization of deferred
stock compensation..... -- 1,590 835 1,221 3,221 7,731
--- ------- ------- ------- ------- --------
Total costs and
operating expenses... 9 2,400 2,051 4,375 9,349 27,419
--- ------- ------- ------- ------- --------
Loss from operations........ (9) (2,400) (2,051) (4,375) (9,349) (11,629)
Interest and other income,
net....................... -- 142 159 177 283 208
--- ------- ------- ------- ------- --------
Net loss.................... $(9) $(2,258) $(1,892) $(4,198) $(9,066) $(11,421)
=== ======= ======= ======= ======= ========
</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, resulting in revenue of $15.8 million and
associated cost of revenue of $10.8 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. There has been a consistent
increase in research and development expenses as we have grown, due to our
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 primarily of interest income and
has fluctuated over the quarters with the average cash and cash equivalents
balance, as well as short-term investments. 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 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
January 1, 2000. As of January 1, 2000 cash and cash equivalents were $18.8
million and short-term investments were $3.0 million. We also have a $6.0
million subordinated debt facility, which is available until June 2000.
Borrowings
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<PAGE> 28
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 January 1, 2000.
Net cash provided by operating activities for the six months ended January
1, 2000 was $911,000, primarily attributable to an increase in accounts payable
and accrued liabilities of $13.3 million and the amortization of deferred stock
compensation of $11.0 million. These sources of cash were largely offset by a
net loss of $20.5 million and an increase in accounts receivable of $2.5 million
and an increase in other assets of $530,000. We generated cash from operations
during this period primarily due to the rapid payment cycle associated with
direct sales through our Web site. During the period ended December 31, 1998 net
cash used in operating activities was $679,000, which was primarily attributable
to a net loss of $2.3 million and an increase in other assets of $204,000,
partially offset by the amortization of deferred stock compensation of $1.6
million and an increase in accounts payable and accrued liabilities of $210,000.
Net cash used in investing activities for the six months ended January 1,
2000 was $236,000, and primarily consisted of purchases of property and
equipment of $3.6 million as well as short-term investments of $2.0 million.
These cash usages were offset by $5.3 million received from maturities and sales
of short-term investments. During the period ended December 31, 1998 net cash
used in investing activities was $4.2 million, and was attributable to purchases
of short-term investments of $3.9 million as well as property and equipment of
$247,000.
Net cash provided by financing activities totaled $10.6 million during the
six months ended January 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 $601,000 from the issuance of common stock upon
exercise of stock options by employees. During the period ended December 31,
1998 net cash provided by financing activities was $18.0 million, almost
entirely attributable to the issuance of Series A redeemable convertible
preferred 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 cash, cash equivalents and short-term investments, 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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Sensitivity. We maintain a short-term investment portfolio
consisting mainly of fixed income securities with an average maturity of less
than one year. The market value of this portfolio was $3.0 million at January 1,
2000. These available-for-sale 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 investments 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 on our securities
portfolio. We do not hedge any interest rate exposures.
Foreign Currency Exchange Risk. We have not had any significant
transactions in foreign currencies, nor did we have any significant balances
that were due or payable in foreign currencies at January 1, 2000. Therefore, a
hypothetical 10.0% change in foreign currency rates would not have a
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<PAGE> 29
significant impact on our financial position and results of operations. We do
not currently hedge any of our foreign currency exposure.
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.
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 clients or vendors. Accordingly, we do
not anticipate incurring material expenses or experiencing any material
operational disruptions as a result of any year 2000 issues.
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<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 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 2,000 developers have
registered with Handspring to create 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.
INDUSTRY OVERVIEW
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 and data communications,
paging, 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 6.8 million units in 1998 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. 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
29
<PAGE> 31
wireless technologies, which are currently designed for voice transmission and
allow only limited data transmission capabilities, are evolving towards 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.
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.
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<PAGE> 32
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.
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 late 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
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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 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 first product, the Visor handheld computer, is a personal organizer
that is enhanced by an open expansion slot, which were 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,
first place in CNET.com's Consumer Electronics "Top Ten Must-Haves" and
inclusion in Business Week's "Best Products of the Year."
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.
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;
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- 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 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
- -----------------------------------------------------------------------------------------------------------
Physician's Desk Reference Medical reference guide Franklin Electronic
Publishers
- -----------------------------------------------------------------------------------------------------------
IntelliGolf Tracks and analyzes golf performance Karrier Communications
- -----------------------------------------------------------------------------------------------------------
</TABLE>
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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
- -----------------------------------------------------------------------------------------------------------
eyemodule Digital Camera Enables users to capture color or black and IDEO Product
white digital images and beam them from Development Inc.
Visor's infrared port to another Visor or
synchronize them with a personal computer
- -----------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------
Sycom Recorder 1850 Voice recorder and playback module Sycom Technologies
- -----------------------------------------------------------------------------------------------------------
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 the introduction of accessories for the Visor
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<PAGE> 36
handheld computer, including the GoType! expandable keyboard from Landware and
the Stowaway portable keyboard from Targus.
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 2,000 developers have registered in our
development 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 the preferred 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. 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 plan to work closely with these
partners to provide an outstanding retail point of purchase presence, and to
enable an efficient channel for broad consumer availability of our products.
We expect to introduce Visor handheld computers addressing English, German
and Japanese speaking international markets in April and May of this year. We
plan to engage local value-added distributors in all the major markets in
Western Europe and Asia where our localized language
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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 in order to be
released into production. We utilize a
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quality 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. Our
research and development expenditures totaled approximately $2.7 million in
fiscal 1999 and approximately $4.6 million for the six months ended January 1,
2000. As of February 26, 2000, we had 28 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.
We are currently in the process of selecting a second outsource
manufacturing site for Visor handheld computers. We expect to be operational at
a second site by the summer of 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
with 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.
Manufactured devices are sent to our fulfillment partner, Logistix. Orders
are placed by end user customers on our handspring.com Web site, or are given
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 this partner, 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
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.
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.
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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, including Casio,
Compaq, Hewlett-Packard and Sharp;
- 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.
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.
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
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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.
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.
EMPLOYEES
As of February 26, 2000, we had a total of 114 employees, of which 28 were
in research and development, 23 were in manufacturing services, 38 were in
marketing and sales and 25 were in general and administrative. 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.
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. In addition, we currently lease office space in Singapore, Japan and the
United Kingdom. We believe our current office space is adequate for our current
operations and that additional office space, if required, can be readily
obtained.
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.
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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
William Holtzman............... 47 Vice President, International
John Hartnett.................. 37 Vice President, Service and Support
Patricia A. Tomlinson.......... 42 Vice President, Human Resources
L. John Doerr(1)(2)............ 48 Director
Bruce W. Dunlevie(1)(2)........ 43 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 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
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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. 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.
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
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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.
COMPOSITION OF BOARD OF DIRECTORS
Our bylaws provide for a board of directors that consists of five members.
Our current directors were elected under a voting agreement between us and our
principal stockholders. The holders of our preferred stock are entitled to elect
two directors to our board. Mr. Doerr and Mr. Dunlevie serve on our board under
this right. The holders of our common stock, voting as a separate class, are
entitled to elect two directors. Ms. Dubinsky and Mr. Hawkins serve on the board
under this right. The fifth board member is to be elected by the holders of our
preferred stock and our common stock, voting together as a group. The fifth
board position is vacant. Upon the closing of this offering, the voting
agreement will terminate and no stockholders will have any special rights for
representation on our board. We anticipate, however, that the current directors
will continue to serve as board members after this offering.
Our certificate of incorporation and bylaws that will take effect upon
completion of this offering provide that our board of directors will consist of
directors divided into three classes that serve staggered three-year terms.
The class I director, initially Bruce W. Dunlevie, 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 director, initially Donna L. Dubinsky, 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.
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 Mr. Doerr and Mr. Dunlevie. There is
one vacancy on the audit committee, which we intend to fill before completion of
this offering. 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.
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<PAGE> 44
DIRECTOR COMPENSATION
None of the board members receives a fee for attending board or committee
meetings. Each member of the board who is not our employee, or an employee of a
parent, subsidiary or affiliate of ours, 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 directors are
automatic and nondiscretionary. Each non-employee director who became a member
of our board of directors before the date of this offering will receive an
option to purchase 20,000 shares of our common stock. Each non-employee director
who becomes a member of our board of directors on or after the date of this
offering will be granted an option to purchase 20,000 shares of our common
stock. Immediately after each annual meeting of our stockholders, each
non-employee director will automatically be granted an additional option to
purchase 7,500 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.
Each option will have an exercise price equal to the fair market value of
our common stock on the date of grant. The options 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 non-employee directors will 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 non-employee continuously
remains our director or consultant. In the event of our dissolution or
liquidation or a "change in control" transaction, options granted to our
non-employee directors under the plan will become 100% vested and exercisable in
full.
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 -- 4,038,462
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
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
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<PAGE> 45
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 $ 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...... 4,038,462 32.7 0.077 10/11/08
</TABLE>
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 $ 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....... 600,000 3,438,462 -- --
</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
14,700,000 shares of our common stock subject to our right to repurchase 80% of
the shares upon termination of her employment. Mr. Hawkins purchased 27,300,000
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 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 4,038,462 shares of our common
stock. The option was immediately exercisable in
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<PAGE> 46
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 900,000 shares of our common stock. The option
becomes exercisable over three years. In August 1999, we issued an option to Mr.
Whitney to purchase 31,011 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 January 1, 2000, options to purchase
9,529,038 shares of our common stock were outstanding under our 1998 Equity
Incentive Plan, 5,137,386 shares had been issued upon exercise of options and
2,872,038 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 January 1, 2000 had a weighted average exercise price of $0.29 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 January 1, 2000, options to
purchase 2,206,011 shares of our common stock were outstanding under our 1999
Executive Equity Incentive Plan, 225,000 shares had been issued upon exercise of
options and 568,989 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 January 1, 2000 had a weighted average exercise price of $0.97
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
On March 28, 2000, our board of directors adopted 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.
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<PAGE> 47
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 may
be exercised during the lifetime of the option holder only by the option holder.
The compensation committee may allow exceptions to this 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 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.
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<PAGE> 48
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 the 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
shares, or 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
On March 28, 2000, our board of directors adopted the 2000 Employee Stock
Purchase Plan subject to stockholder approval. 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.
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 % 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 and .
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 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
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<PAGE> 49
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 up to their maximum percentage allowable 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 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 regarding which indemnification by Handspring is sought, nor are we
aware of any threatened litigation that may result in claims for
indemnification.
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<PAGE> 50
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 five percent (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 27,300,000 shares of common stock to Jeffrey C.
Hawkins and 14,700,000 shares of common stock to Donna L. Dubinsky at a price
per share of $0.00167 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 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 12,115,386 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 12,115,386
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 1,949,862 shares of
common stock, for a total purchase price of $7.0 million. QUALCOMM
licenses CDMA technology to us;
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<PAGE> 51
- 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 417,828 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 417,828
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."
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<PAGE> 52
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of January 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
75,050,571 shares of common stock outstanding on January 1, 2000, assuming the
conversion of all outstanding shares of preferred stock into common stock, and
shares of common stock outstanding after the completion of this
offering, assuming the exercise of an outstanding right to purchase 596,895
shares of common stock immediately prior to the closing of this offering and 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)..................... 27,288,000 36.4%
Donna L. Dubinsky(2)...................... 14,688,000 19.6%
L. John Doerr(3).......................... 12,533,214 16.7%
Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, California 94205
Bruce W. Dunlevie(4)...................... 12,533,214 16.7%
Benchmark Capital Partners II, L.P.
2480 Sand Hill Road
Menlo Park, California 94205
Edward T. Colligan(5)..................... 4,038,462 5.1%
Executive officers and directors as a
group (8 persons)(6).................... 73,517,670 91.8%
</TABLE>
- -------------------------
(1) Represents 27,123,000 shares held of record by Mr. Hawkins and his spouse as
trustees under the Strauss-Hawkins Trust Agreement dated April 17, 1991 of
which 14,104,530 shares are
51
<PAGE> 53
subject to a lapsing repurchase right. Also includes 45,000 shares held of
record by The Robert Paul Hawkins 1997 Charitable Remainder Unitrust, 60,000
shares held of record by The Robert Douglas Hawkins 1997 Charitable
Remainder Unitrust and 60,000 shares held of record by The James Alan
Hawkins 1997 Charitable Remainder Unitrust. Mr. Hawkins is the trustee of
each of these charitable trusts.
(2) Represents shares held of record by Ms. Dubinsky as trustee under the
Amended and Restated Dubinsky Trust Agreement dated May 23, 1995.
(3) Represents 11,550,612 shares held by Kleiner Perkins Caufield & Byers VIII,
L.P., 669,273 shares held by KPCB VIII Founders Fund, L.P. and 313,329
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 12,533,214 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 600,000 shares held by Mr. Colligan and his spouse and 3,438,462
shares subject to fully exercisable options held by Mr. Colligan.
(6) Includes 825,000 shares held by our executive officers who were not
individually listed in this table, of which 660,939 shares are subject to a
lapsing repurchase right, and 5,050,242 shares subject to exercisable
options held by Mr. Colligan and the other executive officers who were not
individually listed in this table.
52
<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
Immediately after the closing of this offering, our authorized capital
stock will consist of shares of common stock, par value $0.001
per share, and shares of preferred stock, par value $0.001 per
share. As of January 1, 2000, assuming the conversion of all outstanding shares
of preferred stock into common stock and the exercise of an outstanding right to
purchase 596,895 shares of common stock upon the closing of this offering, there
were outstanding 75,050,571 shares of common stock, held of record by
approximately 66 stockholders. We also had outstanding options to purchase
11,735,049 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 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 27,016,290 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.
53
<PAGE> 55
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 deferring
hostile takeovers, 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 .
LISTING
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the trading symbol " ."
54
<PAGE> 56
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 shares of
common stock outstanding, based on shares of common stock outstanding as of
January 1, 2000, assuming the exercise of an outstanding right to purchase
596,895 shares of common stock and no exercise of the underwriters'
over-allotment option. Of these shares, all of the 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
75,050,571 shares of common stock held by existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act. 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, 75,050,571 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 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.
55
<PAGE> 57
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.
56
<PAGE> 58
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
Underwriter Shares
----------- ----------
<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>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering, if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to 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> <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, our officers and directors and our stockholders have agreed that we
will not offer, sell, contract to sell, announce our intention 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 additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock without the prior
written consent of Credit Suisse First
57
<PAGE> 59
Boston Corporation for a period of 180 days after the date of this prospectus,
except in the case of issuances pursuant to the exercise of employee stock
options outstanding on the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of common stock for employees, directors and
other persons associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent 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 applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol " ."
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.
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. Other than the prospectus in electronic format, the
information contained on any underwriter's web site and any information
contained on any other web site maintained by an underwriter is not part of this
prospectus or the registration statement of which this prospectus forms a part,
has not been approved or endorsed by us or any underwriter in its capacity as an
underwriter and should not be relied upon by investors.
58
<PAGE> 60
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 the securities laws, (ii) where required
by law, that the purchaser is purchasing as principal and not as agent, and
(iii) the purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission 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 these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or these persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or these 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 the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95-17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
59
<PAGE> 61
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 for the period from July
29, 1998 (date of inception) to June 30, 1999 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 in the files 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 www.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.
60
<PAGE> 62
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' Equity (Deficit)
and Comprehensive Loss.................................... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 63
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Handspring, Inc.
The reincorporation described in Note 1 to the financial statements has not
been consummated at March 27, 2000. When it has been consummated, we will be in
a position to furnish the following report:
"In our opinion, the accompanying balance sheet and the related statement
of operations, of stockholders' equity (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 the results of its operations and its cash
flows for the period from July 29, 1998 (date of inception) to June 30, 1999 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 audit. We conducted our audit 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 audit provides a reasonable basis
for the opinion expressed above."
/s/ PricewaterhouseCoopers LLP
San Jose, California
March 27, 2000
F-2
<PAGE> 64
HANDSPRING, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
JUNE 30, 1999 JANUARY 1, 2000 JANUARY 1, 2000
------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 7,533 $ 18,799 $ 20,299
Short-term investments............................. 6,234 2,983 2,983
Accounts receivable, net........................... -- 2,485 2,485
Prepaid expenses and other current assets.......... 48 479 479
------- -------- --------
Total current assets............................ 13,815 24,746 26,246
Property and equipment, net.......................... 1,034 4,080 4,080
Other assets......................................... 214 744 744
------- -------- --------
Total assets.................................... $15,063 $ 29,570 $ 31,070
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................... $ 1,222 $ 12,209 $ 12,209
Accrued liabilities................................ 67 2,399 2,399
------- -------- --------
Total current liabilities....................... 1,289 14,608 14,608
Long-term liabilities................................ -- 96 96
Redeemable convertible preferred stock, $0.001 par
value, 9,300,000 shares authorized, 8,076,924 and
9,005,430 (unaudited) shares issued and outstanding
at June 30, 1999 and January 1, 2000, respectively;
no shares authorized, issued or outstanding pro
forma; (aggregate liquidation preference of $17,972
and $27,962 (unaudited) at June 30, 1999 and
January 1, 2000, respectively; pro forma, nil)..... 17,972 27,962 --
Commitments and contingencies (Note 7)
Stockholders' equity (deficit):
Common Stock, no par value, 105,000,000 shares
authorized; 46,183,386 and 47,437,386
(unaudited) shares issued and outstanding at
June 30, 1999 and January 1, 2000 respectively;
75,050,571 pro forma shares issued and
outstanding..................................... 519 1,150 30,612
Additional paid in capital......................... 13,391 48,999 48,999
Deferred stock compensation........................ (9,745) (34,401) (34,401)
Accumulated other comprehensive loss............... (6) -- --
Accumulated deficit................................ (8,357) (28,844) (28,844)
------- -------- --------
Total stockholders' equity (deficit)............ (4,198) (13,096) 16,366
------- -------- --------
Total liabilities and stockholders' equity
(deficit)..................................... $15,063 $ 29,570 $ 31,070
======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 65
HANDSPRING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 29, 1998 JULY 29, 1998 SIX MONTHS
(DATE OF INCEPTION) (DATE OF INCEPTION) TO ENDED
TO JUNE 30, 1999 DECEMBER 31, 1998 JANUARY 1, 2000
------------------- ---------------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Revenue................................ $ -- $ -- $ 15,790
------- ------- --------
Costs and operating expenses:
Cost of revenue...................... -- -- 10,822
Research and development............. 2,738 367 4,618
Selling, general and
administrative.................... 2,451 452 10,376
Amortization of deferred stock
compensation(*)................... 3,646 1,590 10,952
------- ------- --------
Total costs and operating
expenses........................ 8,835 2,409 36,768
------- ------- --------
Loss from operations................... (8,835) (2,409) (20,978)
Interest and other income, net......... 478 142 491
------- ------- --------
Net loss............................... $(8,357) $(2,267) $(20,487)
======= ======= ========
Basic and diluted net loss per share... $ (1.06) $ (0.32) $ (1.10)
======= ======= ========
Shares used in calculating basic and
diluted net loss per share........... 7,848 7,189 18,609
======= ======= ========
Pro forma basic and diluted net loss
per share (Note 2)................... $ (0.32) $ (0.44)
======= ========
Shares used in calculating pro forma
basic and diluted net loss per share
(Note 2)............................. 25,984 46,132
======= ========
(*)Amortization of deferred stock
compensation:
Cost of revenue...................... $ 526 $ 123 $ 1,238
Research and development............. 1,217 615 3,013
Selling, general and
administrative.................... 1,903 852 6,701
------- ------- --------
$ 3,646 $ 1,590 $ 10,952
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 66
HANDSPRING, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND
COMPREHENSIVE LOSS
PERIOD FROM JULY 29, 1998 (DATE OF INCEPTION) TO JUNE 30, 1999 AND FOR THE SIX
MONTHS ENDED JANUARY 1, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL DEFERRED OTHER
--------------- PAID-IN STOCK COMPREHENSIVE ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION LOSS DEFICIT TOTAL
------ ------ ---------- ------------ ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock................... 42,000 $ 70 $ -- $ -- $ -- $ -- $ 70
Issuance of common stock on exercise of
stock options............................ 4,183 449 -- -- -- -- 449
Deferred stock compensation................ -- -- 13,391 (13,391) -- -- --
Amortization of deferred stock
compensation............................. -- -- -- 3,646 -- -- 3,646
Unrealized loss on short-term
investments.............................. -- -- -- -- (6) -- (6)
Net loss................................... -- -- -- -- -- (8,357) (8,357)
------ ------ ------- -------- ---- -------- --------
Balances, June 30, 1999.................... 46,183 519 13,391 (9,745) (6) (8,357) (4,198)
Issuance of common stock for services...... 75 30 -- -- -- -- 30
Issuance of common stock on exercise of
stock options............................ 1,179 601 -- -- -- -- 601
Deferred stock compensation................ -- -- 35,608 (35,608) -- -- --
Amortization of deferred stock
compensation............................. -- -- -- 10,952 -- -- 10,952
Change in unrealized loss on short-term
investments.............................. -- -- -- -- 6 -- 6
Net loss................................... -- -- -- -- -- (20,487) (20,487)
------ ------ ------- -------- ---- -------- --------
Balances, January 1, 2000 (unaudited)...... 47,437 $1,150 $48,999 $(34,401) $ -- $(28,844) $(13,096)
====== ====== ======= ======== ==== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 67
HANDSPRING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 29, 1998 JULY 29, 1998 SIX MONTHS
(DATE OF INCEPTION) (DATE OF INCEPTION) TO ENDED
TO JUNE 30, 1999 DECEMBER 31, 1998 JANUARY 1, 2000
------------------- ---------------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................... $ (8,357) $(2,267) $(20,487)
Adjustment to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization............ 70 15 626
Amortization of deferred stock
compensation.......................... 3,646 1,590 10,952
Amortization of premium or discount on
short-term investments................ (108) (15) (83)
Stock compensation to non-employees...... -- -- 30
Changes in assets and liabilities:
Accounts receivable................... -- -- (2,485)
Prepaid expenses and other current
assets.............................. (48) (8) (431)
Other assets.......................... (214) (204) (530)
Accounts payable...................... 898 188 10,987
Accrued liabilities................... 67 22 2,332
-------- ------- --------
Net cash provided by (used in)
operating activities.............. (4,046) (679) 911
-------- ------- --------
Cash flows from investing activities:
Purchases of short-term investments........ (10,965) (3,932) (1,968)
Proceeds from maturities or sales of
short-term investments................... 4,833 -- 5,308
Purchases of property and equipment........ (780) (247) (3,576)
-------- ------- --------
Net cash used in investing
activities........................ (6,912) (4,179) (236)
-------- ------- --------
Cash flows from financing activities:
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 70 601
-------- ------- --------
Net cash provided by financing
activities........................ 18,491 18,042 10,591
-------- ------- --------
Net increase in cash and cash equivalents.... 7,533 13,184 11,266
Cash and cash equivalents:
Beginning of period........................ -- -- 7,533
-------- ------- --------
End of period.............................. $ 7,533 $13,184 $ 18,799
======== ======= ========
Supplemental cash flow disclosures:
Accounts payable incurred upon acquisition
of property and equipment................ $ 324 $ $
-------- ------- --------
Purchase of property and equipment under
financing agreement...................... $ -- $ -- $ 96
-------- ------- --------
Unrealized loss on short-term
investments.............................. $ (6) $ 1 $ 6
-------- ------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 68
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 its development of its first handheld computer
device, which was named "the Visor." Shipments of the Visor began in October
1999 via the world wide web.
Principles of consolidation and basis of presentation -- The consolidated
financial statements of Handspring, Inc. include the accounts of its
wholly-owned subsidiary, Handspring Singapore Pte Ltd, which was incorporated in
Singapore on November 30, 1999. All significant intercompany balances and
transactions have been eliminated.
Reincorporation -- In March 2000, the Company's Board of Directors
authorized the reincorporation of the Company in the State of Delaware. As a
result of the reincorporation, the Company is authorized to issue 1,000,000,000
shares of $0.001 par value common 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 December 31, 1998 and for the six months ended
January 1, 2000 are unaudited and should be read in conjunction with the
Company's financial statements for the period from July 29, 1998 (inception) to
June 30, 1999. 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 Statement 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. The results of
operations of any interim period are not necessarily indicative of the results
of operations for the full year.
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 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.
F-7
<PAGE> 69
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Concentration of credit risk -- Financial instruments that potentially
subject the Company to concentrations of credit risk consist of cash and cash
equivalents and short-term investments. 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.
Property and equipment -- Property and equipment are stated at historical
cost less accumulated depreciation and amortization. Depreciation and
amortization is computed using the straight-line method over the estimated
useful lives of the assets, which is generally five years for leasehold
improvements, three years for computers and office equipment, furniture and
fixtures and software, and one year for tooling.
Foreign currency translation -- The majority of the Company's operations is
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 loss.
Income taxes -- The Company accounts for income taxes in accordance with
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("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.
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.
Segment reporting -- The Financial Accounting Standards Board 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. The Company has determined that it
operates in a single reportable segment.
Comprehensive loss -- The Financial Accounting Standards Board 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-shareholder sources. Statements of comprehensive loss for
the period from July 29, 1998 (inception) to June 30, 1999 and for the six
months ended January 1, 2000 have been included within the statements of
stockholders' equity (deficit).
F-8
<PAGE> 70
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 is an outstanding right to purchase
198,965 shares of Series A redeemable convertible preferred stock at $7.539 per
share. 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 January 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 -- The Company recognizes revenue from product sales,
net of any discounts, when the products are shipped to customers.
Advertising costs -- The cost of advertising is expensed as incurred. For
the period from July 29, 1998 (inception) to June 30, 1999 and for the six
months ended January 1, 2000 advertising costs totaled $114,000 and $742,000
(unaudited), respectively.
Software development costs -- Costs for the development of new software and
substantial enhancements to existing software are expensed as incurred until
technological feasibility has been established, at which time any additional
development costs would be capitalized in accordance with SFAS No. 86, Computer
Software to be Sold, Leased, or Otherwise Marketed. The Company believes its
current process for developing software is essentially completed concurrently
with the establishment of technological feasibility; accordingly, no costs have
been capitalized to date.
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.
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.
F-9
<PAGE> 71
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SHORT-TERM INVESTMENTS
The fair value and the amortized cost of investments at June 30, 1999 and
January 1, 2000 are presented below. Fair values are based on quoted market
prices obtained from the Company's brokers. All of the Company's investments are
classified as available-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
AMORTIZED MARKET UNREALIZED HOLDING
COST VALUE HOLDING 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)
====== ====== == ===
JANUARY 1, 2000 (UNAUDITED)
Corporate obligations..................... $2,483 $2,484 $1 $--
Government obligations.................... 500 499 -- (1)
------ ------ -- ---
$2,983 $2,983 $1 $(1)
====== ====== == ===
</TABLE>
The Company realized no gains or losses on the sale of securities during
the period from July 29, 1998 (inception) to June 30, 1999. There were no sales
of available-for-sale investments during the six months ended January 1, 2000
(unaudited).
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, 1999 JANUARY 1, 2000
------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Tooling..................................... $ 633 $1,726
Computer and office equipment............... 304 1,291
Furniture and fixtures...................... 89 1,014
Software.................................... 78 284
Leasehold improvements...................... -- 432
------ ------
Total property and equipment.............. 1,104 4,747
Less: Accumulated depreciation and
amortization.............................. (70) (667)
------ ------
Property and equipment, net............... $1,034 $4,080
====== ======
</TABLE>
F-10
<PAGE> 72
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, 1999 JANUARY 1, 2000
------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Accrued royalty expense..................... $-- $ 854
Accrued product warranty.................... -- 812
Accrued sales and use tax................... -- 324
Deferred rent............................... 21 281
Accrued compensation and related benefits... 31 110
Other....................................... 15 18
--- ------
$67 $2,399
=== ======
</TABLE>
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 bear interest at
10.0% per annum, and are collateralized by the Company's assets and subordinated
to senior indebtedness. Without 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 has reserved 198,965 shares of
Series A redeemable convertible preferred stock in the event this purchase
option is exercised. 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
January 1, 2000 (unaudited). 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 $96,000 (unaudited) outstanding as of January 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. Both of these amounts
are included in other assets at June 30, 1999 and January 1, 2000 (unaudited).
F-11
<PAGE> 73
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of January 1, 2000, the future minimum lease commitments under all
leases were as follows (unaudited):
<TABLE>
<CAPTION>
CAPITAL OPERATING
PERIODS ENDING JUNE 30, LEASES LEASES
----------------------- ------- ---------
(IN THOUSANDS)
<S> <C> <C>
2000 (six months)...................................... $ 16 $ 739
2001................................................... 31 1,535
2002................................................... 31 1,601
2003................................................... 31 1,661
2004................................................... -- 1,719
2005................................................... -- 288
---- ------
Total minimum lease payments........................... 109 $7,543
======
Less: Amounts representing interest.................... (13)
----
Present value of minimum lease payments................ $ 96
====
</TABLE>
Rent expense under operating leases, net of sublease income, for the period
from July 29, 1998 (inception) to June 30, 1999 and for the six months ended
January 1, 2000 was approximately $283,000 and $640,000 (unaudited)
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. 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.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK
At January 1, 2000, the amounts, terms and liquidation values of Series A
and Series B redeemable convertible preferred stock are as follows (unaudited):
<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 24,231 $17,972
B..................... 1,000 928 9,990 2,785 9,990
----- ----- ------- ------ -------
9,300 9,005 $27,962 27,016 $27,962
===== ===== ======= ====== =======
</TABLE>
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
shares of common stock on a three-to-one basis, subject to certain
adjustments. Such shares will be converted automatically immediately
prior to the closing of a firm commitment underwritten public
F-12
<PAGE> 74
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
offering of at least $20 million and at least $3.59 per share, or upon
the written consent of a majority of the shares of preferred stock
outstanding at the time of such vote. The shareholders 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 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 shareholders. 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 as of
June 30, 1999 or January 1, 2000 (unaudited).
- In the event of liquidation, dissolution or winding up of the Company,
stockholders 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 full payment 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.
F-13
<PAGE> 75
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 33.6 million and 21.7 million (unaudited) shares of the
founders' common stock subject to repurchase by the Company at June 30, 1999 and
January 1, 2000, respectively. The Company has the right of first refusal should
any common shareholder 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 shareholders have the right to participate
in the sale of stock by the founders, the preferred shareholders have the right
to participate in the sale of stock by the founders.
During fiscal 2000, the Company issued 75,000 (unaudited) shares of common
stock for services. 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
46,183,386 and 47,437,386 (unaudited) were issued and outstanding as of June 30,
1999 and January 1, 2000, respectively. Common stock reserved for future
issuances is as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, 1999 JANUARY 1, 2000
------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Issuance under stock options................ 10,355 15,176
Conversion of convertible preferred stock... 24,231 27,016
Exercise of right to purchase mandatory
redeemable convertible preferred stock.... 597 597
------ ------
Total shares reserved..................... 35,183 42,789
====== ======
</TABLE>
Stock Option Plan
Under the 1998 Equity Incentive Plan (the "Plan"), the Company may grant
options to purchase up to 17,538,462 shares of common stock to employees,
officers, directors and consultants. Options granted under the 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 Plan may be 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. Shares issued upon exercise
of options that are unvested are subject to repurchase by the Company. There
were 4,183,386 and 3,286,611
F-14
<PAGE> 76
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited) shares issued under the 1998 Equity Incentive Plan outstanding at
June 30, 1999 and January 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 3,000,000 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
225,000 shares issued under the 1999 Executive Equity Incentive Plan that were
subject to repurchase at January 1, 2000.
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............................ 14,538,462 --
Options granted....................... (12,363,924) 12,363,924 $0.12
Options exercised..................... -- (4,183,386) 0.11
----------- ----------
Balance at June 30, 1999................ 2,174,538 8,180,538 0.13
Authorized............................ 6,000,000 --
Options granted....................... (4,733,511) 4,733,511 0.94
Options exercised..................... -- (1,179,000) 0.51
----------- ----------
Balance at January 1, 2000
(unaudited)........................... 3,441,027 11,735,049 $0.42
=========== ==========
</TABLE>
The following table summarizes information concerning options outstanding
and exercisable at January 1, 2000 (unaudited):
<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>
$0.08............... 5,603,538 8.79 $0.08 5,603,538 $0.08
$0.17 - $0.25............... 1,639,500 9.37 0.22 1,639,500 0.22
$0.33 - $0.67............... 1,859,511 9.66 0.61 1,859,511 0.61
$1.00 - $1.33............... 2,632,500 9.91 1.14 2,188,500 1.10
---------- ----------
$0.08 - $1.33............... 11,735,049 9.26 $0.42 11,291,049 $0.38
========== ==========
</TABLE>
DEFERRED STOCK COMPENSATION
During the period ended June 30, 1999 and six months ended January 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. In anticipation of the
Company's initial public offering, the Company has subsequently determined that,
for financial statement purposes, the estimated value of its common stock was in
excess of the exercise prices. Accordingly, the Company has recorded deferred
compensation for the difference between the purchase price of the stock issued
to employees under stock options and the
F-15
<PAGE> 77
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 January 1, 2000, the Company had recorded
deferred stock compensation related to these options of $13,391,00 and
$35,608,000 (unaudited), respectively, of which $3,646,000 and $10,952,000
(unaudited) has been amortized to expense during the period ended June 30, 1999
and six months ended January 1, 2000, respectively. Future compensation expense
from options granted through January 1, 2000 (unaudited) is estimated to be
$10,794,000, $13,614,000, $7,120,000 and $4,138,000 for the fiscal years ended
2000, 2001, 2002 and 2003, 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 determined its stock-based compensation
cost based on the fair value at the grant dates for the awards under a method
prescribed by SFAS No. 123, the Company's net loss would have been increased to
the pro forma amounts indicated below (in thousands, except per share data):
<TABLE>
<CAPTION>
PERIOD FROM
JULY 29, 1998 SIX MONTHS
(DATE OF INCEPTION) ENDED
TO JUNE 30, 1999 JANUARY 1, 2000
------------------- ---------------
(UNAUDITED)
<S> <C> <C>
Net loss:
As reported................................... $(8,357) $(20,487)
Pro forma..................................... (8,394) (24,427)
Basic and diluted net loss per share:
As reported................................... $ (1.06) $ (1.10)
Pro forma..................................... (1.07) (1.31)
</TABLE>
The Company calculated the fair value of each option grant on the date of
grant using the Black-Scholes option pricing model using the following
assumptions: weighted average expected option term of four years; risk free
interest rates of 4.18% to 6.19%; 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 (inception) to June 30,
1999 and the six months ended January 1, 2000 was $3.66 and $23.38,
respectively.
10. INCOME TAXES
At January 1, 2000, the Company had net operating loss carryforwards of
approximately $11,200,000 available to reduce future federal and state taxable
income. The carryforwards expire beginning in 2019 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 utilization limitation in case of a
change in stock ownership, as defined by federal and state tax law.
F-16
<PAGE> 78
HANDSPRING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Temporary differences which gave rise to significant portions of deferred
tax assets are as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, 1999 JANUARY 1, 2000
------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Net operating losses........................ $ 1,036 $ 4,445
Capitalized costs........................... 890 326
Tax credit carryforwards.................... 151 506
Other....................................... (50) 831
------- -------
2,027 6,108
Valuation allowance......................... (2,027) (6,108)
------- -------
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 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.
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.
12. SUBSEQUENT EVENTS
Stock Split -- In March 2000, the Board of Directors authorized a
three-for-one stock split of the outstanding shares of Common Stock. All common
share and per share information included in these financial statements have been
retroactively adjusted to reflect this stock split.
F-17
<PAGE> 79
[LOGO]
<PAGE> 80
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..........................
Blue Sky Fees and Expenses.................................. 5,000
Transfer Agent and Registrar Fees...........................
Accounting Fees and Expenses................................
Legal Fees and Expenses.....................................
Printing Expenses.........................................
Miscellaneous.............................................
-------
Total............................................. $
=======
</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 27,300,000 shares of common
stock to Jeffrey C. Hawkins for a purchase price of $45,500 in cash.
II-1
<PAGE> 81
2. On August 21, 1998, we issued and sold 14,700,000 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 24,230,772 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 60,000 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. These
shares of Series A preferred stock are convertible into 596,895 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 2,785,518 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 7,500 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 7,500 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 March 30, 2000, we had issued 6,001,386 shares of common
stock to employees upon exercise of options under our 1998 Equity Incentive
Plan, with exercise prices ranging from $0.077 to $1.333 per share. As of
March 30, 2000, there were 10,534,238 shares of common stock issuable upon
exercise of outstanding options under our 1998 Equity Incentive Plan, with
exercise prices ranging from $0.077 to $20.00 per share.
10. As of March 30, 2000, we had issued 1,146,249 shares of common
stock to employees upon exercise of options under our 1999 Executive Equity
Incentive Plan, with exercise prices ranging from $0.667 to $1.333 per
share. As of March 30, 2000, there were 3,255,762 shares of common stock
issuable upon exercise of outstanding options under our 1999 Executive
Equity Incentive Plan, with exercise prices ranging from $0.333 to $20.00
per share.
All of the 8,076,924 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 three-for-one 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> 82
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 Form of Restated Bylaws to be effective upon the closing of
the offering
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
21.1 List of Subsidiaries of Registrant
23.1 Consent of Fenwick & West LLP (See Exhibit 5.1)*
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (see page II-5 of this Registration
Statement)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment
+ 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.
II-3
<PAGE> 83
(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> 84
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this 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 30th day of March, 2000.
HANDSPRING, INC.
By: /s/ BERNARD J. WHITNEY
------------------------------------
Bernard J. Whitney
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Donna L. Dubinsky, Jeffrey C. Hawkins and
Bernard J. Whitney and each of them, his or her true and lawful
attorneys-in-fact and agents with full power of substitution, for him or her and
in his or her 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 or she 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.
Pursuant to the requirements of the Securities Act of 1933, this
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 March 30, 2000
- ----------------------------------------------------- Executive Officer and a
Donna L. Dubinsky Director
PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING
OFFICER:
/s/ BERNARD J. WHITNEY Chief Financial Officer March 30, 2000
- -----------------------------------------------------
Bernard J. Whitney
ADDITIONAL DIRECTORS:
/s/ JEFFREY C. HAWKINS Director March 30, 2000
- -----------------------------------------------------
Jeffrey C. Hawkins
</TABLE>
II-5
<PAGE> 85
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ L. JOHN DOERR Director March 30, 2000
- -----------------------------------------------------
L. John Doerr
/s/ BRUCE W. DUNLEVIE Director March 30, 2000
- -----------------------------------------------------
Bruce W. Dunlevie
</TABLE>
II-6
<PAGE> 86
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 Form of Restated Bylaws to be effective upon the closing of
the offering
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
21.1 List of Subsidiaries of Registrant
23.1 Consent of Fenwick & West LLP (See Exhibit 5.1)*
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (see page II-5 of this Registration
Statement)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment
+ 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 3.1
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "HANDSPRING, INC. (DELAWARE)", FILED IN THIS OFFICE ON THE
TWENTY-SEVENTH DAY OF MARCH, A.D. 2000 AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
[SEAL]
GREAT SEAL OF THE STATE OF DELAWARE
1793 - 1847 - 1907
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
3186524 8100 AUTHENTICATION: 0341509
001153001 DATE: 03-27-00
<PAGE> 2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 ON 03/27/2000
001153001 - 3186524
CERTIFICATE OF INCORPORATION
OF
HANDSPRING, INC. (DELAWARE)
ARTICLE I
The name of the corporation is Handspring, Inc. (Delaware)
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 stock which the corporation has authority to
issue is One Thousand (1,000) shares, all of which shall be Common Stock, par
value $0.001 per share.
ARTICLE V
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal the Bylaws of the corporation, subject to the right of the
stockholders entitled to vote with respect thereto to alter and repeal
provisions of the Bylaws adopted by the Board of Directors.
ARTICLE VI
The election of directors need not be by written ballot unless the Bylaws
of the corporation shall so provide.
ARTICLE VII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is 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.
1
<PAGE> 3
Neither any amendment nor repeal of this Article VII, nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article VII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
ARTICLE VIII
The name and mailing address of the incorporator is Benjamin Hadary, c/o
Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California 94306.
The undersigned incorporator hereby acknowledges that the foregoing
certificate is his act and deed and that the facts stated herein are true.
Dated: March 27, 2000
/s/ BENJAMIN HADARY
----------------------------------
Benjamin Hadary, Incorporator
2
<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: April ___, 2000
HANDSPRING, INC. (DELAWARE)
----------------------------------------
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 __________ shares, consisting of two
classes: (i) __________ 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.
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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 is issued by the Company.
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.
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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
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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.
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(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 ___ (__). 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
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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
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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
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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 $_________ 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
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(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
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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
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(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.
(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 3.3
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HANDSPRING, INC.
Handspring, Inc., a Delaware corporation (the "Corporation"), which was
originally incorporated on March 27, 2000 under the name Handspring, Inc.
(Delaware), hereby certifies that the Second 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 Second Amended and
Restated Certificate of Incorporation to be signed by its duly authorized
officer.
Dated: June ___, 2000
HANDSPRING, INC.
-------------------------------
Donna L. Dubinsky, President
and Chief Executive Officer
<PAGE> 2
EXHIBIT A
SECOND 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. This corporation shall have perpetual existence.
ARTICLE IV
The total number of shares of all classes of stock which the
corporation has authority to issue is 1,010,000,000 shares, consisting of two
classes: 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.
The voting, dividend and liquidation rights of the holders of the
Common Stock are subject to and qualified by the rights of the holders of the
Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series. The holders of the
Common Stock shall have no preemptive rights to subscribe for any shares of any
class of stock of this corporation whether now or hereafter authorized. The
holders of the Common Stock are entitled to one vote for each share of Common
Stock held at all meetings of stockholders. There shall be no cumulative voting.
Dividends may be declared and paid on the Common Stock from funds lawfully
available therefor as and when determined by the Board of Directors and subject
to any preferential dividend rights of any then outstanding Preferred Stock.
Upon the dissolution or liquidation of the corporation, whether voluntary or
involuntary, the holders of Common Stock will be entitled to receive all assets
of the corporation available for distribution to its stockholders, subject to
any preferential rights of any then outstanding Preferred Stock.
1
<PAGE> 3
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series and, by filing a Certificate
of Designation pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, to fix the designation, powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof,
and to increase or decrease the number of shares of any such series, but not
below the number of shares of such series then outstanding. The number of
authorized shares of Preferred Stock may also be increased or decreased, but not
below the number of shares thereof then outstanding, by the affirmative vote of
the holders of a majority of the capital stock of the corporation entitled to
vote, unless a vote of any other holders is required pursuant to the Certificate
of Designation establishing a series of Preferred Stock. Any shares of Preferred
Stock that may be redeemed, purchased or acquired by the corporation may be
reissued except as otherwise provided by applicable law or the Certificate of
Designation establishing such series of Preferred Stock. The different series of
Preferred Stock that may be issued hereunder shall not be construed to
constitute different classes of shares for the purposes of voting by classes
unless expressly provided in the Certificate of Designation providing for the
issue of such series of Preferred Stock.
Except as otherwise expressly provided in any Certificate of
Designation designating any series of Preferred Stock pursuant to the foregoing
provisions of this Article IV, any new series of Preferred Stock may be
designated, fixed and determined as provided herein by the Board of Directors
without approval of the holders of Common Stock or the holders of Preferred
Stock, or any series thereof, and any such new series may have powers,
preferences and rights, including, without limitation, voting rights, dividend
rights, liquidation rights, redemption rights and conversion rights, senior to,
junior to or pari passu with the rights of the Common Stock, the Preferred Stock
or any future class or series of Preferred Stock or Common Stock.
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 Certificate of
Incorporation or the Bylaws, each as amended, and notwithstanding the fact that
a lesser percentage may be specified by law, this 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
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
2
<PAGE> 4
(a) The conduct of the affairs of the corporation shall be managed
under the direction of the Board of Directors. The number of directors shall be
fixed from time to time exclusively by resolution of the Board of Directors in
the manner provided in the Bylaws of the corporation.
(b) Notwithstanding the foregoing provision of this Article VI, each
director shall hold office until such director's successor is elected and
qualified, or until such director's earlier death, resignation or removal. No
decrease in the authorized number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(c) 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.
(d) Subject to the rights of the holders of any series of Preferred
Stock, the directors of the corporation may be removed by the affirmative vote
of the holders of at least sixty six and two-thirds percent (66 2/3%) of the
shares of the capital stock of the corporation issued and outstanding and
entitled to vote generally in the election of directors cast at a meeting of the
stockholders called for that purpose.
(e) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the initial public offering of this 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
3
<PAGE> 5
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. 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.
(f) Unless and except to the extent that the Bylaws of this corporation
shall so require, the election of directors need not be by written ballot.
(g) No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws of the corporation, and no action shall be taken by the stockholders
by written consent in lieu of a meeting.
(h) The advance notice of stockholder nominations for the election of
directors of the corporation and of other business to be brought by stockholders
before any meeting of stockholders of the corporation shall be given in the
manner provided in the Bylaws of the corporation. Any business transacted at
special meetings of stockholders shall be confined to the purpose or purposes
stated in the notice of such meeting.
(i) Notwithstanding any other provisions of law, this Certificate of
Incorporation or the Bylaws, each as amended, and notwithstanding the fact that
a lesser percentage may be specified by applicable law, this 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 VI.
ARTICLE VII
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 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 Certificate of Incorporation inconsistent
with this Article VII, shall apply to or have any effect on the liability or
alleged
4
<PAGE> 6
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.
ARTICLE VIII
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute and this Certificate of Incorporation, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE IX
The books of this corporation may, subject to any statutory
requirements, be kept outside the State of Delaware as may be designated by the
Board of Directors or by the Bylaws of this corporation.
5
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
HANDSPRING, INC. (DELAWARE)
March 27, 2000
<PAGE> 2
BYLAWS
OF
HANDSPRING, INC. (DELAWARE)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I STOCKHOLDERS...........................................................................................1
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.......................................................................................1
Section 1.6: Organization.................................................................................2
Section 1.7: Voting; Proxies..............................................................................2
Section 1.8: Fixing Date for Determination of Stockholders of Record......................................2
Section 1.9: List of Stockholders Entitled to Vote........................................................3
Section 1.10: Action by Written Consent of Stockholders....................................................3
Section 1.11: Inspectors of Elections......................................................................4
ARTICLE II BOARD OF DIRECTORS.....................................................................................5
Section 2.1: Number; Qualifications.......................................................................5
Section 2.3: Regular Meetings.............................................................................5
Section 2.4: Special Meetings.............................................................................6
Section 2.5: Telephonic Meetings Permitted................................................................6
Section 2.6: Quorum; Vote Required for Action.............................................................6
Section 2.7: Organization.................................................................................6
Section 2.8: Written Action by Directors..................................................................6
</TABLE>
i
<PAGE> 3
BYLAWS
OF
HANDSPRING, INC. (DELAWARE)
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 2.9: Powers.......................................................................................6
Section 2.10: Compensation of Directors...................................................................7
ARTICLE III COMMITTEES............................................................................................7
Section 3.1: Committees...................................................................................7
Section 3.2: Committee Rules..............................................................................7
ARTICLE IV OFFICERS...............................................................................................7
Section 4.1: Generally....................................................................................7
Section 4.2: Chief Executive Officer......................................................................8
Section 4.3: Chairperson of the Board.....................................................................8
Section 4.4: President....................................................................................8
Section 4.5: Vice President...............................................................................8
Section 4.6: Chief Financial Officer......................................................................9
Section 4.7: Treasurer....................................................................................9
Section 4.8: Secretary....................................................................................9
Section 4.9: Delegation of Authority......................................................................9
Section 4.10: Removal......................................................................................9
ARTICLE V STOCK..................................................................................................9
Section 5.1: Certificates.................................................................................9
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates..................10
Section 5.3: Other Regulations...........................................................................10
</TABLE>
ii
<PAGE> 4
BYLAWS
OF
HANDSPRING, INC. (DELAWARE)
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE VI INDEMNIFICATION......................................................................................10
Section 6.1 Indemnification of Officers and Directors...................................................10
Section 6.2: Advance of Expenses.........................................................................10
Section 6.3: Non-Exclusivity of Rights...................................................................11
Section 6.4: Indemnification Contracts...................................................................11
Section 6.5: Effect of Amendment.........................................................................11
ARTICLE VII NOTICES..............................................................................................11
Section 7.1: Notice......................................................................................11
Section 7.2: Waiver of Notice............................................................................12
ARTICLE VIII INTERESTED DIRECTORS................................................................................12
Section 8.1: Interested Directors; Quorum................................................................12
ARTICLE IX MISCELLANEOUS.........................................................................................12
Section 9.1: Fiscal Year.................................................................................12
Section 9.2: Seal........................................................................................13
Section 9.3: Form of Records.............................................................................13
Section 9.4: Reliance Upon Books and Records.............................................................13
Section 9.5: Certificate of Incorporation Governs........................................................13
Section 9.6: Severability................................................................................13
ARTICLE X AMENDMENT.............................................................................................13
Section 10.1: Amendments...............................................................................13
</TABLE>
1
<PAGE> 5
BYLAWS
OF
HANDSPRING, INC. (DELAWARE)
ARTICLE I
STOCKHOLDERS
Section 1.1: Annual Meetings. Unless directors are elected by written
consent in lieu of an annual meeting as permitted by Section 211 of the Delaware
General Corporation Law, 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, the President, the holders of shares of
the Corporation that are entitled to cast not less than ten percent (10%) of the
total number of votes entitled to be cast by all stockholders at such meeting,
or by a majority of the members of the Board of Directors. Special meetings may
not be called by any other person or persons.
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.
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 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
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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
Corporation's stock 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 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, or to express consent or dissent to corporate action in
writing without a meeting, 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.
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 to
express consent to corporate action in writing without a meeting, 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
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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: Action by Written Consent of Stockholders.
(a) Procedure. Unless otherwise provided by the Certificate of
Incorporation or prohibited by applicable law, any action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Written stockholder consents
shall bear the date of signature of each stockholder who signs the consent and
shall be delivered to the Corporation by delivery to its registered office in
the State of Delaware, to its principal place of business or to any officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Any delivery made to the registered
office of the Corporation shall be by hand or by certified or registered mail,
return receipt requested. No written consent shall be effective to take the
action set forth therein unless, within sixty (60) days of the earliest dated
consent delivered to the Corporation in the manner provided above, written
consents signed by a sufficient number of stockholders to take the action set
forth therein are delivered to the Corporation in the manner provided above.
(b) Notice of Consent. Prompt notice of the taking of corporate action
by stockholders without a meeting by less than unanimous written consent of the
stockholders shall be given to those stockholders who have not consented thereto
in writing and who, if the action had been taken at a meeting, would have been
entitled to notice of the meeting if the record date for such meeting had been
the date that written consents signed by a sufficient number of holders to take
the action were delivered to the Corporation. In the case of a Certificate
Action, as defined below, if the Delaware General Corporation Law so requires,
such notice shall be given prior to filing of the Certificate Action in
question. If the action which is consented to requires the filing of a
certificate under the Delaware General Corporation Law (a "CERTIFICATE ACTION"),
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then if the Delaware General Corporation Law so requires, the certificate so
filed shall state that written stockholder consent has been given in accordance
with Section 228 of the Delaware General Corporation Law and that written notice
of the taking of corporate action by stockholders without a meeting as described
herein has been given as provided in such section.
Section 1.11: 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 1.11 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 1.11 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 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 inspectors at 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
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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
1.11 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.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The Board of Directors shall
consist of one or more members. The initial number of directors shall be five,
and thereafter shall be fixed from time to time by resolution of the Board of
Directors. 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. Each director
shall hold office 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 then outstanding: (i) any
director or the entire Board of Directors may be removed, with or without cause,
by the holders of a majority of the shares then entitled to vote at an election
of directors and (ii) 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 to be elected by all stockholders having the
right to vote as a single class, may be filled by the stockholders, by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
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
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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.
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
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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 provision of the Bylaws 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 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
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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 and 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.
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
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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.
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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 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
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or consent of stockholders or disinterested directors, or otherwise.
Additionally, nothing in this 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.
11
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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 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
12
<PAGE> 17
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.
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. The stockholders of the Corporation holding a
majority of the outstanding voting stock then entitled to vote at an election of
directors shall have the power to adopt, amend or repeal Bylaws. To the extent
provided in the Certificate of Incorporation of the Corporation, the Board of
Directors of the Corporation shall also have the power to adopt, amend or repeal
Bylaws of the Corporation.
13
<PAGE> 1
EXHIBIT 3.5
RESTATED BYLAWS
OF
HANDSPRING, INC.
April __, 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
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<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
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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. 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
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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.
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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.
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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
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<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.
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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.
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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
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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
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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.
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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 or these
Bylaws or to adopt new Bylaws.
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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
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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
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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)
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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
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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
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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;
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(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
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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.
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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
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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.
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(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:
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(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
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<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;
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<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").
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<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
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<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.
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<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
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<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.
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<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
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<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
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<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
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<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 0 649,276
Attn: Chief Financial Officer
5775 Morehouse Avenue
San Diego, CA 92121-1714
Fax: (858) 658-2501
</TABLE>
<PAGE> 1
EXHIBIT 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement (this "AGREEMENT"), dated as of March ___,
2000, 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.
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<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.
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<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
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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.
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<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.
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<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>
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<PAGE> 1
EXHIBIT 10.2
HANDSPRING, INC.
1998 EQUITY INCENTIVE PLAN
AS ADOPTED ON OCTOBER 8, 1998 AND
AS AMENDED ON AUGUST 4, 1999
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 5,846,154 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.
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<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:
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<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.
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<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
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<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
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<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
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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.
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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
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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
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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;
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(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
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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
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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.
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EXHIBIT 10.3
HANDSPRING, INC.
1999 EXECUTIVE EQUITY INCENTIVE PLAN
AS ADOPTED ON AUGUST 4, 1999 AND
AMENDED ON JANUARY 3, 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 2,000,000 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.
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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:
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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.
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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
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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
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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
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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
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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;
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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
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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
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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
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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.
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"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.
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EXHIBIT 10.4
HANDSPRING, INC.
2000 EQUITY INCENTIVE PLAN
As Adopted March _______, 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 [____________________] 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 20,000,000 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 2,000,000 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 3,000,000 Shares in the calendar year in which they commence
their employment. A person may be granted more than one Award under this Plan.
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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.
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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.
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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.
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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
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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.
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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 25,000 Shares (an "INITIAL GRANT") on the date such Outside
Director first becomes a member of the Board, unless such Outside Director
received a grant of Options before the Effective Date. Each Outside Director who
became a member of the Board prior to the Effective Date and who did not receive
a prior Option grant 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 7,500 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 since the date of such Outside
Director's Initial Grant. If an Outside Director did not receive an Initial
Grant on or after the Effective Date, such Outside Director will automatically
be granted a Succeeding Grant on the one (1) year anniversary of such Outside
Director's last option grant from the Company.
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.
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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.
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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
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Handspring, Inc.
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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.
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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
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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, Subsidiary or Affiliate of the Company.
"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;
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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
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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
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EXHIBIT 10.5
HANDSPRING, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
As Adopted March _______, 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 _______________ 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 ____________ 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;
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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.
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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.
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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
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<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
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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
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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
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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 10.6
CHAN-PAUL PARTNERSHIP
SINGLE TENANT ABSOLUTE NET LEASE
TO
HANDSPRING, INC.
FOR
PREMISES LOCATED AT
189 NORTH BERNARDO
MOUNTAIN VIEW, CALIFORNIA
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Article 1 - Property Leased.............................................................. 1
1.1 - Premises................................................................... 1
1.2 - Acceptance of the Premises................................................. 1
1.3 - Year 2000 Disclaimer....................................................... 2
1.4 - Possession................................................................. 2
Article 2 - Term......................................................................... 3
2.1 - Lease Term................................................................. 3
Article 3 - Rent......................................................................... 3
3.1 - Base Rent.................................................................. 3
3.2 - Adjustments to Base Rent................................................... 4
3.3 - Additional Rent............................................................ 4
3.4 - Absolute Net Lease......................................................... 4
3.5 - Interest................................................................... 4
3.6 - Late Charges............................................................... 4
Article 4 - Security Deposit............................................................. 5
Article 5 - Use of Premises.............................................................. 6
5.1 - Permitted Uses............................................................. 6
5.2 - Matters of Record.......................................................... 6
5.3 - Tenant to Comply with Legal Requirements................................... 6
5.4 - Uses Prohibited............................................................ 7
5.5 - Hazardous Substances....................................................... 7
5.6 - Landlord's Access to Premises.............................................. 9
5.7 - Signs...................................................................... 10
Article 6 - Utilities.................................................................... 10
6.1 - Tenant's Obligation........................................................ 10
Article 7 - Taxes........................................................................ 11
7.1 - Tenant's Obligation........................................................ 11
7.2 - General.................................................................... 11
Article 8 - Insurance.................................................................... 11
8.1 - Property/Rental Insurance - Premises....................................... 11
8.2 - Property Insurance - Fixtures and Inventory................................ 12
8.3 - Landlord's Liability Insurance............................................. 12
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8.4 - Tenant's Responsibilities With Regard to Liability Insurance............... 12
8.5 - Mutual Waiver of Claims.................................................... 12
Article 9 - Indemnity and Exculpation.................................................... 13
9.1 - Indemnification of Landlord................................................ 13
9.2 - Landlord as Party Defendant................................................ 13
9.3 - Waiver of Claims........................................................... 13
Article 10 - Damage or Destruction....................................................... 14
10.1 - Landlord's Duty to Restore................................................ 14
10.2 - Landlord's Right to Terminate............................................. 14
10.3 - Tenant's Right to Terminate............................................... 15
10.4 - Waiver of Civil Code Remedies............................................. 16
10.5 - No Abatement of Rentals................................................... 16
10.6 - Liability for Personal Property........................................... 16
10.7 - Liens..................................................................... 16
Article 11 - Repairs and Maintenance..................................................... 17
11.1 - Tenant's Maintenance and Repair Obligations............................... 17
11.2 - Landlord Has No Duty to Maintain or Repair................................ 17
11.3 - Landlord May Perform Tenant's Obligations................................. 18
11.4 - Waiver of Civil Code Remedies............................................. 18
11.5 - Surrender of Premises..................................................... 18
Article 12 - Alterations and Additions................................................... 19
12.1 - Prohibitions in General................................................... 19
12.2 - Surrender of Alterations and Additions.................................... 19
12.3 - Repair of Premises........................................................ 19
12.4 - Required Alterations...................................................... 19
12.5 - Tenant Improvements....................................................... 19
Article 13 - Fixtures.................................................................... 20
13.1 - Fixtures.................................................................. 20
13.2 - Trade Fixtures and Personal Property...................................... 20
Article 14 - Condemnation................................................................ 20
14.1 - Definition of Terms....................................................... 20
14.2 - Rights.................................................................... 21
14.3 - Total Taking.............................................................. 21
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14.4 - Partial Taking............................................................ 21
14.5 - Restoration Obligation.................................................... 22
Article 15 - Assignment and Subletting................................................... 22
15.1 - Prohibitions in General................................................... 22
15.2 - Collection of Rent........................................................ 22
15.3 - Assumption Agreement...................................................... 23
15.4 - Request for Transfer...................................................... 23
15.5 - Conditional Consent....................................................... 23
15.6 - Corporations and Partnerships............................................. 24
15.7 - Reasonable Provisions..................................................... 25
15.8 - Reimbursement of Landlord's Costs......................................... 25
Article 16 - Subordination; Lender Approval; Attornment; Estoppel
Certificates; Financial Statement............................................ 25
16.1 - Subordination............................................................. 25
16.2 - Subordination Agreements.................................................. 25
16.3 - Approval by Lenders....................................................... 26
16.4 - Attornment................................................................ 26
16.5 - Estoppel Certificates and Financial Statements............................ 26
Article 17 - Remedies Upon Default by Tenant............................................. 27
17.1 - Events of Default......................................................... 27
17.2 - Rights of Landlord Upon Tenant's Default.................................. 28
17.3 - Continuance of Lease...................................................... 29
17.4 - Reletting Premises........................................................ 30
17.5 - Attorneys' Fees........................................................... 30
17.6 - Waiver of Jury Trial...................................................... 30
17.7 - Waiver of Rights of Redemption............................................ 30
17.8 - Default and Litigation Notice Provisions.................................. 31
17.9 - Remedies are Cumulative................................................... 31
Article 18 - Holding Over................................................................ 31
18.1 - Holding Over.............................................................. 31
Article 19 - Notices..................................................................... 31
19.1 - Service of Notices........................................................ 31
Article 20 - Attorneys' Fees............................................................. 32
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20.1 - Prevailing Party to Recover............................................... 32
Article 21 - Successors.................................................................. 32
21.1 - Covenants are Binding..................................................... 32
Article 22 - Landlord Default............................................................ 33
22.1 - No Default Without Notice................................................. 33
Article 23 - Limitation on Landlord Liability............................................ 33
23.1 - No Personal Liability..................................................... 33
Article 24 - Quiet Enjoyment............................................................. 33
24.1 - Express Conditional Covenant.............................................. 33
Article 25 - Surrender................................................................... 33
25.1 - Free of Liens............................................................. 33
Article 26 - Waiver...................................................................... 34
26.1 - No Implied Waiver......................................................... 34
Article 27 - Entire Agreement............................................................ 34
27.1 - Integration Provision..................................................... 34
Article 28 - Landlord's Right to Perform Tenant's Covenants.............................. 34
28.1 - Landlord May Perform...................................................... 34
Article 29 - Guaranty.................................................................... 35
29.1 - [Intentionally Omitted]................................................... 35
Article 30 - General..................................................................... 35
30.1 - Headings.................................................................. 35
30.2 - Definition of Landlord.................................................... 35
30.3 - Exhibits.................................................................. 35
30.4 - Definition of Agents...................................................... 35
30.5 - Interpretation of Terms................................................... 35
30.6 - Counterparts.............................................................. 35
30.7 - Time of Essence........................................................... 36
30.8 - Severability.............................................................. 36
30.9 - Merger.................................................................... 36
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30.10 - Governing Law............................................................ 36
30.11 - Authority................................................................ 36
30.12 - Irrevocable Offer to Lease............................................... 36
30.13 - Representation by Legal Counsel.......................................... 36
30.14 - Attached Exhibits........................................................ 36
Article 31 - Brokers..................................................................... 37
</TABLE>
<PAGE> 7
CHAN-PAUL PARTNERSHIP
SINGLE TENANT ABSOLUTE NET LEASE
TO
HANDSPRING, INC.
This Lease ("Lease"), dated for references purposes as of June 22, 1999,
is entered into by and between CHAN-PAUL PARTNERSHIP, A CALIFORNIA GENERAL
PARTNERSHIP ("Landlord") and HANDSPRING, INC., jointly and severally ("Tenant").
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth in this Lease, the parties agree as follows:
Article 1. Property Leased.
1.1 Premises. Landlord hereby leases to Tenant, and Tenant leases
from Landlord, upon the terms and conditions set forth herein, the Premises
described as follows:
1.1.1 Land. The real property (the "Land") commonly known as
189 North Bernardo, Mountain View, California, more particularly described on
Exhibit "A" hereto.
1.1.2 Building. That certain two story building (the
"Building") situated on the Land and containing approximately 58,400 rentable
square feet which square footage is agreed to by the parties hereto; and
1.1.3 Improvements. All other improvements, structures,
mechanical, plumbing, electrical systems, partitions, cabinetry, floor
coverings, wall coverings, ceiling, lighting and other fixtures (excluding trade
fixtures), and other facilities, specifically including the Tenant Improvements
to be constructed and installed by Landlord pursuant to Section 12.5 below
(collectively, the "Improvements") which are now or hereafter constructed
within, installed upon, incorporated into or attached to the Land or the
Building. The Improvements shall not include any of Tenant's Personal Property
(defined in Section 13.2 below).
1.2 Acceptance of the Premises. Except as otherwise set forth in
Section 5.3 hereof and except for the Building HVAC, plumbing, elevator and
electrical systems ("Building Systems") which shall be delivered on Commencement
Date in good working order and repair, and the Tenant Improvements, which shall
be performed in compliance with all laws and constructed using materials of good
quality, Tenant accepts the Premises, including the Improvements, in their
present condition and has satisfied itself that the Premises, the Building and
all Improvements are in good, clean, safe, and tenantable condition as of the
date of this Lease subject to the construction and installation of Tenant
Improvements by Landlord. Tenant further agrees with and represents to Landlord
that the Premises have been inspected by Tenant,
1
<PAGE> 8
that Tenant has received assurances acceptable to Tenant by means independent of
Landlord or any agent of Landlord of the truth of all facts material to this
Lease, and that the Premises are being leased by Tenant as a result of Tenant's
own inspection and investigation and, except as specifically set forth in this
Section 1.2 with respect to Building Systems and Tenant Improvements and Section
5.3 with respect to compliance with laws on the Commencement Date, not as a
result of any representations made by Landlord or any agent of Landlord except
those expressly set forth above in this paragraph and Section 5.3 hereof. Except
as otherwise provided in this Section 1.2 and Section 5.3, Tenant's acceptance
of the Premises as of the Commencement Date shall conclusively establish that
the Premises are in a condition satisfactory to Tenant. Except as otherwise set
forth in Section 5.3 hereof and except as specifically set forth in this Section
1.2 with respect to the Building Systems and Tenant Improvements, the Premises,
and each and every part thereof, are leased "AS-IS," "WHERE-IS," "WITH ALL
FAULTS" and Landlord has made no representations or warranty as to the condition
of the Premises or as to the suitability or profitability of the Premises for
Tenant's intended use. Tenant has inspected and is satisfied with the physical
condition of the Premises.
1.3 Year 2000 Disclaimer. Landlord hereby disclaims any liability
for, and Tenant hereby releases Landlord from any liability for, any and all
damages, injuries or other losses, whether ordinary, special, consequential,
punitive or otherwise, arising out of, relating to, or in connection with, (a)
the failure of any automated, computerized and/or software system or other
technology used in, on, or about the Premises or relating to the management or
operation of the Premises to accurately receive, provide or process date/time
data (including, but not limited to, calculating, comparing and sequencing) both
before and after the Commencement Date, and before, after, during and between
the years 1999 A.D. and 2000 A.D., and leap year calculations and, or (b) the
malfunction, ceasing to function or providing of invalid or incorrect results by
any such technology as a result of date/time data. The foregoing disclaimer
shall apply to any such technology used in, on, or about the Premises or that
affects the Premises, whether or not such technology is within the control of
Landlord or any of Landlord's agents or representatives. THE FOREGOING
DISCLAIMER INCLUDES A DISCLAIMER OF ALL WARRANTIES OR REPRESENTATIONS, EXPRESS
OR IMPLIED, WITH RESPECT TO THE MATTERS DESCRIBED HEREIN, INCLUDING ANY IMPLIED
WAY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
1.4 Possession. Landlord shall deliver and Tenant shall accept
possession of (i) only the first floor of the Building on the Commencement Date,
and (ii) the second floor of the Building on December 15, 1999 ("Second Floor
Rent Commencement Date"). Landlord shall deliver the first floor of the Premises
on the Commencement Date, and the second floor of the Premises on the Second
Floor Rent Commencement Date in accordance with the terms and conditions of
Section 1.2 hereof. If Landlord does not deliver possession of the first floor
of the Building to Tenant on the terms and conditions required herein on or
before September 15, 1999, or the second floor of the Building to Tenant on or
before January 15, 2000, then Tenant, at its discretion, shall have the right to
terminate this Lease.
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Article 2. Term.
2.1 Lease Term. The term of this Lease (the "Lease Term") shall be
for a period of five (5) Lease Years (plus any initial or fractional month which
may be included within the first Lease Year pursuant to the following sentences)
commencing on August 15, 1999 ("Commencement Date") and expiring on August 31,
2004. A "Lease Year" shall be a period of twelve (12) successive full calendar
months, beginning on the first day of the first full calendar month of the Lease
Term provided that, if the Commencement Date is a date other than the first day
of a calendar month, then the initial fractional month together with the next
succeeding twelve (12) full calendar months shall constitute the first Lease
Year. The expiration of the Lease Term or sooner termination of this Lease is
referred to herein as the "Lease Termination."
Article 3. Rent.
3.1 Base Rent. Tenant shall pay Landlord as "Base Rent" for the
Premises, monthly installments in the following sums:
(a) Upon execution of this Lease, One Hundred and Twenty-Five Thousand
Five Hundred and Sixty Dollars ($125,560), Sixty-Two Thousand Seven Hundred and
Eighty Dollars ($62,780) to be applied as Base Rent for the first month
following the Commencement Date for the first floor of the Premises ("First
Floor Base Rent Initial Payment") and Sixty-Two Thousand Seven Hundred and
Eighty Dollars ($62,780) to be applied as Base Rent for the first month
following the Second Floor Rent Commencement Date for the second floor of the
Premises ("Second Floor Base Rent Initial Payment").
(b) On the first day of the first full calendar month following the
Commencement Date, until the first day of the first full calendar month
following the Second Floor Rent Commencement Date, Sixty-Two Thousand Seven
Hundred and Eighty Dollars ($62,780) as Base Rent for the first floor of the
Premises, provided, however, that if the Commencement Date falls on a date other
than the first day of the month, Tenant shall be credited in such first full
calendar month the amount by which Tenant's First Floor Base Rent Initial
Payment exceeded the amount which Tenant would have paid in the month in which
the Commencement Date occurred had the Base Rent applicable to the first floor
of the Premises been prorated for such partial month.
(c) On the first day of the first full calendar month following the
Second Floor Rent Commencement Date, One Hundred and Twenty-Five Thousand Five
Hundred and Sixty Dollars ($125,560) as Base Rent for the first and second floor
of the Premises, provided, however, that if the Second Floor Rent Commencement
Date falls on a date other than the first day of the month, Tenant shall be
credited in such first full calendar month following the Second Floor Rent
Commencement Date the amount by which Tenant's Second Floor Base Rent Initial
Payment exceeded the amount which Tenant would have paid in the month in which
the Second Floor Commencement Date occurred had the Base Rent applicable to the
second floor of the Premises
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been prorated for such partial month.
Base Rent payments shall in advance on the first day of each calendar month in
the amounts set forth in subsections (b) and (c) above, commencing on the
Commencement Date and continuing throughout the Lease Term, and subject to
adjustment as set forth below in Section 3.2, provided that the first
installment of Base Rent shall be paid in advance upon Tenant's execution of
this Lease as set forth in subsection (a) above. Base Rent shall be paid by
Tenant in lawful money of the United States, without deduction, offset, prior
notice or demand, at such place(s) as may be designated from time to time by
Landlord. The Base Rent is based upon an agreed square footage of usable and
rentable area and is not subject to adjustment as a result of anyone's
recalculation of such area as being either more or less.
3.2 Adjustments to Base Rent. Beginning on the first day of the
second Lease Year and continuing thereafter through the balance of the Lease
Term (including any extensions thereof) on the first day of each succeeding
Lease Year ("Adjustment Date") monthly installments of Base Rent shall be
increased by multiplying the Base Rent installment payable during the last month
of the preceding Lease Year by 1.035 so that each Lease Year the Base Rent
increases over the prior Lease year's Base Rent by three and one-half percent (3
1/2%), compounded.
3.3 Additional Rent. All taxes, charges, costs, expenses and other
sums which Tenant is required to pay hereunder (together with all interest and
penalties that may accrue thereon if Tenant fails to pay the same) and all
damages, costs and expenses which Landlord may incur by reason of any Default of
Tenant shall be deemed to be additional rent hereunder ("Additional Rent"). In
the event of nonpayment by Tenant of any Additional Rent, Landlord shall have
all of the rights and remedies with respect thereto as Landlord has for the
nonpayment of Base Rent. The term "Rentals" as used in this Lease shall mean
Base Rent and Additional Rent.
3.4 Absolute Net Lease. It is the intention of Landlord and Tenant
that Rentals specified herein to be paid to Landlord shall be absolutely net to
Landlord. All costs, expenses and obligations of every kind relating to the
Premises (except as otherwise specifically and expressly provided in this Lease)
shall be paid by Tenant, and Tenant shall indemnify and hold Landlord harmless
against all such costs, expenses and obligations.
3.5 Interest. All payments due from Tenant to Landlord shall bear
interest from the date due until paid at the lesser rate of ten (10%) percent
per annum or the maximum rate allowed by law. In addition, Tenant shall pay all
reasonable costs and reasonable attorneys' fees incurred by Landlord in the
collection of such amounts whether or not suit be filed.
3.6 Late Charges. Tenant acknowledges that late payment by Tenant
to Landlord of any Rentals will cause Landlord to incur costs not contemplated
by this Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include,
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without limitation, processing and accounting charges, and late charges that may
be imposed on Landlord by the terms of any encumbrance and note secured by any
encumbrance covering the Premises. Therefore, if any installment of Base Rent or
any amount due as Additional Rent due from Tenant is not received by Landlord
when due, Tenant shall pay to Landlord an additional sum of ten (10%) percent of
the overdue amount of Rentals as a late charge. The parties agree that this late
charge represents a fair and reasonable estimate of the costs that Landlord will
incur by reason of late payment by Tenant. Acceptance of any late charge shall
not constitute a waiver of Tenant's default with respect to the overdue amount,
or prevent Landlord from exercising any of the other rights and remedies
available to Landlord.
Article 4. Security Deposit. On or before the 23rd day of July 1999,
Tenant shall deposit with Landlord an irrevocable letter of credit ("Letter of
Credit") on a form acceptable to Landlord in the amount of Four Hundred Thousand
Dollars ($400,000.00) (the "Security Deposit"). The Letter of Credit shall be in
lieu of the cash Security Deposit. All references in this Lease to the "Security
Deposit" shall mean the Letter of Credit. Landlord shall be entitled to draw on
the Letter of Credit in whole or in part as provided for in this Article 4. The
Letter of Credit shall: (i) be issued by a commercial bank reasonably
satisfactory to Landlord ("Issuer"); (ii) be a stand-by, at-sight, irrevocable
letter of credit; (iii) be payable to Landlord; (iv) require that any draw on
the Letter of Credit shall be made only upon receipt by the Issuer of a written
certification Landlord certifying, under penalty of perjury, that the Tenant has
perform any one or more of the obligations required to be performed by Tenant
under the Lease and has not cured such failure or posted an additional cash
security deposit with Landlord in the damages likely to be caused by such
failure to perform that has not been cured and certifying that the amount drawn
on the Letter of Credit is the amount due Landlord on account of the Tenant's
default; (v) not expire prior to one year or longer after the date of its
issuance; and (vi) provide that it is governed by the Uniform Customs and
Practice for Documentary Credits (1993 revisions). Within fourteen (14) days
prior to expiration of the Letter of Credit then in effect, Tenant shall cause
the Issuer to issue and deliver to Landlord a Letter of Credit to replace the
expiring Letter to Credit ("Replacement Letter of Credit"). The Replacement
Letter of Credit shall be in the same amount as the expiring Letter of Credit
and shall be on the terms and conditions set forth in items (i) through (vi)
above. In the event Landlord transfers its interest in the Lease, at Landlord's
request and at Landlord's cost a new Letter of Credit shall be issued to the
transferee of the Landlord ("Transferee") on the same terms and conditions as
the existing Letter of Credit, except that the new Letter of Credit shall be
payable to the Transferee. Landlord shall surrender the existing Letter of
Credit to Tenant simultaneously with Tenant's delivery of the new Letter of
Credit to Transferee. The Security Deposit shall be held by Landlord as security
for the faithful performance by Tenant of all of the terms, covenants, and
conditions of this Lease applicable to Tenant. If Tenant defaults with respect
to any provision of this Lease, including but not limited to the provisions
relating to the condition of the Premises upon Lease Termination, Landlord may
(but shall not be required to) use, apply or retain all or any part of the
Security Deposit for the payment of any amount which Landlord may spend by
reason of Tenant's default or to compensate Landlord for any loss or damage
which Landlord may suffer by reason of Tenant's default. If any portion of the
Security Deposit is so used or applied, Tenant
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shall, within ten days after written demand therefor, deposit cash with Landlord
in an amount sufficient to restore the Security Deposit to its original amount;
Tenant's failure to do so shall be a Default by Tenant. The rights of Landlord
pursuant to this Article 4 are in addition to any rights which Landlord may have
pursuant to Article 18 below. If Tenant fully and faithfully performs every
provision of this Lease to be performed by it, the Security Deposit or any
balance thereof shall be returned (without interest) to Tenant (or, at
Landlord's option, to the last assignee of Tenant's interests hereunder) at the
Lease Termination and after Tenant has vacated the Premises. Landlord shall not
be required to keep the Security Deposit separate from Landlord's general funds
or be deemed a trustee of same.
Article 5. Use of Premises.
5.1 Permitted Uses. Tenant shall use the Premises only for the
purpose of office and/or research or development and for any and all legal uses
related to office and/or research and development and for no other purpose. Any
change in use of the Premises by Tenant without the prior written consent of
Landlord shall be a Default by Tenant.
5.2 Matters of Record. Tenant acknowledges that this Lease is
subject to all matters of record and that Tenant has reviewed and accepts same
and assumes all risk as to such matters.
5.3 Tenant to Comply with Legal Requirements. Notwithstanding
anything to the contrary in this Lease, at the Commencement Date, Landlord
represents and warrants that the Premises, the Land and Improvements shall
conform to all requirements of covenants, conditions, restrictions and
encumbrances, all underwriter's requirements, and all municipal, county, federal
and state rules, regulations, statutes, ordinances, laws, requirements and
building codes, (collectively, "Laws") applicable thereto. In the event of a
breach of the foregoing representation and warranty, Landlord shall, at its sole
cost and expense, correct such noncompliance and Tenant's sole remedy shall be
that provided in Article 22 hereof. Except as otherwise set forth in the
preceding sentences of this Section 5.3, Tenant shall, at its sole cost and
expense, promptly comply with all Laws relating to or affecting the condition,
use or occupancy of the Premises and, both now in force, or which may hereafter
be in force, whether or not the same are now contemplated by the parties; the
provisions of all recorded documents affecting the Premises, and the
requirements of any board of fire underwriters (or similar body now or hereafter
constituted) relating to or affecting the condition, use or occupancy of the
Premises including, without limitation, Tenant's obligations pursuant to this
Section 5.3 shall include without limitation maintaining or restoring the
Premises and making structural and nonstructural alterations and additions in
compliance and conformity with all laws and recorded documents relating to the
condition, use, occupational safety or occupancy of the Premises during the
Lease Term. Tenant shall maintain during the Lease Term all permits, licenses
and other authorizations required for the lawful operation of its business at
the Premises. Except as otherwise set forth in this Section 5.3, Tenant shall
indemnify, defend, and hold Landlord harmless from and against any loss,
expense, cost, damage, attorneys' fees, penalties, fines or liability arising
out of the
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failure of Tenant to comply with any applicable law or recorded document or any
board of fire underwriters.
5.4 Uses Prohibited.
5.4.1 Effect on Insurance. Tenant shall not do or permit
anything to be done in or about the Premises nor bring or keep anything on the
Premises which will in any way cause a cancellation of any insurance policy
covering the Premises or any part thereof or any of its contents, nor shall
Tenant sell or permit to be kept, used or sold in or about the Premises any
articles which may be prohibited by a standard form policy of fire insurance.
5.4.2 Dangerous Uses Nuisances and Waste. Tenant shall not do
or permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of occupants of neighboring property or
injure or annoy them. Tenant shall not use or allow the Premises to be used for
any unlawful or hazardous purpose, nor shall Tenant cause, suffer, maintain or
permit any nuisance in, on or about the Premises. Tenant shall not commit or
suffer to be committed any waste in or upon the Premises. Tenant shall at all
times cooperate with Landlord and Landlord's agents in the performance of
Tenant's duties and responsibilities.
5.5 Hazardous Substances. Notwithstanding anything to the contrary
contained in this Lease, the following shall apply:
5.5.1 Except as otherwise set forth in Section 5.5 7 hereof,
Tenant shall not cause or allow to exist any condition on, upon, under or about
the Premises which may pose a significant hazard to human health or the
environment, or which is not in compliance with law;
5.5.2 Except with the consent of Landlord, which consent shall
not be unreasonably withheld, Tenant shall not cause or permit the production,
use, treatment, storage, transportation or disposal of any Hazardous Substance
(defined below), pollutant or contaminant on, upon, under or about the Premises,
except to the extent that Tenant's normal business activities involve the same
as of the Commencement Date.
5.5.3 Hazard Substance shall include, without limitation:
(i) Those substances included within the definitions of
"hazardous substances," "hazardous materials," "toxic substances," or "solid
waste" in the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 as amended, 42 U.S.C. Sections 9601 et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901 et seq., and the
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq., and in
the regulations promulgated pursuant to said laws;
(ii) Those substances defined as "hazardous wastes" under
any Environmental Law described in subsection 5.6.6 below and in the regulations
promulgated
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pursuant to such Law;
(iii) Those chemicals known to cause cancer or
reproductive toxicity, as published pursuant to any Environmental Law described
in subsection 5.6.6 below and in the regulations promulgated pursuant to such
Law;
(iv) Those substances listed in the United States
Department of Transportation Table (49 CFR 172.101 and amendments thereto) or by
the Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CRF part 302 and amendments thereto);
(v) Any material, waste or substance which is (A)
petroleum, (B) asbestos, (C) polychlorinated biphenyls, (D) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C.
Section 1251 et seq. (33 U.S.C. Section 1321) or listed pursuant to Section 307
of the Clean Water Act (33 U.S.C. Section 1317); (E) a chemical substance or
mixture regulated under the Toxic Substances Control Act of 1976, 15 U.S.C.
Sections 2601 et seq.; (F) flammable explosives; or (G) radioactive materials;
and
(vi) Such other substances, materials and wastes which
are or become regulated as hazardous or toxic under applicable local, state or
federal law, or the United States government, or which are classified as
hazardous or toxic under federal, state, or local laws or regulations.
Notwithstanding the foregoing, Hazardous Substances shall not include products
containing Hazardous Substances in amounts typically used for office and
janitorial purposes.
5.5.4 Tenant shall indemnify, defend and hold harmless
Landlord from and against any and all claims, demands, losses, costs,
liabilities, expenses (including without limitation reasonable attorneys' fees)
which may arise or result from any breach of or failure by Tenant to perform any
of its obligations set forth in this Section 5.5. Notwithstanding anything to
the contrary contained herein, Tenant shall defend, indemnify and hold harmless
Landlord from and against any and all claims, actions, suits, proceedings,
judgments, losses, costs, personal injuries, damages, liabilities, deficiencies,
fines, penalties, damages, attorneys' fees, consultants' fees, investigations,
detoxifications, remediations, removals, and expenses of every type and nature,
directly or indirectly arising out of or in connection with any Hazardous
Substances present at any time on or about the Premises, or the soil, air,
improvements, groundwater or surface water thereof, or the violation of any
Environmental Requirements relating to any such Hazardous Substances, the
Premises or the use of the Premises by Tenant, its agents, employees or
invitees, or is otherwise caused by the activities of any other third party on
the Premises during the Lease Term; except to the extent that any of the
foregoing actually results from the release, disposal, discharge, or emission of
Hazardous Materials on or about the Premises during the term of this Lease by
Landlord or Landlord's employees or agents ("Tenant Contamination").
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5.5.5 In the event any investigation or monitoring of site
conditions or any clean-up, containment, restoration, removal or other remedial
work (collectively, the "Remedial Work") is required under any Requirements of
Environmental Laws as a result of Tenant Contamination, Tenant shall perform or
cause to be performed the Remedial Work in compliance with the applicable law,
regulation, order or agreement. All Remedial Work shall be performed by one or
more contractors, selected by Tenant and approved in advance in writing by
Landlord, and under the supervision of a consulting engineer, selected by Tenant
and approved in advance in writing by Landlord. All costs and expenses of
Remedial Work shall be paid by Tenant including, without limitation, the charges
of the contractor(s) and/or the consulting engineer, and Landlord's reasonable
attorneys', architects' and/or consultants' fees and costs incurred in
connection with monitoring or review of the Remedial Work. In the event Tenant
shall fail to timely commence, or cause to be commenced, or fail to diligently
prosecute to completion, the Remedial Work, Landlord may, but shall not be
required to, cause such Remedial Work to be performed, subject to the provisions
of Sections 11.3 and 11.5. Tenant's obligations under this Section 5.5 shall
apply to any Tenant Contamination which occurs during the Lease Term, including
any extensions thereof, as well as any holdover period and shall survive Lease
Termination and with respect to same.
5.5.6 "Requirements of Environmental Law" means all
requirements of environmental, ecological, health, or industrial hygiene laws or
regulations or rules of common law related to the property, including, without
limitation, all requirements imposed by any environmental permit, law, rule,
order, or regulation of any federal, state, or local executive, legislative,
judicial, regulatory, or administrative agency, which relate to (i) exposure to
or release of Hazardous Substances; (ii) pollution or protection of the air,
surface water, ground water, land; (iii) solid, gaseous, or liquid waste
generation, treatment, storage, disposal, or transportation; or (iv) regulation
of the manufacture, processing, distribution and commerce, use, or storage of
Hazardous Substances, including, without limitation, those laws expressly
identified in subsection 5.5.3.
5.5.7 Notwithstanding anything to the contrary contained
herein, Landlord shall defend, indemnify and hold harmless Tenant from and
against any and all claims, actions, suits, proceedings, judgments, losses,
costs, personal injuries, damages, liabilities, deficiencies, fines, penalties,
damages, attorneys' fees, consultants' fees, investigations, detoxifications,
remediations, removals, and expenses of every type and nature, directly or
indirectly arising out of or in connection with any Hazardous Substances present
at any time on or about the Premises, or the soil, air, improvements,
groundwater or surface water thereof, or the violation of any Environmental
Requirements relating to any such Hazardous Substances, the Premises or the use
of the Premises; except to the extent that any of the foregoing actually results
from Tenant Contamination.
5.6 Landlord's Access to Premises. Tenant shall permit Landlord and
its agents to enter the Premises at all reasonable times, upon twenty-four (24)
hours advance written notice (except in case of emergency) for the purposes of
(i) inspecting the same, (ii) posting notices of
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nonresponsibility, (iii) protecting the Premises in the event of an emergency,
(iv) exhibiting the Premises to prospective purchasers, lenders or tenants, (v)
making repairs, on behalf of Tenant, that Tenant has neglected or refused to
make, and (vi) at any time within one hundred eighty (180) days prior to Lease
Termination, to place upon the Premises ordinary "for lease" signs. In the event
of an emergency, Landlord shall have the right to use any and all means which
Landlord may deem proper to gain access to the Premises. Any entry to the
Premises by Landlord in accordance with this Section 5.6 or any other provision
of this Lease which (except in an emergency) does not unreasonably interfere
with Tenant's use or occupancy of the Premises, shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into, or
a detainer of, the Premises, or an eviction of Tenant from the Premises or any
portion thereof nor give Tenant the right to abate the Rentals payable under
this Lease or any other right or remedy. Tenant hereby waives any claim for
damages for any injury or inconvenience to or interference with Tenant's
business, any loss of beneficial or quiet enjoyment of the Premises, and any
other loss occasioned by Landlord's entry to the Premises as permitted by this
Section 5.6, or any other provision of this Lease.
5.7 Signs. Subject to review and approval and potential
modification by the City of Mountain View, Landlord shall provide Tenant signage
on the monument to be installed by Landlord as described on Exhibit B. Except as
set forth in the preceding sentence, Tenant shall not place or permit to be
placed any sign on the Land or Improvements or the exterior of the Building
without the prior written consent of Landlord, except for signs which are in
existence as of the Commencement Date. Tenant shall, upon request by Landlord,
immediately remove any of Tenant's signs that Tenant has placed or permitted to
be placed on the Land, Improvements or the exterior of the Building without the
prior written consent of Landlord. If Tenant fails to so remove any such sign
within five days after Landlord's request, Landlord may enter upon the Premises
and remove such sign and Tenant shall pay to Landlord upon demand and as
Additional Rent, the cost of such removal. All signs placed on the Premises by
Tenant shall comply with all recorded documents affecting the Premises, and with
applicable laws, regulations and ordinances. At Lease Termination Tenant shall
remove all signs which it has placed on the Premises, and shall, at its sole
cost, repair any damage caused by the installation or removal of such signs.
Article 6. Utilities.
6.1 Tenant's Obligation. Tenant shall pay during the Lease Term and
prior to delinquency, all charges and all expenses or costs associated with
water, gas, light, heat, power, electricity, telephone or other communication
service, trash pickup, janitorial service, sewer, and all other services and
utilities supplied to or consumed on the Premises, and all taxes, fees, levies
or surcharges therefor. The disruption, failure, lack or shortage of any service
or utility due to any cause whatsoever shall not affect any obligation of Tenant
hereunder, and Tenant shall faithfully keep and observe all the terms,
conditions and covenants of this Lease and pay all Rentals due hereunder, all
without diminution, credit or deduction.
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Article 7. Taxes.
7.1 Tenant's Obligation. Tenant shall pay, prior to delinquency,
all real estate taxes, personal property taxes, vehicular taxes, taxes computed
or based on rental income or environmental or energy usage, business and
occupation taxes, sales and/or use taxes, employee taxes, occupational license
taxes, general and special assessments, and all other governmental impositions,
fees, assessments, levies and charges of every kind and nature whatsoever,
whether deemed ad valorem or excise and specifically including any tax increase
caused by a transfer of ownership or any increase in rate or valuation ("Taxes")
which, during or with respect to any portion of the Lease Term, shall be
assessed, levied or imposed by any governmental subdivision or any other
authority having any direct or indirect power to tax against or in connection
with the use, possession, operation, existence, ownership, rental income or
management of the Premises. In the event any such Taxes are payable by Landlord
and it shall not be lawful for Tenant to reimburse Landlord for such Taxes, then
the Rentals payable hereunder shall be increased to net Landlord the same net
Rentals after imposition of any such Taxes upon Landlord as would have been
payable to Landlord prior to the imposition of any such Taxes. Nothing contained
in this Section 7.1 shall require Tenant to pay any federal, state and municipal
net income taxes or franchise, estate, or inheritance taxes imposed upon
Landlord.
7.2 General. During any partial tax fiscal year(s) within the Lease
Term, Taxes shall be prorated according to the ratio which the number of days
Tenant occupies the Premises during such year bears to 365. Tenant shall furnish
to Landlord fifteen days prior to the last date when any Tax will become
delinquent, official receipts or other proof satisfactory to Landlord evidencing
payment thereof. If by law any Taxes may be paid in installments, Tenant may pay
the same (and any accrued interest on any unpaid balance thereof) in
installments as each installment becomes due and payable.
Article 8. Insurance.
8.1 Property/Rental Insurance - Premises. During the Lease Term,
Landlord shall keep the Premises insured against loss or damage by fire and
those risks normally included in the term "all risk" including (a) flood
coverage, (b) earthquake coverage at the election of Landlord (and only if
available at commercially reasonable rates), (c) coverage for loss of rents for
a period of not less than eighteen (18) months ("Rental Loss Insurance") and (d)
boiler and machinery coverage if the Landlord deems such coverage necessary. Any
deductibles, not to exceed $100,000, shall be paid by Tenant. The amount of such
insurance shall be not less than one hundred percent (100%) of the replacement
value of the Premises; such insurance shall include a so-called "change-in-code"
endorsement insuring the increased costs of reconstructing the Premises incurred
due to the need to comply with applicable codes. Any recovery received from said
insurance policy shall be paid to Landlord and thereafter applied by Landlord to
the reconstruction of the Premises in accordance with the provisions of Article
10 below. Tenant, in addition to the rent and other charges provided herein,
agrees to reimburse Landlord for the cost of the premiums for all such insurance
covering the Premises. Such reimbursement shall be
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made within fifteen (15) days of Tenant's receipt of a copy of Landlord's
statement therefor, accompanied by reasonable backup documentation. Tenant shall
pay to Landlord any deductibles (subject to the above conditions) owing,
accompanied by reasonable back-up documentation, within fifteen (15) days after
receipt of notice from Landlord of the amount owing.
8.2 Property Insurance - Fixtures and Inventory. During the Lease
Term, Tenant shall, at its sole expense, maintain insurance with "all risk"
coverage on any fixtures, leasehold improvements, furnishings, merchandise,
equipment, or personal property in or on the Premises, whether in place as of
the date hereof or installed hereafter, for the full replacement value thereof,
and Landlord shall not have any responsibility nor pay any costs for maintaining
any types of such insurance. Any deductibles shall be paid by Tenant.
8.3 Landlord's Liability Insurance. During the Lease Term, Landlord
shall maintain a policy or policies of comprehensive general liability insurance
insuring Landlord (and such others as designated by Landlord) against liability
for bodily injury, death and property damage on or about the Premises or the
common area, with combined single limit coverage of not less than Five Million
Dollars ($5,000,000). Tenant, in addition to the rent and other charges provided
herein, agrees to pay to Landlord the premiums for all such insurance. The
insurance premiums shall be paid within fifteen (15) days of Tenant's receipt of
a copy of Landlord's statement therefor.
8.4 Tenant's Responsibilities With Regard to Liability Insurance.
During the Lease Term, Tenant shall, at its sole expense, maintain for the
mutual benefit of Landlord and Tenant, comprehensive general liability and
property damage insurance against claims for bodily injury, death or property
damage occurring in or about the Premises or arising out of the use or occupancy
of the Premises, with combined single limit coverage of not less than One
Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000)
in the aggregate. The limits of such insurance shall not serve to limit the
liability of Tenant. Tenant shall furnish to Landlord prior to the Commencement
Date, and at least twenty (20) days prior to the expiration date of any policy,
certificates indicating that the liability insurance required by Tenant above is
in full force and effect; that Landlord has been named as an additional insured
to the extent of contractual liability assumed in Section 9.1 "Indemnification
of Landlord"; and that any such policy will not be canceled unless thirty (30)
days' prior written notice of the proposed cancellation has been given to
Landlord. The insurance shall be with insurers approved by Landlord and with
policies in form satisfactory to Landlord, provided however, that such approval
shall not be unreasonably withheld.
8.5 Mutual Waiver of Claims. Notwithstanding an other provisions of
this Lease to the contrary, Landlord hereby releases Tenant, and Tenant hereby
releases Landlord, and their respective subtenants, assignees, officers, agents,
employees and servants, from any and all claims or demands of damages, loss,
expense, or injury to the Premises, or to the furnishings and fixtures and
equipment, or inventory or other property of either Landlord or Tenant in, or
about
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or upon the Premises or the Building, which are or would be included in a
standard "all risk" insurance policy, whether or not such loss or damage is due
to the negligence of Landlord or Tenant, their agents, employees, guests,
licensees, invitees, or contractors. Provided that such is available, each party
hereto shall obtain insurance coverage pursuant to this Article 8 which contains
a waiver of subrogation rights by the insurer as is applicable to this Section
8.5.
Article 9. Indemnity and Exculpation.
9.1 Indemnification of Landlord. Tenant shall defend, indemnify,
and hold Landlord and its agents harmless (except for their gross negligence or
willful misconduct and then only to the extent that insurance actually carried
or required to be carried pursuant to this Lease does not cover same) from and
against any and all obligations, losses, costs, expenses, claims, demands,
liabilities (including expert consultant or witness fees, attorneys' fees and
investigation costs incurred in defending same) on account of, or arising out of
the use, condition or occupancy of the Premises or any act or omission to act by
Tenant or Tenant's agents or any occurrence in, upon or at the Premises causing
injury, death or damage to any person or property whomever or whatever
("Claims"). It is understood that Tenant is and shall be in control and
possession of the Premises and that Landlord shall in no event be responsible or
liable for any injury or damage to any property of Tenant or any other person,
or for damage or injury or death to any person whatsoever, happening on, in,
about, or in connection with the Premises, or for any injury or damage to the
Premises or any part thereof, except as resulting from the actions or omissions
of Landlord or Landlord's agents or representatives. The provisions of this
Lease permitting Landlord to enter and inspect the Premises are for the purpose
of enabling Landlord to become informed as to whether Tenant is complying with
the terms of this Lease, and Landlord shall be under no duty to enter, inspect
or to perform any of Tenant's covenants set forth in this Lease including,
without limitation, as of the date any extended Lease Term commencing and Tenant
expressly assumes all such duties. Tenant shall further indemnify, defend and
hold harmless Landlord from and against any and all Claims arising from any
breach or default in the performance or observance of any obligation on Tenant's
part to be performed or observed under the terms of this Lease. The provisions
of this Section 9.1 shall survive Lease Termination with respect to any act,
omission, event, condition, damage, injury or death occurring prior to such
Lease Termination.
9.2 Landlord as Party Defendant. If, by reason of Tenant's or
Tenant's agent's act or omission, Landlord is made a party defendant in any
action or proceeding concerning this Lease or the Premises, Tenant shall hold
harmless, defend and indemnify Landlord from and against all Claims asserted in
such action or proceeding, including all damages, costs and attorneys' fees.
9.3 Waiver of Claims. Landlord shall not be liable to Tenant, and
Tenant waives all claims against Landlord, for injury or death to any person
(including without limitation Tenant and Tenant's agents) or for damage or loss
of use of any property (including without limitation Tenant's Personal Property)
by and from all causes, including without limitation, any
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defect in or condition of the Premises and/or any damage or injury resulting
from fire, steam, electricity, gas, water or rain which may leak or flow from or
into any part of the Premises, or from breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures, whether the damage, injury or death results from conditions
arising in, upon, or about the Premises or from other sources. Tenant shall
immediately notify Landlord in writing of any known defect in or undesirable or
dangerous condition at the Premises and shall promptly repair or correct same at
Tenant's sole cost and expense except as otherwise expressly provided in Article
10 or Article 14. The provisions of this Section 9.3 shall not apply to any
damage or injury caused by Landlord's or Landlord's agent's or representative's
willful misconduct or gross negligence.
Article 10. Damage or Destruction.
10.1 Landlord's Duty to Restore. If the Premises are damaged by any
peril after the Commencement Date, Landlord shall restore the Premises unless
the Lease is terminated by Landlord pursuant to Section 10.2 or by Tenant
pursuant to Section 10.3. All insurance proceeds available from the fire and
property damage insurance carried by Tenant pursuant to Section 8.1 (excluding,
however, any proceeds paid with respect to any Alterations installed and paid
for by Tenant and Tenant's personal property and trade fixtures shall be paid to
and become the property of Landlord. If this Lease is terminated pursuant to
either Section 10.2 or 10.3, then all insurance proceeds available from
insurance carried by Tenant, including pursuant to Section 8.1 and any other
insurance which covers loss to property that is Landlord's property on
termination of this Lease shall be paid to and become the property of Landlord.
If this Lease is not so terminated, then upon receipt of the insurance proceeds
(if the loss is covered by insurance) and the issuance of all necessary
governmental permits, Landlord shall commence and diligently prosecute to
completion the restoration of the Premises, to the extent then allowed by Law,
to substantially the same condition in which the Premises were immediately prior
to such damage. Landlord's obligation to restore shall be limited to the
Premises and Improvements constructed by Landlord as they existed as of the
Commencement Date, excluding any Tenant's Alterations, trade fixtures and/or
personal property constructed or installed by Tenant in the Premises. Tenant
shall, at its discretion, forthwith replace or fully repair all Tenant's
Alterations, trade fixtures and personal property installed by Tenant and
existing at the time of such damage or destruction.
10.2 Landlord's Right to Terminate. Landlord shall have the right
to terminate this Lease in the event any of the following occurs, which right
may be exercised only by delivery to Tenant of a written notice of election to
terminate within 30 days after the date of such damage:
10.2.1 Either the Premises or the Building is damaged by an
Insured Peril to such an extent that the estimated cost to restore exceeds fifty
percent (50%) of the then actual replacement cost thereof;
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10.2.2 Either the Premises or the Building is damaged by an
Uninsured Peril to such an extent that the estimated cost to restore exceed
twenty-five percent (25%) of the then actual replacement cost thereof; provided,
however, that Landlord may not terminate this Lease pursuant to this section if
Tenant agrees in writing to pay the amount by which the cost to restore the
damage exceeds such amount and subsequently deposits such amount with Landlord
within 30 days after Landlord has notified Tenant of its election to terminate
this Lease;
10.2.3 The Premises are damaged by any peril within 12 months
of the last day of the Lease Term to such an extent that the estimated cost to
restore equals or exceeds an amount equal to six monthly installments of the
Base Rent then due; or
10.2.4 Either the Project or the Building is damaged by any
peril and, because of the laws then in force, (i) cannot be restored at
reasonable cost to substantially the same condition in which it was prior to
such damage, or (ii) cannot be used for the same use being made thereof before
such damage if restored as required by this Article.
10.2.5 As used herein, the following terms shall have the
following meanings: (i) the term "Insured Peril" shall mean a peril actually
insured against for which the insurance proceeds actually received by Landlord
are sufficient (except for any "deductible" amount specified by such insurance)
to restore the Premises under then existing building codes to the condition
existing immediately prior to the damage; and (ii) the term "Uninsured Peril"
shall mean any peril which is not an Insured Peril. Notwithstanding the
foregoing, if the "deductible" for earthquake or flood insurance exceeds ten
percent (10%) of the replacement cost of the improvements insured, such peril
shall be deemed an "Uninsured Peril."
10.3 Tenant's Right to Terminate. If the Premises are damaged by
any peril and Landlord does not elect to terminate this Lease or is not entitled
to terminate this Lease pursuant to paragraph 10.2, within thirty (30) days
following the date of such damage, Landlord shall furnish Tenant with the
written opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be completed. Tenant shall have
the right to terminate this lease in the event any of the following occurs,
which right may be exercised only by delivery to Landlord of a written notice of
election to terminate within seven (7) days after Tenant receives from Landlord
the estimate of the time needed to complete such restoration.
10.3.1 The Premises are damaged by any peril and, in the
reasonable opinion of Landlord's architect or construction consultant, the
restoration of the Premises cannot be substantially completed within 200 days
after the date of such damage; or
10.3.2 The Premises are damaged by any peril within twelve
(12) months of the last day of the Lease Term and, in the reasonable opinion of
Landlord's architect or construction consultant, the restoration of the Premises
cannot be substantially completed within 90 days after the date of such damage
and such damage renders unusable more than thirty percent (30%) of the Premises.
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10.4 Waiver of Civil Code Remedies. Tenant hereby expressly waives
any rights to terminate this Lease upon damage or destruction to the Premises
except as provided in Section 10.2 above, including without limitation any
rights pursuant to the provisions of Section 1932, Subdivision 2 and Section
1933, Subdivision 4, of the California Civil Code, as amended from time to time,
and the provisions of any similar law hereinafter enacted.
10.5 No Abatement of Rentals. The Rentals and other charges due
under this Lease shall not be reduced or abated by reason of any damage or
destruction to the Premises (except to the extent of proceeds that are received
by Landlord from the Rental Loss Insurance or would have been received by
Landlord had Landlord maintained the Rental Loss Insurance required in Section
8.1 above) and Landlord shall be entitled to all proceeds of the insurance
maintained pursuant to Section 8.1 above during the period of rebuilding
pursuant to Section 10.1 above, or if the Lease is terminated pursuant to
Section 10.2 above. Tenant shall have no claim against Landlord, including,
without limitation, for compensation for inconvenience or loss of business or
goodwill during any period of repair or reconstruction.
10.6 Liability for Personal Property. In no event shall Landlord
have any liability for, nor shall it be required to repair or restore, any
injury or damage to Tenant's Personal Property or to Alterations, or any other
personal property installed in or upon the Premises by Tenant or at the expense
of Tenant, except in the event such injury or damage is caused by the gross
negligence or willful misconduct of Landlord.
10.7 Liens. Tenant shall keep the Premises free from any liens
arising out of work performed, materials furnished, or obligations incurred by
Tenant or Tenant's agents. Tenant shall give notice to Landlord in writing
fifteen (15) days prior to employing any laborer or contractor to perform
services related to (or receiving materials for use upon) the Premises, and
prior to the commencement of any work of improvement on the Premises. Landlord
shall have the right to post and keep posted on the Premises notices for the
protection of Landlord and the Premises from mechanics' and materialmen's liens,
including without limitation a notice of nonresponsibility. Tenant shall
indemnify, hold harmless and defend Landlord from any liens or encumbrances
(including all costs, liabilities, and attorneys' fees with respect thereto)
arising out of any work performed or materials furnished by or at the direction
of Tenant or Tenant's agents. Should any claims of lien be filed against, or any
action be commenced affecting the Premises and/or Tenant's interest in the
Premises, Tenant shall give Landlord notice of such lien or action within three
days after Tenant receives notice of the filing of the lien or the commencement
of the action. If Tenant shall not, within twenty days following the imposition
of any such lien, cause such lien 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 or posting a proper bond. All such sums paid
by Landlord and all expenses incurred by Landlord in connection therewith,
including attorneys' fees and costs, shall be payable to Landlord by Tenant as
Additional Rent on demand.
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Article 11. Repairs and Maintenance.
11.1 Tenant's Maintenance and Repair Obligations. Subject to the
provisions of Article 10 above, except as otherwise set forth in Section 11.1.3
hereof, Tenant shall throughout the Lease Term, at its own cost and expense,
keep and maintain in good and sanitary order, condition, and repair the entire
Premises and every part thereof, including, without limitation, interior and
exterior (i) roof and roofing, walls, floors, ceilings, skylights, doors,
windows, plate glass, (ii) all foundations, structural and operational parts,
(iii) gas, steam, electrical, plumbing, water, sewer, lighting, heating,
ventilating and air conditioning equipment and systems, connections, piping,
wiring, switches, fixtures and fittings, (iv) signs, (v) curbs, sidewalks,
gutters, concrete and paving, (vi) landscaping, (vii) all Tenant Improvements to
be installed pursuant to Section 12.5. The term "repair" as used herein shall
include and mean replacements, restorations, and/or renewals when necessary, as
well as interior and exterior painting and sealing and resurfacing asphalt.
Without limiting the generality of the foregoing, the following shall apply:
11.1.1 Prior to the Commencement Date and throughout the
balance of the Lease Term, Tenant shall enter into a written contract with a
firm engaged in the business of maintaining air conditioning, ventilating and
heating equipment to perform regular and customary maintenance service and, if
necessary, to repair or replace such equipment.
11.1.2 Tenant shall, at its sole cost and expense, keep and
maintain the landscaping of the grounds of the Premises in an attractive,
sightly and well-kept condition.
11.1.3 Notwithstanding anything to the contrary contained in
this Lease, if any of Tenant's obligations under Article 11 of this Lease would
require Tenant to pay all or any portion of any charge which must be treated as
a capital improvement under generally accepted accounting principles, then
Tenant shall pay its share of such expenses as follows: the cost of such
improvement shall be amortized over the useful life of the improvement (as
reasonably determined by Landlord) with interest on the unamortized balance at
the then prevailing market rate Landlord would pay if it borrowed funds to
construct such improvements from an institutional lender, and Landlord shall
inform Tenant of the monthly amortization payment required to so amortize such
costs, and shall also provide Tenant with the information upon which such
determination is made; and (ii) Tenant shall pay to Landlord such amortization
payment for each month after such improvement is completed until the first to
occur of (i) the expiration of the Lease term or (ii) the end of the term over
which such costs were amortized, which amount shall be due at the same time the
base monthly rent is due.
11.2 Landlord Has No Duty to Maintain or Repair. As additional
consideration for this Lease, except as otherwise specifically and expressly
provided for in this Lease, Landlord shall have no duty to repair, maintain or
replace the Premises or any part or component thereof, Tenant having assumed the
duty to do so with respect to the Premises and every part and component thereof.
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11.3 Landlord May Perform Tenant's Obligations. If Tenant fails to
make any repairs or maintenance required of Tenant pursuant to this Section 11.3
within five days after written notice by Landlord to Tenant, Landlord, in
addition to all other remedies available hereunder or by law, and without
waiving any alternative remedies, may enter into the Premises and perform such
repairs or maintenance, in which event Tenant shall reimburse Landlord as
Additional Rent for the cost of such maintenance or repairs on the next date
upon which Base Rent becomes due; Landlord shall have no liability to Tenant for
any damage, inconvenience, or interference with the use of the Premises by
Tenant as a result of performing any such repairs or maintenance.
11.4 Waiver of Civil Code Remedies. Tenant expressly waives the
benefits of any statute now or hereafter in effect (including, without
limitation, the provisions of Subsection 1 of Section 1932 and Sections 1941 and
1942 of the Civil Code of California) which might otherwise afford Tenant the
right to make repairs at Landlord's expense (or to deduct the cost of such
repairs from Rentals due hereunder) or to terminate this Lease because of
Landlord's failure to keep the Premises in good order, condition and repair,
Tenant having assumed all such obligations. Tenant acknowledges and agrees that
Tenant's obligation to improve, repair, and maintain the Premises is part of the
consideration for Landlord's renting the Premises to Tenant.
11.5 Surrender of Premises. Upon Lease Termination, Tenant shall
surrender the Premises to Landlord free of deferred maintenance in broom clean,
good condition and repair, normal wear and tear excepted (provided that normal
wear and tear shall not include any wear and tear that could have been avoided
by prudent maintenance nor shall it include wear and tear which has reached a
point where an item is an economically practical matter ought to be replaced
rather than repaired) including, without limitation, with (i) originally painted
interior walls washed, or repainted if marked or chipped, (ii) other interior
walls cleaned, repaired or replaced, (iii) all carpets cleaned and in good
condition, (iv) all electrical, gas, steam, water, lighting, plumbing, sewer,
mechanical and air conditioning, ventilating and heating systems and every part
thereof inspected and in good operating condition and repair, (v) all exterior
walls, roof and roofing, drop ceilings, plate glass, windows, doors, driveways,
paving, concrete, landscaping, lighting, in good condition and repair, (vi) all
Tenant Improvements (or their replacements) and other Alterations and every part
thereof in good operating condition and repair, and (vii) all floors cleaned,
all to the reasonable satisfaction of Landlord. Upon demand, Tenant shall
reimburse Landlord for the cost of repairing any and all damage to the Premises.
If the Premises are not surrendered at Lease Termination as required by this
Section 11.5, Tenant shall indemnify Landlord against claims, loss or liability
resulting from Tenant's failure to comply with the provisions of this Section
11.5, including, without limitation, any losses reasonably suffered by Landlord
due to lost opportunities to lease the Premises to succeeding tenants. Landlord
may, without abatement of Rentals, enter the Premises for alteration,
renovation, or decoration during the last thirty days of the Lease Term if
Tenant has removed substantially all of Tenant's personal property and has
ceased using the Premises for the operation of its business therein.
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Article 12. Alterations and Additions.
12.1 Prohibitions in General. Tenant shall not demolish or make any
alterations, additions, changes, enlargements or improvements (collectively,
"Alterations") to the Premises or any part thereof without first obtaining the
prior written consent of Landlord which shall not be unreasonably withheld,
except for any individual non-structural alteration which does not effect
materially any of the Building systems or its water tightness and the cost of
which is less than $25,000 and as to which Tenant provides Landlord a detailed
description (with plans, specifications and permits if applicable) at least ten
(10) days prior to commencement of the alteration. Landlord may impose, as a
condition to Landlord's consent, such requirements as Landlord may deem
necessary in its reasonable discretion, including without limitation: the
requirement that Tenant post a completion bond in an amount and form
satisfactory to Landlord; the requirement that upon written request of Landlord
prior to Lease Termination (or if Lease Termination occurs due to a Default by
Tenant within thirty days after Tenant quits possession of the Premises),
Tenant, at Tenant's sole cost and expense, will remove any or all Alterations to
the Premises subject to the provisions of Section 12.3 below; and the
requirement that Tenant reimburse Landlord for Landlord's actual costs incurred
in reviewing any proposed Alteration, whether or not Landlord's consent is
granted. Tenant shall not make or permit to be made any Alterations to the
Premises without acquiring and complying with the conditions of all permits
required for such work by any governmental authority having jurisdiction
thereof. Landlord acknowledges that Tenant desires to construct a cafeteria in
the Premises and Tenant acknowledges that such construction will be subject to
the terms and conditions of this Article 12.
12.2 Surrender of Alterations and Additions. All Alterations made
to the Premises by Tenant shall at Lease Termination become the property of
Landlord and remain upon and be surrendered with the Premises, unless otherwise
specified by Landlord pursuant to Section 12.1 above, or by notice to Tenant
prior to Lease Termination.
12.3 Repair of Premises. Tenant shall, at its sole cost and
expense, repair all damage to the Premises caused by a removal by Tenant of any
Alterations pursuant to Section 12.1 above and any Personal Property pursuant to
Section 13.2 below.
12.4 Required Alterations. Subject to Sections 5.3, 12.1, 12.2 and
12.3 above, Tenant shall, at its sole cost, make any alteration, addition, or
change to the Premises of any sort, substantial or insubstantial, ordinary or
extraordinary, foreseeable or unforeseeable, whether structural or otherwise, as
may be required by law due to an act or omission of Tenant or Tenant's use or
occupancy of, the Premises or as a result of Tenant's application for any permit
or governmental approval.
12.5 Tenant Improvements. Landlord, at its sole cost and expense,
shall install the Tenant Improvements described in Exhibit "C" hereto, on the
terms and conditions contained therein.
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Article 13. Fixtures.
13.1 Fixtures. At Lease Termination, all fixtures, other than trade
fixtures, attached to the Premises by or on behalf of Tenant shall be deemed to
be a part of the realty and the Premises. However, if Landlord elects not to
consider any of such fixtures as a part of the realty, Tenant shall remove any
and all such fixtures on or before the date of Lease Termination. Tenant at its
sole cost and expense shall repair all damage to the Premises caused by removal
of Tenant's fixtures and trade fixtures, including without limitation repairing
floors and painting walls where required by Landlord to Landlord's reasonable
satisfaction.
13.2 Trade Fixtures and Personal Property. All personal property,
trade fixtures, machinery, tools, equipment, appliances, furniture and
furnishings (collectively "Personal Property") owned by Tenant or installed by
Tenant in the Premises shall be and remain the property of Tenant and may be
removed by Tenant at any time during the Lease Term when Tenant is not in
default hereunder, subject to the provisions of Sections 12.3 and 13.1 above. If
after Lease Termination and within ten days after written demand by Landlord,
Tenant fails to remove any of Tenant's Personal Property, or if removed by
Landlord, fails to pay the removal expenses, the Personal Property may be deemed
abandoned property by Landlord and may be disposed of as Landlord deems
appropriate. If, Landlord elects to remove from the Premises such Personal
Property, Tenant shall reimburse Landlord on demand for the cost of removal,
storage and disposition of such Personal Property.
Article 14. Condemnation.
14.1 Definition of Terms. For the purpose of this Lease the term:
14.1.1 "Taking" means a taking of the Premises or damage
related to the exercise of the power of eminent domain and includes a voluntary
conveyance, in lieu of court proceedings, to any agency, authority, public
utility, persons or corporate entity empowered to condemn property.
14.1.2 "Total Taking" means the Taking of the entire Premises
or so much of the Premises as to prevent or substantially impair the use thereof
by Tenant for the uses herein specified; provided, however, that in no event
shall a taking of less than twenty percent of the Premises be considered a Total
Taking.
14.1.3 "Partial Taking" means the Taking of only a portion of
the Premises which does not constitute a Total Taking.
14.1.4 "Date of Taking" means the date upon which title to the
Premises, or a portion thereof, passes to and vests in the condemnor or the
effective date of any order for possession if issued prior to the date title
vests in the condemnor.
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14.1.5 "Award" means the amount of any award made,
consideration paid, or damages ordered as a result of a Taking.
14.2 Rights. The parties agree that in the event of a Taking all
rights between them or in and to an Award shall be as set forth herein and
Tenant shall have no right to any Award except as set forth herein.
14.3 Total Taking. In the event of a Total Taking during the Lease
Term:
14.3.1 The rights of Tenant under the Lease and the leasehold
estate of Tenant in and to the Premises shall cease and terminate as of the Date
of Taking;
14.3.2 Landlord shall refund to Tenant any prepaid but
unearned Rentals and the unused balance of the Security Deposit;
14.3.3 Tenant shall pay to Landlord any Rentals due Landlord
under the Lease, prorated as of the Date of Taking;
14.3.4 To the extent the Award is not payable to the
beneficiary or Mortgagee of a deed of trust or mortgage encumbering the
Premises, Tenant shall receive from the Award those portions of the Award
attributable to Tenant's trade fixtures and moving expenses of Tenant; and
14.3.5 The remainder of the Award shall be paid to and be the
property of Landlord.
14.4 Partial Taking: In the event of a Partial Taking during the
Lease Term:
14.4.1 The rights of Tenant under the Lease and leasehold
estate of Tenant in and to the portion of the Premises taken shall cease and
terminate as of the Date of Taking;
14.4.2 From and after the Date of Taking, the current Base
Rent shall be reduced in the proportion that the value of the portion of the
Premises taken bears to the total value of the Premises prior to the Taking. The
value of the portion of the Premises taken shall be the total amount of the
Award, minus any portion of the Award for consequential damages and minus any
portion of the Award attributable to the trade fixtures of Tenant;
14.4.3 To the extent the Award is not payable to the
beneficiary or Mortgagee of a deed of trust or Mortgage encumbering the
Premises, Tenant shall receive from the Award those portions of the Award
attributable to Tenant's trade fixtures; and
14.4.4 The remainder of the Award shall be paid to and be the
property of Landlord; and
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14.4.5 Each party waives the provisions of California Code of
Civil Procedure Section 1265.130 allowing either party to petition the Superior
Court to terminate this Lease in the event of a Partial Taking.
14.5 Restoration Obligation. In the event of a Partial Taking,
Landlord shall promptly proceed to rebuild, repair and restore the remainder of
the Building and/or Improvements to a complete, independent and self-contained
architectural unit.
Article 15. Assignment and Subletting.
15.1 Prohibitions in General. Tenant shall not (whether
voluntarily, involuntarily, or by operation of law) (i) assign, transfer,
hypothecate, or encumber Tenant's interest in this Lease or in the Premises,
(ii) allow all or any part of the Premises to be sublet, licensed, occupied, or
used by any person or entity other than Tenant, (iii) transfer any right
appurtenant to this Lease or the Premises, (iv) mortgage or encumber the Lease
(or otherwise use the Lease as a security device) in any manner, or (v) permit
any person or entity to assume or succeed to any interest of Tenant whatsoever
in this Lease, without Landlord's prior written consent in each instance, which
consent with respect only to transfers described in clauses (i) and (ii) above
shall not be unreasonably withheld. Landlord's consent to any such assignment,
sublease, hypothecation, encumbrance, or transfer (collectively "Transfer")
shall be evidenced by Landlord's signature on the Assumption Agreement provided
for in Section 15.3 below. Any Transfer without Landlord's consent shall
constitute a Default by Tenant and shall be voidable at Landlord's option.
Landlord's consent to any one Transfer shall not constitute a waiver of the
provisions of this Article 15 as to any subsequent Transfer nor a consent to any
subsequent Transfer; further, Landlord's consent to any one or more Transfers
shall not release Tenant from Tenant's obligations under this Lease. The
provisions of this Article 15 expressly apply to all heirs, successors,
sublessees, assignees and transferees of Tenant. All Transfers and proposed
Transfers are subject to the provisions of this Article 15. If Landlord consents
to a proposed Transfer, such Transfer shall be valid and the Transferee shall
have the right to take possession of the Premises only if an executed
counterpart of the assignment, sublease or other document evidencing the
Transfer is first delivered to Landlord, and such transfer document contains the
same terms and conditions as stated in Tenant's notice given to Landlord
pursuant to Section 15.4 below, except for any such modifications Landlord has
consented to in writing.
15.2 Collection of Rent. Subject to Section 15.5.2 hereof, Tenant
irrevocably assigns to Landlord, as security for Tenant's obligations under this
Lease, all rent to be paid by or on behalf of any Transferee not otherwise
payable to Landlord by reason of any Transfer of all or any part of the Premises
as permitted by this Article 15. Landlord, as assignee of Tenant, or a receiver
for Tenant appointed on Landlord's application, may collect such rent and apply
it toward Tenant's obligations under this Lease, provided, however, that until
the occurrence of any Default by Tenant or except as provided by the provisions
of Section 15.6.3 below, Tenant shall have the right to collect such rent.
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15.3 Assumption Agreement. As a condition to Landlord's consent to
any Transfer of Tenant's interest in this Lease or the Premises, Tenant and
Tenant's assignee, sublessee, encumbrancer, hypothecate, or transferee
(collectively "Transferee"), shall execute a written Assumption Agreement, in a
form approved by Landlord, which Agreement shall include a provision that
Tenant's Transferee shall expressly assume all obligations of Tenant under this
Lease, and be and remain jointly and severally liable with Tenant for the
performance of all conditions, covenants, and obligations under this Lease from
the effective date of the Transfer of Tenant's interest in this Lease.
15.4 Request for Transfer. Tenant shall give Landlord at least
fifteen (15) days prior written notice of any desired Transfer and of the
proposed terms of such Transfer, including but not limited to: the name and
legal composition of the proposed Transferee; an audited financial statement, if
applicable of the proposed Transferee prepared in accordance with generally
accepted accounting principles within one year prior to the proposed effective
date of the Transfer; the nature of the proposed Transferee's business to be
carried on in the Premises; the payment to be made or other consideration to be
given on account of the Transfer; a current financial statement of Tenant; and
other such pertinent information as may be reasonably requested by Landlord, all
in sufficient detail to enable Landlord to evaluate the proposed Transfer and
the prospective Transferee. Tenant's notice shall not be deemed to have been
served or given until such time as Tenant has provided Landlord with all
information reasonably requested by Landlord pursuant to this Section 15.4 and
Landlord shall notify Tenant within fifteen (15) days thereafter whether
Landlord will grant or withhold its consent. In the event that Landlord fails to
grant or deny consent within such fifteen (15) day period, such consent shall be
deemed denied. Tenant shall immediately notify Landlord of any modification to
the proposed terms of such Transfer or any change in the information provided to
Landlord pursuant to this Section 15.4.
15.5 Conditional Consent. If Landlord consents to a Transfer
proposed by Tenant, Tenant may enter into such Transfer, and if Tenant does so,
the following shall apply:
15.5.1 Tenant shall not be released of its liability for the
performance of all of its obligations under the Lease.
15.5.2 If Tenant assigns its interest in this Lease, then
Tenant shall pay to Landlord fifty percent (50%) of all subrent (as defined in
section 15.5.5 below) received by Tenant over and above (i) the assignee's
agreement to assume the obligations of Tenant under this Lease, and (ii) all
Permitted Transfer Costs related to such assignment. In the case of assignment,
the amount of subrent owed to Landlord shall be paid to Landlord on the same
basis, whether periodic or in lump sum, that such subrent is paid to Tenant by
the assignee. In calculating Landlord's share of any periodic payments, all
Permitted Transfer Costs shall be first recovered by Tenant.
15.5.3 If Tenant sublets all or any part of the Premises, then
with respect to
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the space so subleased, Tenant shall pay to Landlord fifty percent (50%) of the
positive difference, if any, between (i) all subrent actually paid by the
subtenant to Tenant, less (ii) the sum of all Base Rent and Additional Rent
allocable to the space sublet and all Permitted Transfer Costs related to such
sublease. Such amount shall be paid to Landlord on the same basis, whether
periodic or in lump sum, that such subrent is paid to Tenant by its subtenant.
In calculating Landlord's share of any periodic payments, all Permitted Transfer
Costs shall be first recovered by Tenant.
15.5.4 Tenant's obligations under this Section 15.5 shall
survive any Transfer, and Tenant's failure to perform its obligations hereunder
shall be a Default by Tenant. At the time Tenant makes any payment to Landlord
required by this section, Tenant shall deliver an itemized statement of the
method by which the amount of which Landlord is entitled was calculated,
certified by Tenant as true and correct. Landlord shall have the right at
reasonable intervals to inspect Tenant's books and records relating to the
payments due hereunder. Upon request therefore, Tenant shall deliver to Landlord
copies of all bills, invoices or other documents upon which its calculations are
based. Landlord may condition its approval of any Transfer upon obtaining a
certification from both Tenant and the proposed transferee of all subrent and
other amounts that are to be paid to Tenant in connection with such Transfer.
15.5.5 As used in this section, the term "subrent" shall mean
any consideration of any kind received, or to be received by Tenant, as rent or
in lieu of rent, including payments from or on behalf of the transferee (in
excess of the book value thereof) for Tenant's assets, fixtures, leasehold
improvements, inventory, accounts, goodwill, equipment, furniture, and general
intangibles. As used in this section, the term "Permitted Transfer costs" shall
mean (i) all reasonable leasing commissions paid to third parties not affiliated
with Tenant in order to obtain the Transfer in question, (ii) all reasonable
attorneys' fees incurred by Tenant with respect to the Transfer in question, and
(iii) the reasonable cost of improvements installed in the premises at the cost
and expense of Tenant for the benefit of the subtenant.
15.6 Corporations and Partnerships. If Tenant is a partnership, any
withdrawal or substitution (whether voluntary, involuntary, or by operation of
law and whether occurring at one time or over a period of time) of any
partner(s) owning fifty percent (50%) or more of the partnership, any
assignments) of fifty percent (50%) or more (cumulatively) of any interest in
the capital or profits of the partnership, or the dissolution of the partnership
shall be deemed a Transfer of this Lease. Notwithstanding anything to the
contrary in this Lease, Tenant may, without Landlord's prior written consent and
without any participation by Landlord in assignment and subletting proceeds,
sublet the Premises or assign the Lease to: (i) a subsidiary, affiliate,
division or corporation controlling, controlled by or under common control with
Tenant; (ii) a successor corporation related to Tenant by merger, consolidation,
nonbankruptcy reorganization, or government action; or (iii) a purchaser of
substantially all of Tenant's assets located in the Premises; provided, however,
that the entity occupying the Premises on the first day after the date of any
assignment, transfer or subletting of the Premises pursuant to subsections (i)
through (iii) of this Section 15.6 has a net worth that is greater than or equal
to the
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greater of (a) the net worth of the Tenant on the Commencement Date, or (b) the
net worth of the Tenant on the day prior to the day of assignment, subletting or
transfer to such entity. For the purpose of this Lease, sale of Tenant's capital
stock through any public exchange shall not be deemed an assignment, subletting,
or any other transfer of the Lease or the Premises.
15.7 Reasonable Provisions. Tenant expressly agrees that the
provisions of this Article 15 are not unreasonable standards or conditions for
purposes of Sections 1951.4(b)(2) and 1995.260 of the California Civil Code, as
amended from time to time.
15.8 Reimbursement of Landlord's Costs. Tenant shall pay upon
demand Landlord's actual and reasonably incurred attorneys' fees, engineering
fees, architects fees, and fees of any other consultant engaged by Landlord for
reviewing, investigating, processing and/or documenting any requested Transfer,
whether or not Landlord's consent is granted.
Article 16. Subordination; Lender Approval; Attornment; Estoppel
Certificates: Financial Statements.
16.1 Subordination. Subject to section 16.2 hereof, this Lease
shall be subject and subordinate to the lien of any mortgages or deeds of
trust(including all advances thereunder, renewals, replacements, modifications,
supplements, consolidations, and extensions thereof) in any amounts) whatsoever
now or hereafter placed on or against (i) the Premises, or (ii) Landlord's
interest or estate therein, without the necessity of the execution and delivery
of any further instruments on the part of Tenant to effectuate such
subordination. If the holder of any mortgage or deed of trust constituting a
first lien against the Premises shall elect to have this Lease prior to the lien
of its mortgage or deed of trust and shall give written notice thereof to
Tenant, this Lease shall be deemed prior to such mortgage or deed of trust and,
if the holder of the first mortgage or deed of trust so specifies shall be prior
to all other mortgages and deeds of trust affecting the Premises whether this
Lease is dated prior to or subsequent to the date of such mortgage or deed of
trust or the date of the recording thereof. Any such holder of a first mortgage
or deed of trust may also require that although this Lease is made prior to such
mortgage or deed of trust, the holder's rights in connection with insurance
proceeds, condemnation proceeds, other liens and/or other matters described by
such holder may be made senior to this Lease and the rights of Tenant hereunder,
and Tenant shall subordinate this Lease and Tenant's rights hereunder to any or
all such matters as requested by such holder.
16.2 Subordination Agreements. Notwithstanding anything to the
contrary in this Lease, this Lease shall not be subject to or subordinate to any
ground or underlying lease or to any lien, mortgage, deed of trust, or security
interest now or hereafter affecting the Premises, nor shall Tenant be required
to execute any documents subordinating this Lease, unless the ground lessor,
lender, or other holder of the interest to which this Lease shall be
subordinated contemporaneously executes a recognition and nondisturbance
agreement which (i) provides that this Lease shall not be terminated so long as
Tenant is not in default under this Lease and (ii) subject to modifications of
this Lease permitted by section 16.3 below, recognizes all of Tenant's
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rights hereunder. Tenant shall execute and deliver within five (5) business days
after demand, without charge therefor, such further instruments evidencing
subordination of this Lease to ground or underlying leases and/or to the lien of
any first mortgages or deeds of trust affecting the Premises as may be required
by Landlord; provided that such mortgagee or beneficiary under such mortgage or
deed of trust or lessor under such ground or underlying lease agrees in writing
that this Lease shall not be terminated in the event of any foreclosure if
Tenant is not in default under this Lease at the time of such foreclosure.
Tenant's failure to execute and timely deliver such instruments evidencing
subordination of this Lease shall constitute a Default by Tenant hereunder.
16.3 Approval by Lenders. Tenant recognizes that the provisions of
this Lease may be subject to the approval of any financial institution that may
make a loan secured by a new or subsequent deed of trust or mortgage affecting
the Premises if Landlord refinances or otherwise modifies any existing financing
on the Premises. If the financial institution should require, as a condition to
such financing, any modifications of this Lease, including without limitation,
modification of the provisions relating to damage to and/or condemnation of the
Premises, Tenant agrees to execute the appropriate amendments; provided,
however, that no modification shall increase the Rentals payable by Tenant
hereunder or materially increase any other obligation of Tenant or materially
decreases any right of Tenant. Failure of Tenant to execute and deliver to
Landlord any such amendment within five business days after demand shall
constitute a Default by Tenant hereunder.
16.4 Attornment. In the event of foreclosure or the exercise of the
power of sale under any mortgage or deed of trust made by Landlord and covering
the Premises, Tenant shall attorn to the purchaser upon any such foreclosure or
sale and recognize such purchaser as the Landlord under this Lease, provided
such purchaser expressly agrees in writing to be bound by the terms of the
Lease.
16.5 Estoppel Certificates and Financial Statements.
16.5.1 Delivery by Tenant. Tenant shall, within five business
days following request by Landlord therefor and without charge, execute and
deliver to Landlord any and all documents requested by Landlord in connection
with the sale or financing of the Premises or any lender making a loan affecting
the Premises, including without limitation estoppel certificates and current
financial statements of Tenant. Landlord may require that any estoppel
certificates shall (i) certify that this Lease is unmodified and in full force
and effect (or, if modified, state the nature of such modification and certify
that this Lease, as so modified, is in full force and effect) and has not been
assigned, (ii) certify the date to which Rentals are paid in advance, if any,
(iii) acknowledge that there are not, to Tenant's knowledge, any uncured
defaults on the part of Landlord hereunder, or specify such defaults if claimed,
(iv) evidence the status of this Lease as may be required either by a lender
making a loan to Landlord to be secured by a deed of trust or mortgage covering
the Premises or a purchaser of the Premises from Landlord, (v) warrant that in
the event any beneficiary of any security instrument encumbering the Premises
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forecloses on the security instrument or sells the Premises pursuant to any
power of sale contained in such security instrument, such beneficiary and its
transferee shall not be liable for the Security Deposit or for any claim of
damages or set off as a result of any pre-foreclosures or pre-sale breach by
Landlord, (vi) certify the date Tenant entered into occupancy of the Premises
and that Tenant is conducting business at the Premises, and (vii) certify such
other matters relating to the Lease and/or Premises as may be requested by a
lender making a loan to Landlord or a purchaser of the Premises from Landlord.
Any such estoppel certificate may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises. Any financial statements of Tenant
shall include an opinion of a certified public accountant (if available) and a
balance sheet and profit and loss statement for the most recent fiscal year, all
prepared in accordance with generally accepted accounting principles
consistently applied. Upon ten (10) days prior written request from Landlord
(which Landlord may make at any time during the Lease Term but not more often
than two (2) times any calendar year), Tenant shall deliver to Landlord a
current financial statement of Tenant. Landlord shall have a reciprocal
obligation to provide an estoppel certificate for the benefit of Tenant. If
Landlord shall fail to respond within ten (10) days of receipt by Landlord of a
written request by Tenant for such a certificate, Landlord shall be deemed to
have certified that the Lease is in full force and effect, that there are no
uncured defaults in Landlord's performance, that the security deposit is as
stated in the Lease, and that not more than one 91) month's Rent has been paid
in advance.
16.5.2 Failure to Deliver. Tenant's failure to timely deliver
an estoppel certificate as required pursuant to Section 16.5.1 above shall be
conclusive upon Tenant that (i) this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) there are now no
uncured defaults in Landlord's performance, (iii) no Rentals have been paid in
advance except those that are set forth in this Lease, (iv) no beneficiary of
any security instrument encumbering the Premises or its transferee shall be
liable for the Security Deposit or for any claim of damages or set off as a
result of any pre-foreclosure or pre-sale breach by Landlord in the event of a
foreclosure or sale under such security instrument, and (v) Tenant has entered
into occupancy of the Premises on such date as may be represented by Landlord
and is open and conducting business at the Premises. Tenant's failure to timely
deliver any financial statements or estoppel certificates as required pursuant
to Section 16.5.1 above shall be a Default by Tenant.
Article 17. Remedies Upon Default by Tenant.
17.1 Events of Default. The term "Default by Tenant" shall mean the
occurrence of any of the following events:
17.1.1 Failure by Tenant to pay when due any Rentals required or
due hereunder when such failure continues for more than five (5) days after
written demand for payment is delivered by Landlord to Tenant;
17.1.2 Vacation or abandonment of the Premises by Tenant;
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17.1.3 Commencement, and continuation for at least sixty (60)
days, of any case, action, or proceeding by, against, or concerning Tenant under
any federal or state bankruptcy, insolvency, or other debtor's relief law,
including without limitation, (i) a case under Title 11 of the United States
Code concerning Tenant or Guarantor, whether under Chapter 7, 11, or 13 of such
Title or under any other Chapter, or (ii) a case, action, or proceeding seeking
Tenant's financial reorganization or an arrangement with any of Tenant's
creditors;
17.1.4 Voluntary or involuntary appointment of a receiver,
trustee, keeper, or other person who takes possession for more than thirty days
of substantially all of Tenant's assets or of any asset used in Tenant's
business on the Premises, regardless of whether such appointment is as a result
of insolvency or any other cause;
17.1.5 Execution of an assignment for the benefit of creditors
of substantially all assets of Tenant available by law for the satisfaction of
judgment creditors;
17.1.6 Commencement of proceedings for winding up or
dissolving (whether voluntary or involuntary) the entity of Tenant;
17.1.7 Levy of a writ of attachment or execution on Tenant's
interest under this Lease, if such writ continues for a period of twenty days;
17.1.8 Use of the Premises for an unlawful purpose or the
occurrence of a nuisance or waste in or on the Premises in violation of
subsection 5.5.2 hereof;
17.1.9 Failure by Tenant to keep in force the insurance
required by section 8.1.
17.1.10 Transfer or attempted Transfer of this Lease by Tenant
contrary to the provisions of Article 15 above;
17.1.11 Failure by Tenant to timely execute and deliver a
subordination agreement, or estoppel certificate, or lease amendment, or failure
to timely deliver a financial statement, or any other document, as required
under Article 16 hereof; or
17.1.12 Failure by Tenant to timely observe or perform any
other term, covenant, condition, warranty, or provision contained in this Lease
when such failure continues for more than ten (10) days after demand, provided
that if performance or observance requires more than ten (10) days (and cannot
be accomplished by the payment of money) then so long as Tenant initiates the
performance or observance within said ten (10) days and thereafter diligently
pursues same to completion no Default by Tenant shall be deemed to have
occurred.
17.2 Rights of Landlord Upon Tenant's Default. Upon any Default by
Tenant, Landlord shall have the right to terminate this Lease and Tenant's right
to possession of the Premises by giving written notice of termination to Tenant,
and to recover from Tenant:
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17.2.1 The worth at the time of award of the unpaid Rentals
which had been earned at the time of termination;
17.2.2 The worth at the time of award of the amount by which
the unpaid Rentals which would have been earned after termination until the time
of award exceeds the amount of such rental loss that Tenant proves could have
been reasonably avoided;
17.2.3 The worth at the time of award (computed by discounting
at the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent) of the amount by which the unpaid Rentals for the
balance of the Lease Term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided; and
17.2.4 Any other amounts necessary to compensate Landlord for
detriment proximately caused by the Default by Tenant or which in the ordinary
course of events would likely result, including without limitation the
reasonable costs and expenses incurred by Landlord in:
(i) Retaking possession of the Premises;
(ii) Cleaning and making repairs and alterations
(including installation of leasehold improvements, whether or not the same shall
be funded by a reduction of rent, direct payment or allowance or otherwise)
necessary to return the Premises to good condition and to prepare the Premises
for reletting;
(iii) Removing, transporting, and storing any of Tenant's
property left at the Premises (although Landlord shall have no obligation to
remove, transport, or store any of the property);
(iv) Reletting the Premises, including without
limitation, brokerage commissions, advertising costs, and attorneys' fees;
(v) Attorneys' fees, expert witness fees, consultants and
court costs; and
(vi) Costs of carrying the Premises such as repairs,
maintenance, taxes and insurance premiums, utilities and security precautions
(if any).
17.2.5 The "worth at the time of award" of the amounts
referred to in subparagraphs 17.2.1 and 17.2.2 of this Section 17.2 is computed
by allowing interest at the lesser of ten percent per annum or the maximum rate
allowed by law.
17.3 Continuance of Lease. Upon Default by Tenant and unless and
until Landlord
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elects to terminate this Lease pursuant to Section 17.2 above, this Lease shall
continue in effect after the Default by Tenant and Landlord may enforce all
rights and remedies under this Lease, including without limitation, the right to
recover payment of Rentals as they become due. Neither efforts by Landlord to
mitigate damages caused by a Default by Tenant nor the acceptance of any Rentals
shall constitute a waiver by Landlord of any of Landlord's rights or remedies,
including the rights and remedies specified in Section 17.2 above. The rights of
Landlord under this Article 17 shall be additional to all other rights to which
Landlord is entitled in accordance with applicable law.
17.4 Reletting Premises. Upon Default by Tenant, Landlord may, at
Landlord's election, reenter the Premises, and without terminating this Lease,
and at any time and from time to time, relet the Premises or any part or parts
thereof for the account and in the name of Tenant or otherwise. Landlord may at
Landlord's election eject Tenant or any of Tenant's subtenants, assignees or
other persons claiming any right in or through this Lease. Tenant shall
nevertheless pay to Landlord on the due date specified in this Lease all Rentals
required to be paid by Tenant under this Lease, plus Landlord's expenses, less
the proceeds of any sublease or reletting. The expenses allowed Landlord shall
include without limitation costs paid to retake possession of the Premises
(including attorneys' fees), costs to place the Premises in its original
condition, ordinary wear and tear excepted, costs to secure new tenants
(including broker's commissions and attorneys' fees) and costs to fulfill all of
Tenant's covenants and conditions hereunder to the end of the Lease Term. No act
by or on behalf of Landlord under this Section 17.4 shall constitute a
termination of this Lease unless Landlord gives Tenant written notice of
termination. Notwithstanding any prior reletting without termination, Landlord
may later elect to terminate this Lease because of Default by Tenant.
17.5 Attorneys' Fees. Tenant shall pay reasonable fees and costs of
attorneys engaged by Landlord in collection of Rentals or to enforce any of
Landlord's rights and remedies under this Article 17 and applicable law.
17.6 Waiver of Jury Trial. Landlord and Tenant each hereby waives
trial by jury in any action or proceeding arising out of this Lease or its
execution or negotiation whether based on contract or tort and whether brought
by either Landlord or Tenant.
17.7 Waiver of Rights of Redemption. In the event Landlord (i)
lawfully terminates Tenant's right to possession of the Premises, or (ii) if
Tenant abandons same or the Lease otherwise terminates (whether by the
expiration of the period set forth in a notice of default, decision of a court,
or otherwise), Tenant hereby expressly waives any and all rights to recover or
regain possession of the Premises or to reinstate or redeem this Lease to which
it may be entitled by or under any present or future law including without
limitation, Section 1174 and 1179 of the California Code of Civil Procedure. In
addition, Tenant hereby expressly waives any and all right to bring any action
whatsoever against any tenant taking possession of the Premises after Tenant has
been dispossessed or evicted hereunder or has abandoned, delivered, or
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surrendered possession of the Premises, or to make any such tenant a party to
any action brought by Tenant against Landlord.
17.8 Default and Litigation Notice Provisions. For purposes of Code
of Civil Procedure Section 1162, Tenant's "place of residence" and "usual place
of business" shall be the Premises and for purposes of Code of Civil Procedure
Sections 1011 and 1013, concerning service of notices or papers during
litigation, "residence" and "office" of Tenant shall mean and be the Premises
until Tenant has released actual and legal possession of the Premises to
Landlord or has appeared in such litigation by California licensed legal
counsel.
17.9 Remedies are Cumulative. Each of the remedies provided
Landlord hereunder cumulative with and in addition to all other rights and
remedies now or hereafter allowed either hereunder or by law, equity or
agreement of the parties.
Article 18. Holding Over.
18.1 Holding Over. This Lease shall terminate without further
notice at the expiration of the Lease Term. Any holding over by Tenant after the
expiration of the Lease Term shall not constitute a renewal or extension of the
Lease Term or give Tenant any rights in or to the Premises except as expressly
provided in this Lease. Any holding over after the expiration of the Lease Term,
with the express consent of Landlord, shall be construed to be a tenancy from
month to month, at one hundred fifty percent (150%) of the Base Rent for the
month preceding the expiration of the Lease Term in addition to all Additional
Rent payable hereunder, and shall otherwise be on the terms and conditions
herein specified insofar as applicable. If Tenant remains in possession of the
Premises after expiration of the Lease Term or other Lease Termination without
Landlord's consent, Tenant shall indemnify Landlord against any loss or
liability resulting from Tenant's failure to surrender the Premises, including
without limitation, any claims made by any succeeding tenant based on delay in
the availability of the Premises.
Article 19. Notices.
19.1 Service of Notices. Any notice required or desired to be given
under this Lease shall be in writing with copies directed as indicated and shall
be personally served or given by certified mail. Any notice given by mail shall
be deemed to have been given when served or, if mailed (certified, return
receipt requested and postage prepaid) three business days after mailing,
addressed to the party to be served with a copy as indicated herein. Either
party may change its address for purposes of notice by giving notice of such
change of address to the other party in accordance with the provisions of this
Article 19, provided that Notices of Default by Tenant or otherwise related to
demands for performance by Tenant may always be served at the Premises while
Tenant is in possession. At the date of execution of this Lease, the addresses
of the parties are:
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Landlord: CHAN-PAUL PARTNERSHIP, A CALIFORNIA GENERAL PARTNERSHIP
c/o Jay Paul Company
Attn: Jay Paul
353 Sacramento Street, Suite 1740
San Francisco, CA 94111
With a copy to: Thomas G. Perkins, Esq.
152 North Third Street, Suite 900
San Jose, California 95112
Tenant: HANDSPRING, INC.
Prior to the Commencement Date: After the Commencement Date
299 California Avenue 189 North Bernardo
Suite 300 Mountain View, CA
Palo Alto, CA 94304 Attn: Bernard J. Whitney, CFO
Attn: Bernard J. Whitney, CFO
With a copy to: Marc E. Gottschalk, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Article 20. Attorneys' Fees.
20.1 Prevailing Party to Recover. In the event either party shall
bring any action or legal proceeding for damages for an alleged breach of any
provision of this Lease, to recover Rentals, to terminate the tenancy of the
Premises, or to enforce, protect or interpret any term or covenant of this Lease
or right or remedy of either party, the prevailing party shall be entitled to
recover as a part of such action or proceeding, reasonable attorneys' fees,
expert witness fees and court costs as may be fixed by the court.
Article 21. Successors.
21.1 Covenants are Binding. Subject to the provisions of Article 16
above and Section 30.2 below, the covenants and agreements contained in this
Lease shall be binding on the parties hereto and on their respective successors
and assigns.
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Article 22. Landlord Default.
22.1 No Default Without Notice. Landlord shall not be in default
under this Lease unless Tenant shall have given Landlord written notice of the
breach and, within thirty days after notice, Landlord has not cured the breach
or, if the breach is such that it cannot reasonably be cured under the
circumstances within thirty days, has not commenced to the cure within said
thirty (30) days and thereafter diligently pursued same to completion. In the
event of any default on the part of Landlord under this Lease, Tenant shall give
notice of same by certified mail, return receipt requested, to any beneficiary
of a deed of trust or mortgagee of a mortgage, affecting the Premises whose
address shall have been furnished to it, and shall offer such beneficiary or
mortgagee a reasonable opportunity to cure the default, including time to obtain
possession of the Premises by power of sale or judicial foreclosure, if such
should prove necessary to effect a cure.
Article 23. Limitation on Landlord Liability.
23.1 No Personal Liability. Any money judgment attained by Tenant
(whether tort or contract and including costs and attorneys' fees) based upon
Landlord's breach of this Lease or of a duty or claims arising out of this Lease
or in connection with this Lease and its subject matters shall be satisfied only
out of Landlord's insurance and the proceeds of the sale or disposition of
Landlord's interest in the Premises (whether by Landlord or by execution of
judgment) and Landlord shall have no personal liability therefor. In no event
shall Landlord or its agents be liable to Tenant for consequential damages,
including without limitation, lost profits or lost goodwill and Tenant waives
any right to assert claims for same against Landlord or its agents.
Article 24. Quiet Enjoyment.
24.1 Express Conditional Covenant. Landlord covenants and agrees
with Tenant that upon Tenant paying Rentals and timely performing all of its
covenants and conditions under the Lease, Tenant shall and may peaceably and
quietly have, hold and enjoy the Premises for the Lease Term, subject, however,
to the terms of this Lease and any mortgages or deeds of trust affecting the
Premises, and the rights reserved by Landlord hereunder.
Article 25. Surrender.
25.1 Free of Liens. Tenant shall vacate and deliver possession of
the Premises free and clear of all liens, charges, or encumbrances thereon
resulting from any act or omission on Tenant's part and free and clear of all
violations of applicable laws of any federal, state, municipal, or other agency
or authority, and shall indemnify Landlord against any and all loss, expense,
damage, costs, and attorneys' fees arising out of Tenant's failure to do so.
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Article 26. Waiver.
26.1 No Implied Waiver. The waiver by Landlord of any breach of any
term, covenant or condition herein contained (or the acceptance by Landlord of
any performance by Tenant after the time the same shall become due) shall not be
deemed to be a waiver of such term, covenant or condition or any subsequent
breach thereof or of any other term, covenant or condition herein contained,
unless otherwise expressly agreed to by Landlord in writing. The acceptance by
Landlord of any sum less than that which is required to be paid by Tenant shall
be deemed to have been received only on account of the obligation for which it
is paid (or for which it is allocated by Landlord, in Landlord's absolute
discretion, if Tenant does not designate the obligation as to which the payment
should be credited), and shall not be deemed an accord and satisfaction
notwithstanding any provisions to the contrary written on any check or contained
in any letter of transmittal. No custom or practice which may arise between the
parties hereto in the administration of the terms of this Lease shall be
construed as a waiver or diminution of Landlord's right to demand performance by
Tenant in strict accordance with the terms of this Lease.
Article 27. Entire Agreement.
27.1 Integration Provision. Any agreements, warranties, or
representations not expressly contained herein shall in no way bind either
Landlord or Tenant, and Landlord and Tenant expressly waive all claims for
damages by reason of any statement, representation, warranty, promise or
agreement, if any, not contained in this Lease. This Lease supersedes and
cancels any and all previous negotiations, arrangements, brochures, agreements
and understandings, whether written or oral, between Landlord and its agents and
Tenant and its agents with respect to the Premises or this Lease. This Lease
constitutes the entire agreement between the parties hereto and is intended by
the parties as a final expression of their agreement and may not be contradicted
by evidence of any prior argument or of a contemporaneous oral agreement. This
Lease is further intended by the parties as a complete and exclusive statement
of the terms of the parties agreement and may not be explained or supplemented
by evidence of consistent additional terms. No addition to, or modification of,
any term or provision of this Lease shall be effective until and unless set
forth in a written instrument signed by both Landlord and Tenant.
Article 28. Landlord's Right to Perform Tenant's Covenants.
28.1 Landlord May Perform. If Tenant shall at any time fail to make
any payment or perform any other act on its part to be made or performed under
this Lease, including without limitation the payments and obligations described
in Article 6, Article 7 and Article 10, Landlord may upon fifteen days written
notice to Tenant, but shall not be obligated to, and without waiving or
releasing Tenant from any obligation under this Lease, make such payment or
perform such other act to the extent that Landlord may deem desirable, and in
connection therewith, pay expenses and employ counsel. All sums so paid by
Landlord and all penalties, interest and costs
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in connections therewith shall be due and payable by Tenant as Additional Rent
upon demand.
Article 29. Guaranty.
29.1 [Intentionally Omitted].
Article 30. General.
30.1 Headings. The section and subsection headings used in this
Lease are for convenience of reference only. They shall not be construed to
limit or extend the meaning of any part of this Lease, and shall not be deemed
relevant in resolving any question of interpretation or construction of any
section of this Lease.
30.2 Definition of Landlord. The term "Landlord" as used in this
Lease, so far as the covenants or obligations on the part of Landlord are
concerned, shall be limited to mean and include only the owner at the time in
question of the fee title to the Premises. In the event of any transfer of such
interest, the Landlord herein named (and in case of any subsequent transfers or
conveyances, the then grantor) shall from and after the date of such transfer or
conveyance be automatically freed and relieved of all liability with respect to
performance to any covenants or obligations on the part of Landlord contained in
this Lease which are to be performed or first arise on and after the date of
such transfer or conveyance. The covenants and obligations contained in this
Lease on the part of Landlord shall, subject to the provisions of this Section
30.2, be binding upon each Landlord and its heirs, personal representatives,
successors and assigns only during its respective period of ownership. Except as
provided in this Section 30.2, this Lease shall not be affected by any transfer
of Landlord's interest in the Premises, and Tenant shall attorn to any
transferee of Landlord provided that all of Landlord's obligations hereunder are
assumed in writing by such transferee.
30.3 Exhibits. All exhibits attached to this Lease shall be deemed
to be incorporated herein by the individual reference to each such exhibit, and
all such exhibits shall be deemed to be a part of this Lease as though set forth
in full in the body of the Lease.
30.4 Definition of Agents. For purposes of this Lease and without
otherwise affecting the definition of the word "agent" or the meaning of
"agency," the term "agents" shall be deemed to include the agents, employees,
servants, invitees, contractors, successors, guests, customers, subcontractors,
representatives, partners, affiliated companies, and any other person or entity
related in any way to the respective party, Landlord or Tenant.
30.5 Interpretation of Terms. The words "Landlord" and "Tenant" as
used herein shall include the plural as well as the singular. Words used in
neuter gender include the masculine and feminine and words in the masculine or
feminine gender include the neuter.
30.6 Counterparts. This Lease may be executed in counterparts, each
of which
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shall be deemed an original, but such counterparts when taken together shall be
deemed one agreement.
30.7 Time of Essence. Time is of the essence as to each and every
provision in this Lease requiring performance or observance by Tenant within a
specified time.
30.8 Severability. In case any one or more of the provisions
contained herein, shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Lease, but this Lease shall be
construed as if such invalid, illegal or unenforceable provision had not been
contained herein. However, if Tenant's obligation to pay the Rentals is
determined to be invalid or unenforceable, this Lease at the option of Landlord
shall terminate.
30.9 Merger. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger and shall, at
the option of Landlord, terminate all or any existing subleases or subtenants,
or may, at the option of Landlord, operate as an assignment to Landlord of any
or all such subleases of subtenants.
30.10 Governing Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California.
30.11 Authority. Each individual executing this Lease on behalf of
a corporation, limited liability company or partnership represents and warrants
that he or she is duly authorized to execute and deliver this Lease on behalf of
and as the act of said entity in accordance with the bylaws or other governing
agreement of said entity, and this Lease is binding upon and enforceable against
said entity in accordance with its terms.
30.12 Irrevocable Offer to Lease. Once signed by Tenant and
delivered to Landlord, this Lease shall constitute an irrevocable offer to Lease
which shall lapse automatically five business days thereafter if not signed and
returned by Landlord within said five business days.
30.13 Representation by Legal Counsel. Tenant warrants and
represents that it has been represented by independent legal counsel of its
choice with respect to the negotiation and execution of this Lease and has fully
represented and accepts the legal implications and consequences of each and
every provision hereof and agrees that no provision is unenforceable as being
unconscionable, under Civil Code Section 1670.5 or on any other grounds, and
waives any right to claim otherwise.
30.14 Attached Exhibits. The following Exhibits are attached
hereto:
Exhibit "A" - Legal Description and Plot Plan
Exhibit "B" - Monument Signage
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Exhibit "C" - Tenant Improvements
Article 31. Brokers. Landlord and Tenant each represents to the other
that it has had no dealings with any real estate broker or agent in connection
with the negotiation of this Lease, except for the real estate brokers or agents
identified on the signature page hereof ("Brokers") and that they know of no
other real estate broker or agent who is entitled to a commission or finder's
fee in connection with this Lease, and Landlord not Tenant shall be responsible
for Commissions, if any, due to the Brokers under a separate agreement. Each
party shall indemnify, protect, defend, and hold harmless the other party
against all claims, demands, losses, liabilities, lawsuits, judgments, and costs
and expenses (including reasonable attorney fees) for any leasing commission,
finder's fee, or equivalent compensation alleged to be owing on account of the
indemnifying party's deals with any real estate broker or agent other than the
Brokers. The terms of this section shall survive the expiration or earlier
termination of the Lease Term.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date set
forth above.
LANDLORD: TENANT:
CHAN-PAUL PARTNERSHIP, HANDSPRING, INC.,
A CALIFORNIA GENERAL PARTNERSHIP A CALIFORNIA CORPORATION
BY: /s/ Jay Paul BY: /s/ Bern Whitney
-------------------------------- ------------------------------
JAY PAUL
ITS: CO-MANAGER AND GENERAL PARTNER ITS: CFO
BY: /s/ Doug Chan
--------------------------------
DOUG CHAN
ITS: CO-MANAGER AND GENERAL PARTNER
37
<PAGE> 44
BROKER EXECUTION
LANDLORD'S BROKER TENANT'S BROKER
CORNISH & CAREY COMMERCIAL WAYNE MASCIA ASSOCIATES
BY: /s/ Phil Mahoney BY: /s/ Jim Obermeyer
-------------------------------- ------------------------------
PHIL MAHONEY JIM OBERMEYER
ITS: EXECUTIVE VICE PRESIDENT ITS: SENIOR VICE PRESIDENT
ADDRESS:
5201 Great America 3945 Freedom Circle #350
- ----------------------------------- --------------------------------
S.C., CA 95054 Santa Clara, CA 95054
- ----------------------------------- --------------------------------
38
<PAGE> 45
Exhibit A
Legal Description and Plot Plan
Real property in the City of Mountain View, County of Santa Clara, State of
California, described as follows:
Parcel 1, as shown on the Parcel Map filed December 19, 1984 in Book 537 of
Maps, page 20, Records of Santa Clara County.
APN: 165-36-004
ARB: 163-33-13, 14
<PAGE> 46
[GRAPHIC DESCRIPTION OF PROPERTY LEASED]
<PAGE> 47
[GRAPHIC RECORD OF SURVEY]
<PAGE> 48
[GRAPHIC OF DISPLAY SIGNAGE]
<PAGE> 49
[GRAPHIC DESCRIPTION OF PREMISES]
<PAGE> 50
EXHIBIT C
The following construction items shall be considered part of the landlords work
at 189 N Bernardo in Mt. View:
- Repair or replace all ceiling grid located on both the first and second
floor.
- Install new 2' x 4' Armstrong Second Look ceiling tile on both the first
and second floors.
- General electrical work shall include: Replace all damaged or discolored
lighting lenses, replace all damaged lamps, relocate all open office
light switching and connect all open office zones to motion sensors.
- General Mechanical work shall include: Replacing all registers and
grills, relocating all open office thermostats, replacing all damaged or
missing ductwork and testing of all VAV boxes and HVAC units. All
deficiencies to the HVAC system shall be corrected by the Landlord.
- Cap all existing plumbing on both the first and second floor and repair
all leaking fixtures in the restrooms.
- Install a 2' x 8'-10" sidelight at all existing office locations.
- Recondition all existing wood doors.
- Install new medium grade carpet and base throughout the building. This
scope to include all offices, stairwells and open office areas. New
lobby carpeting shall be installed at the Tenants expense.
- Framing and drywall work shall include: Install a soffit over the entry
doors to hide alarm conduit, patch all demolished wall intersections and
install draft stops as required by the City of Mt. View.
- Paint all drywall surfaces including the restrooms. The scope will
include two coats of paint.
- ADA items shall include: Extend the lobby stair railing, confirm
certification of the existing elevator and widen existing concrete
walkway at West entrance.
- Install plastic laminate casework in two break rooms and two copy rooms.
- Provide a professional cleaning service for all interior areas.
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.7
SOFTWARE LICENSE AGREEMENT
This Software License Agreement is entered into by and between Palm
Computing, Inc., a subsidiary of 3Com Corporation (collectively, "3Com"), a
California corporation with a place of business at 1565 Charleston Road,
Mountain View, California 94043, and JD Technology, Inc. ("JD"), a California
corporation with a place of business at P.O. Box 7066, Menlo Park, California.
The effective date of this Agreement shall be the date last executed below
("Effective Date").
RECITALS
A. 3Com or its suppliers are the owners of software and other technology
related to the 3Com Palm Computing platform.
B. JD is a developer, manufacturer and marketer of handheld computing
products.
C. JD desires to obtain a license to certain 3Com software and
technology, as more particularly described in Exhibit A (Palm Software), in
order to develop, manufacture and market handheld computing products
incorporating such 3Com software and technology. 3Com is willing to grant JD
such a license upon the terms and conditions set forth below.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS
1.1 "Confidential Information" means that information of either party
("Disclosing Party") which is disclosed to the other party ("Receiving Party")
pursuant to this Agreement, in written form and marked "Confidential,"
"Proprietary" or similar designation, or if disclosed orally, the Disclosing
Party shall indicate that such information is confidential at the time of
disclosure and send a written summary of such information to the Receiving Party
within thirty (30) days of disclosure and mark such summary "Confidential,"
"Proprietary" or similar designation. Confidential Information shall include,
but not be limited to, trade secrets, know-how, inventions, techniques,
processes, algorithms, software programs, schematics, designs, contracts,
customer lists, financial information, product plans, sales and marketing plans
and business information. References to a Receiving Party or a Disclosing Party
shall also include all present and future subsidiary and parent companies of
such party, subject to the restrictions contained in this Agreement.
1.2 "JD Products" means any handheld computing products developed by JD,
or for JD by a third party, which contain Palm Software, in whole or part,
combined with JD's added value.
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<PAGE> 2
1.3 "JD Software" means any software developed or acquired by JD, or for
JD by a third party, for the JD Products.
1.4 "Net Revenue" means monies received or receivable by JD in
connection with the sale, permitted licensing, distribution or other
exploitation of the JD Products, but shall exclude taxes, returns, rebates, and
separately stated shipping and handling costs or maintenance, support, and
engineering fees.
1.5 [*]
1.6 "Palm Device Applications" means the applications files described in
Exhibit A (Palm Software).
1.7 "Palm Device Applications SDK" means 3Com's commercially available
software development kit for applications for the Palm Computing platform as
described in Exhibit A (Palm Software).
1.8 "Palm Desktop Software" means the 3Com desktop software related to
the 3Com Product described in Exhibit A (Palm Software).
1.9 "Palm Development Environment" means the development and debugging
tools relating to the Palm OS described in Exhibit A (Palm Software), including
a list of certain third-party development tools that are commercially available
relating to the Palm OS, provided that JD shall be responsible for obtaining any
necessary rights for such third-party development tools.
1.10 "Palm End-User Documentation" means the end-user documentation
related to the Palm Software as described in Exhibit A (Palm Software).
1.11 "Palm GUI" means the graphical user interface files for the Palm
Computing platform as described in Exhibit A (Palm Software).
1.12 "Palm Installation CD Files" means the artwork, guided tour files,
and other files and related elements of the Palm installation CD as described in
Exhibit A (Palm Software).
1.13 "Palm Materials" shall mean: (a) the Palm End-User Documentation,
Palm Technical Documentation, and any 3Com end user materials provided under
Section 7.3 below; and (b) all current and future foreign language versions
thereof, to the extent that 3Com has the right to grant JD rights to such
versions.
1.14 "Palm OS" means the Palm operating system software files and build
tools described in Exhibit A (Palm Software), including: (a) software and
documentation provided by 3Com to JD pursuant to Section 6.1; and (b) the Palm
OS Drivers. All Palm OS software shall be provided in object code form only,
except as may be agreed by the parties pursuant to Section 6.2(b).
* 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.
2
<PAGE> 3
1.15 "Palm OS Drivers" means the software drivers and sample extensions
for the Palm OS as described in Exhibit A (Palm Software).
1.16 "Palm Software" shall mean: (a) the Palm Device Applications, Palm
Device Applications SDK, Palm Desktop Software, Palm GUI, Palm Installation CD
Files, Palm OS, Palm OS Drivers, and Palm Test Code; and (b) all current and
future foreign language versions thereof, to the extent that 3Com has the right
to grant JD rights to such versions.
1.17 "Palm Technical Documentation" means the technical documentation,
repair manuals, service manual, engineering schematics, and other materials
relating to the Palm OS as described in Exhibit A (Palm Software).
1.18 "Palm Test Code" means the software quality assurance and hardware
and production test code described in Exhibit A (Palm Software).
2. LICENSES
2.1 Development and Documentation License.
(a) 3Com Deliverables. Subject to the terms and conditions of this
Agreement, 3Com hereby grants to JD a limited, non-exclusive, non-transferable
(except as provided in Section 17.9), fully-paid license to use and reproduce
the Palm Development Environment, the Palm Software in object code form, and the
Palm Materials solely to develop, manufacture, test and support the JD Products.
Such license shall include the right to use any 3Com intellectual property
rights associated with or related to use of the Palm Development Environment,
Palm Software and/or Palm Materials, in connection with the development,
manufacturing, testing or support of such items solely within JD Products.
(b) Derivative Works. Subject to the terms and conditions of this
Agreement, 3Com hereby grants to JD a limited, non-exclusive, non-transferable
(except as provided in Section 17.9), fully-paid license to create derivative
works based upon the Palm Materials and, to the extent permitted under Section
6.2 (OS Enhancements), the Palm OS (collectively, "Derivative Works") solely for
use within JD Products.
2.2 Distribution License. Subject to the terms and conditions of this
Agreement, 3Com hereby grants to JD a limited, non-exclusive, non-transferable
(except as provided in Section 17.9), worldwide, royalty-bearing license to use,
reproduce, and distribute (directly and through third parties) solely for use
within JD Products: (i) the Palm Software in object code form only; (ii) the
Palm Materials (subject to Section 13); and (iii) Derivative Works. Such license
shall include the right to use any 3Com intellectual property rights associated
with or related to use of the Palm Development Environment, Palm Software and/or
Palm Materials, in connection with the distribution of such items within JD
Products. Such license shall also include the right to grant end user
sublicenses subject to the provisions of Section 10.4 below.
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<PAGE> 4
2.3 Compatibility and Trademark License.
(a) Compatibility Testing. 3Com will finalize and provide to JD
compatibility test criteria for ensuring interoperability of third party add-on
software for the Palm OS and the JD Products ("Test Criteria") within ninety
(90) days of the Effective Date. JD and 3Com will agree on a reasonable time
period for compatibility testing of the JD Products by any of 3Com's independent
testing labs ("Test Period") which shall be incorporated into the Test Criteria.
When finalized, such Test Criteria shall be attached as Exhibit B (Test
Criteria) to this Agreement. 3Com shall use its reasonable discretion in
determining the contents of the Test Criteria; provided that, in the event JD
does not approve of the Test Criteria, as its sole and exclusive remedy JD may
terminate this Agreement immediately without liability within thirty (30) days
of its first receipt of the Test Criteria from 3Com. Prior to the release of any
and all JD Products, or any upgrade or new version thereof, JD shall submit the
JD Products at its expense to any of 3Com's approved independent compatibility
testing labs ("Approved Testing Lab") for compatibility testing in accordance
with the Test Criteria. If the Approved Testing Lab rejects the JD Products
because of a nonconformance with the Test Criteria, then such testing lab will
provide JD and 3Com a detailed written statement of the reasons for such
rejection. ("Statement of Errors"). Upon receipt of the Statement of Errors, JD
shall use reasonable efforts to modify the JD Products to conform to the Test
Criteria. The parties acknowledge that the contents of the Test Criteria may
need to be changed from time to time if major new functionality is added to the
Palm Software. 3Com shall use its reasonable discretion in determining new Test
Criteria for such Palm Software with such new functionality and will apply such
new Test Criteria to its internal customers and to JD and its other licensees.
(b) Compatibility Certification Requirement. JD agrees that it
shall not release or distribute any JD Products which have not received
compatibility certification from an Approved Testing Lab in accordance with the
Test Criteria. Each version of a JD Product shall be required to pass the Test
Criteria only once, regardless of 3Com's subsequent modifications to the Palm
Software. However, in order to obtain compatibility certification for Palm
Software with new functionality and new Test Criteria as described in the last
paragraph of Section 2.3(a), JD may submit JD Products for compatibility testing
against such new Test Criteria in accordance with Section 2.3(a). JD may
indicate compatibility certification for JD Products only with respect to the
version(s) of the Test Criteria which the JD Products have passed.
(c) Trademark License. Subject to subsections (a) and (b) above and
the other terms and conditions of this Agreement, 3Com hereby grants to JD a
limited, non-exclusive, nontransferable (except as provided in Section 17.9),
fully-paid license to use, subject to the guidelines set forth in 3Com's
Trademark Policy Guidelines attached hereto as Exhibit C, the "Palm Computing
Platform Compatible" trademark and such other 3Com trademarks and the respective
stylistic marks as may be mutually agreeable and the artwork for which has been
provided by 3Com to JD (collectively, the "3Com Trademarks") in connection with
the marketing and sale of JD Products that have received compatibility
certification in accordance with subsection (a) above. JD shall use such
trademarks in conjunction with the distribution, promotion, and marketing of any
JD Products that have received compatibility certification, consistent with the
guidelines set forth in Exhibit C. 3Com shall have the right to receive free
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<PAGE> 5
samples of all advertising and promotional materials and reasonable numbers of
sample production units of the JD Products and related JD documentation on which
such trademarks are used to ensure that 3Com's quality standards are maintained.
The foregoing license shall be limited to use of the 3Com Trademarks for the
purposes of Section 8.3. JD shall have the right to permit its [*] for the JD
Products to use the 3Com Trademarks as set forth herein, provided that JD
contractually obligates such [*] to comply with the terms of Section 7.3 and
this Section 2.3, and provided further that 3Com reserves the right to enforce
and protect its trademark rights directly in the event of any failure to comply
with such terms.
2.4 Right to Sublicense.
(a) [*] Within thirty (30) days of the execution of each [*], JD
shall notify 3Com in writing of such execution and the identity of the [*]. Each
such [*] will contain provisions that protect 3Com's proprietary rights to no
less of an extent than such rights are protected by Sections 2.3 (Compatibility
and Trademark License), 2.5 (No Reverse Engineering), 2.6 (Inspection Rights),
8.3 (Branding), 10 (Proprietary Rights), 13 (Confidentiality), and 15 (Export
Regulations) of this Agreement. In the event of any failure by any [*] to comply
with the foregoing terms of their [*], JD shall use its reasonable efforts to
enforce and protect 3Com's intellectual property rights against such [*],
provided that 3Com reserves the right to enforce and protect its intellectual
property rights directly against such [*] with the cooperation of JD.
(b) Subject to the requirements of Sections 2.5 and 13, JD shall
have the right to sublicense its rights under Section 2.1 to consultants and
contractors solely for the purpose of developing, manufacturing, testing, and
supporting JD Products for JD.
(c) Except as specified in this Section 2.4, JD shall not have
the right to sublicense any of its rights under this Agreement.
2.5 No Reverse Engineering. JD shall not reverse engineer, reverse
compile or disassemble any Palm Software, or otherwise attempt to derive the
source code to any Palm Software. The foregoing shall not apply to such
activities conducted in the ordinary course of technical support of JD Products
such as may occur through the use of debugging tools.
2.6 Inspection Rights. 3Com shall have the right, upon reasonable
advance notice, to inspect JD's records and facilities, and its [*], with
respect to the manufacture of the JD Products hereunder and to receive sample
units thereof in order to verify that such manufacturing is within the scope of
this Agreement, and that there are appropriate security procedures to protect
3Com's Confidential Information. JD shall have similar rights with respect to
its contract manufacturers sublicensed under Section 2.4(b).
2.7 No Other Licenses. The licenses granted under this Agreement are
specifically set forth herein, and no licenses are granted by 3Com to JD by
implication or estoppel.
* 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.
5
<PAGE> 6
2.8 Limitations on Scope of Agreement. Notwithstanding the other terms
and conditions of this Agreement, the rights granted to JD under this Agreement
do not, and will not, include:
(a) [*]
(b) [*]
(c) any right or license to sublicense any of the foregoing rights
to any OEMs, consultants, contractors, or other third parties.
3. DELIVERY AND SOURCING
3.1 Delivery of Licensed Materials. Within forty-five (45) days
following the Effective Date, 3Com will deliver to JD a complete and current set
of the Palm Software, Palm Development Environment and Palm Materials.
3.2 Third Party Sourcing. Exhibit D contains a list of custom components
("Components") that JD may wish to purchase from 3Com's third party component
suppliers and/or manufacturers ("Sources") for incorporation in JD Products.
3Com hereby grants JD the right to use such suppliers and procure such
Components during the term of this Agreement, and will notify such Sources of
the same. In the event that such Sources are unable to promptly fill all
Component orders from 3Com due to market demand, manufacturing delays, or other
factors, JD acknowledges and agrees that such Sources shall fulfill all orders
from 3Com before fulfilling orders from JD or JD's [*].
4 ROYALTIES, FEES, AND REPORTS
4.1 Royalties. JD shall pay to 3Com royalties on its Net Revenues
("Royalties") as specified in Exhibit E (Royalties and Fees). Such royalties
shall be due and payable to 3Com regardless of whether JD collects payments for
the JD Products from JD's customers.
4.2 Maintenance and Support Fees. JD shall pay to 3Com fees as specified
in Exhibit E (Royalties and Fees) for maintenance, support, updates, and
upgrades provided by 3Com to JD pursuant to Sections 6.1 and 7. Such fees shall
be due and payable to 3Com in advance beginning one year after the Effective
Date, regardless of whether JD collects payments for the JD Products or their
maintenance and support from JD's customers.
4.3 Reports. JD shall keep adequate records to verify all reports and
payments to be made to 3Com pursuant to this Agreement for a period of two (2)
years following the date of
* 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.
6
<PAGE> 7
such reports and payments. 3Com shall have the right to select an independent
certified public accountant mutually agreeable to the parties to inspect no more
frequently than annually the records of JD on reasonable notice and during
regular business hours to verify the reports and payments required hereunder. If
such inspection should disclose any underreporting, JD shall pay 3Com such
amount within thirty (30) days of the conclusion of such inspection. The entire
cost of such inspection shall be borne by 3Com; provided, however, that if JD is
determined by such inspection to have underpaid royalties by five percent (5%)
or more, then the cost of such audit shall be borne by JD.
5. PAYMENT TERMS
5.1 Payment. Royalties shall accrue upon shipment to a customer of JD
Products by JD and shall be payable within [*] after the end of each calendar
[*]. Each Royalty payment shall be accompanied by a statement setting forth in
sufficient detail the basis upon which royalties were calculated. Payments and
statements shall be sent to 3Com at the address set forth at the beginning of
this Agreement or such other address as 3Com may designate in writing.
5.2 Royalty-Free Units of JD Products. JD shall have the right to
manufacture and distribute a commercially reasonable number of JD Products,
provided that it does not receive any revenue therefrom, for the following
purposes without incurring a Royalty obligation to 3Com: units for testing,
units with limited functionality for reseller point of purchase and
demonstration, units provided to 3Com, Palm, or other Palm licensees, units used
internally by employees or contractors of JD, and units given to press and
analysts.
5.3 [*]. [*] Such option will be JD's sole and exclusive remedy for
3Com's breach of this Section 5.3. The parties acknowledge that 3Com's current
license agreements with [*] and [*] are exempt from the requirements of this
provision.
5.4 Taxes. In addition to any other payments due under this Agreement,
JD agrees to reimburse and hold 3Com harmless from any sales, use, excise,
import or export, value added or similar tax or duty, any other tax not based on
3Com's net income, and any governmental permit and license fees, customs fees
and similar fees levied upon delivery of the deliverables and/or services
hereunder which 3Com may incur in respect of this Agreement.
6. UPDATE RESPONSIBILITIES AND OS ENHANCEMENTS
6.1 Updates and Additions to Palm Software and Palm Materials. During
the term of this Agreement and subject to Section 9.4 (3Com Update and Support
Obligations), 3Com shall
* 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.
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<PAGE> 8
deliver to JD all upgrades, bug fixes, modifications, enhancements and new
versions of the Palm Software and Palm Materials within ten (10) business days
after 3Com's internal beta releases or production releases. Upon such delivery,
the licenses granted to JD pursuant to Section 2 above shall be deemed to
include the items delivered pursuant to this Section 6.1. JD acknowledges that
during the term of this Agreement, in addition to delivering to JD the upgrades,
bug fixes, modifications, enhancements and new versions referred to above, 3Com.
expects to release separate modules and components for the Palm Computing
platform for which 3Com may elect to require that licensees pay separate
consideration and enter into separate agreements or amendments in order to have
any rights to such modules or components.
6.2 OS Enhancements.
(a) Approved OS Enhancements. In the event that JD requests in
writing that 3Com add new functionality to the Palm OS requiring enhancements to
the Palm OS source code, 3Com will consider such request in good faith and will
respond to JD in writing within thirty (30) days of its receipt of such request
(or within such longer time period as may be reasonably agreed by the parties)
with whether 3Com intends to implement such request and, if so, with a proposed
schedule for implementation. In the event 3Com approves such request under a
proposed schedule reasonably acceptable to JD ("Approved OS Enhancements"), 3Com
will use its reasonable commercial efforts to implement such enhancements within
the proposed schedule, whereupon such Approved OS Enhancements will be deemed
additional Palm OS software for all purposes of this Agreement. Upon delivery to
JD, the licenses granted to JD pursuant to Section 2 above shall be deemed to
include such Approved OS Enhancements. JD shall execute all assignments and
other documents as may be requested by 3Com to evidence and perfect 3Com's
ownership of the Approved OS Enhancements and the intellectual property rights
therein.
(b) Implementation by JD. To the extent that 3Com rejects JD's
request for Palm OS enhancements, or if 3Com's proposed schedule is not
reasonably acceptable to JD, then JD may notify 3Com in writing that JD wishes
to implement such enhancements itself, whereupon the parties will negotiate in
good faith the terms under which JD will develop the enhancements, including:
(i) which Palm OS source code and tools JD will require; (ii) the limitations
that will be placed on JD's (and any contractors') use of such source code and
tools; (iii) the parties respective intellectual property rights in such
enhancements; (iv) 3Com's responsibility, if any, for support and maintenance of
such enhancement; and (v) JD's responsibility for any costs and expenses that
3Com may incur in connection with such implementation, support, and maintenance.
7. SUPPORT
Subject to Section 9.4 (3Com Update and Support Obligation), 3Com shall
provide JD with the following support during the term of this Agreement in
accordance with the 3Com Support terms set forth in Exhibit F (3Com Support
Services).
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<PAGE> 9
7.1 Development Support. 3Com will provide JD with a reasonable level of
support by telephone, e-mail, fax or, if requested by JD, in person at 3Com's
Mountain View and/or Santa Clara, California site, during 3Com's normal business
hours (8:00 am - 5:00 pm California time, excluding holidays) in connection with
JD's use of the Palm Software to develop and support the JD Products, including
the use of reasonable commercial efforts: (i) to answer JD's questions regarding
the proper utilization and optimization of the Palm Software; and (ii) to
provide solutions, workarounds and/or patches to correct any reproducible error
in the Palm Software. JD shall designate up to two qualified individuals per
Designated Site to act as primary technical liaisons for communications with
3Com's technical support staff. 3Com shall designate two qualified individuals
to act as primary and secondary technical liaisons for communications with JD's
technical support staff.
7.2 Customer Support Training. During the term of this Agreement, 3Com
shall, at its expense, provide JD with one (1) course per version of the Palm
Software of basic and advanced training as it relates to customer support for up
to six (6) JD employees engaged in the technical support of the JD Product. 3Com
shall further provide to JD, at 3Com's expense, similar training for
modifications or other revisions to the Palm Software, as it relates to customer
support. Training will be conducted at 3Com's facilities in Mountain View and/or
Santa Clara, California or such other mutually agreeable facility. Each training
course shall commence on a mutually agreed upon date. Such training shall cover
in detail, the installation, configuration, operation, trouble-shooting,
adjustment, test and maintenance of the Palm Software, as it relates to customer
support. JD shall provide a reasonable quantity of appropriate JD Product units
as training aids. 3Com shall provide copies of the student training guides, and
all other necessary materials to each trainee and to JD. All other training
requested by JD and provided by 3Com shall be billed at 3Com's standard rates.
7.3 Customer Support. JD shall be solely responsible for First Level
Support and Second Level Support of the JD Products. The parties agree to work
together to develop and facilitate the call handling processes to provide
seamless customer support and technical service to resellers and end users of
the JD Product. In addition, 3Com will provide JD with Third Level Support
during the term of this Agreement. The definitions of First, Second And Third
Level Support shall be as set forth in Section 7.4 below. During the term of
this Agreement, 3Com shall permit JD to create hyperlinks to the 3Com Web site
and to display certain 3Com end user materials on JD's Web site for customer
support purposes, subject to 3Com's prior approval of each proposed use. During
the term of this Agreement, JD shall permit 3Com to create hyperlinks to the JD
Web site and to display certain JD end-user materials on 3Com's Web site for
customer support purposes, subject to JD's prior approval of each proposed use.
7.4 Technical Support.
(a) Technical Support Levels. For the purposes of Section 7.3
above, "Level" means a certain class of service provided for the JD Products.
Definitions are as follows:
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<PAGE> 10
(i) "First Level Support" means first call support on all
customer calls; technical support staff answers technical inquiries regarding JD
Products, performs JD Product configuration support, if applicable, and provides
broad troubleshooting expertise.
(ii) "Second Level Support" means specialist level technical
support; technical support/escalation staff performs problem isolation and
replication, and implements a solution for a problem that is not the result of a
Palm Software program error. In the case of a Palm Software program error, the
technical staff is able to identify the source of the error, create a
reproducible test case, and document the details of the error for escalation to
3Com.
(iii) "Third Level Support" means backup technical support to
two representatives of JD's Second Level Support team (the "Authorized
Callers"). 3Com will identify to JD its technical support personnel for the Palm
Software (the "Designated Support Personnel"). The Authorized Callers and
Designated Support Personnel will be the primary contacts between 3Com's and
JD's technical support and/or escalation centers. JD will provide a list of
Authorized Callers including names, address, phone numbers, and Internet e-mail
address. 3Com will provide a similar list of Designated Support Personnel. These
lists will be reviewed quarterly and updated as required.
(b) Support Timing. 3Com shall make Third Level Support available
via telephone, FAX or E-Mail solely to JD's Authorized Callers during 3Com's
normal business hours (8:00 am -- 5:00 pm California time, excluding holidays).
3Com. shall use reasonable commercial efforts to answer support questions within
the timeframes specified in Exhibit F (3Com Support Services). So long as 3Com
is using reasonable commercial efforts to answer such questions, 3Com's
inability to resolve answer such question shall not be deemed a material breach
of the Agreement.
(c) Direct Customer Support. 3Com will not be obligated to provide
direct support of any kind to JD's customers or end users pursuant to this
Agreement. JD will provide sufficient information and/or training regarding the
JD Products to 3Com's Designated Support Personnel to enable 3Com to properly
assist JD in resolving problems.
8. MARKETING AND PUBLICITY
8.1 Marketing. The parties agree to work together to identify areas
where joint marketing efforts would benefit both parties, and upon mutual
agreement shall implement such efforts.
8.2 Publicity. Neither party shall disclose the terms of this Agreement
to any third party, other than its financial or legal advisors and current or
potential Non-Corporate Investors, or make any announcements regarding the
nature of the relationship between the parties without the prior approval of the
other party, except that a party may disclose the terms of this Agreement where
required by law, provided that such party uses reasonable effort to obtain
confidential treatment or similar protection to the fullest extent available to
avoid public disclosure of the terms of this Agreement. A party required by law
to make disclosure of the terms of this
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Agreement will promptly notify the other party and permit the other party to
review and participate in the application process seeking confidential
treatment. "Non-Corporate Investors" shall mean venture capital investors/funds
and investment banking investors/funds.
8.3 Branding. JD and its [*] will use the 3Com Trademarks in
conjunction with the distribution of the JD Products and in their advertising,
promotional and printed materials for the JD Products and on the JD Products.
8.4 Nonsolicitation. JD agrees that during the first year of the term of
this Agreement JD will not directly or indirectly, either for itself or any
other person or entity, solicit any individual who is engaged as an employee,
agent or independent contractor, by 3Com or 3Com's subsidiaries (including but
not limited to the Palm Computing subsidiary of 3Com) to terminate his or her
employment or engagement with 3Com or such subsidiary and/or to become an
employee, agent or independent contractor of JD or such other person or entity;
provided, however, that the foregoing limitation will not apply to any
solicitation that occurs after such individual either: (i) initiates contact
with JD regarding terminating his or her employment or engagement with 3Com or
such subsidiary and/or becoming an employee, agent or independent contractor of
JD or such other person or entity; or (ii) responds to advertisements of general
circulation (including general postings on Websites) placed by, or on behalf of,
JD or such other person or entity regarding terminating his or her employment or
engagement with 3Com or such subsidiary and/or becoming an employee, agent or
independent contractor of JD or such other person or entity. JD further agrees
that during the first year of the term of this Agreement it will not directly
solicit, either for itself, or any other person or entity, any strategic partner
of the Palm Computing subsidiary of 3Com to cease doing business with 3Com.
9. [*]
9.1 [*]. Within thirty (30) days of the execution of this Agreement [*],
3Com agrees to [*] with a reputable, financially responsible,
industry-recognized party consented to by both parties to [*]. A fully executed
copy of the [*], together with a receipt [*], shall be delivered to JD within
five (5) days after the execution of the [*]. In addition, [*] such materials
shall become [*]. The [*] shall be borne by JD. The [*] will be authorized to
deliver the [*] to JD [*]
* 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.
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<PAGE> 12
[*]. JD acknowledges and agrees that the [*] do not, and will not, contain any
[*] owned by third parties.
9.2 Use. In the event JD [*] under this Section 9, JD shall have a
limited, nonexclusive, nontransferable (except as provided in Section 17.9)
license to use and modify the [*] at the Designated Sites solely to continue
developing, manufacturing, testing and supporting JD Products. The foregoing
license shall survive termination of this Agreement for a period of [*] from
such termination, subject to earlier termination if JD breaches its
confidentiality obligations with respect to the [*]. Upon termination of the
foregoing license, JD shall promptly: (i) return all [*], including but not
limited to all copies thereof in whole and in part, to 3Com; and (ii) destroy
all copies thereof, in whole and in part, residing within any computers in JD's
control. Except to consultants consistent with Section 13 (Confidentiality), JD
may not disclose any of the [*] to third parties under any circumstances. JD
shall own all proprietary rights in modifications made pursuant hereto, subject
to 3Com's underlying rights to the unmodified [*].
9.3 [*] Dispute Resolution. In the event of a dispute regarding whether
3Com has materially breached Sections 6.1 or 7.1 of this Agreement and failed to
cure such breach within the applicable cure period, the parties shall submit the
matter for resolution pursuant to the arbitration procedure set forth in the
[*], in which case the [*] shall not be released to JD unless and until the
arbitrator finds that there has been such breach. Upon a finding of such breach
by the arbitrator, the [*] shall be released to JD immediately.
9.4 3Com Update and Support Obligations. The parties agree that in the
event the [*], 3Com's obligations pursuant to Sections 6.1 (Updates and
Additions to 3Com Software and Materials) shall terminate upon the earlier to
occur of: (a) 3Com delivering to JD the next major version of the 3Com Software
and Palm Materials subsequent to the version contained in the [*]; or (b) [*]
following the date of such release. In addition, in the event of such release,
3Com's obligations pursuant to Section 7 (Support) shall terminate [*] following
the date of such release.
10. PROPRIETARY RIGHTS
10.1 Title. JD acknowledges that the Palm Software and Palm Materials
are the valuable trade secrets of 3Com. 3Com shall be the sole and exclusive
owner of the Palm Software. Subject always to 3Com's ownership of the Palm
Software, JD shall be the sole and exclusive owner of the JD Products and JD
Software. Applications for the JD Products shall belong solely and exclusively
to the party developing such applications.
10.2 Proprietary Rights Notices. JD agrees that it will not remove,
alter or otherwise obscure any proprietary rights notices appearing in the Palm
Software and Palm Materials. Further, JD agrees that it will cause to appear on
the container or label for each unit of the JD
* 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.
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<PAGE> 13
Products manufactured hereunder appropriate patent and copyright notices and
proprietary data legends as contained in the Palm Software delivered by 3Com or
as otherwise reasonably required by 3Com.
10.3 U.S. Government Restricted Rights Legend. All 3Com technical data
and computer software is commercial in nature and developed solely at private
expense. Software is delivered as Commercial Computer Software as defined in
DFARS 252.227-7014 (June 1995) or as a commercial item as defined in FAR
2.101(a) and as such is provided with only such rights as are provided in 3Com's
standard commercial license for such software. Technical data is provided with
limited rights only as provided in DFARS 252.227-7015 (Nov. 1995) or FAR
52.227-14 (June 1987), whichever is applicable. JD will: (a) identify and
license the software developed by JD hereunder in all proposals and agreements
with the United States Government or any contractor therefor; and (b) legend or
mark such software provided pursuant to any agreement with the United States
Government or any contractor therefor in a form sufficient to obtain for 3Com
and its suppliers the protection intended by this Section 10.3 (U.S. Government
Restricted Rights Legend). JD agrees not to remove or deface any portion of any
legend on any software or documentation delivered to it under this Agreement.
10.4 End-User Licensing. JD agrees that each copy of the software
distributed by JD hereunder will be accompanied by a copy of JD's standard end
user software license; provided, however, that the terms of such license will be
drafted so as to apply to the Palm Software and shall be at least as protective
of the Palm Software as: (i) the terms and conditions JD uses for its own
software products; (ii) the minimum terms and conditions set forth in Exhibit G
(Minimum Terms and Conditions of End User License); and (iii) the terms and
conditions governing this Agreement. JD agrees to enforce the terms and
conditions applicable to the Palm Software contained in such license.
11. WARRANTY
11.1 3Com Warranty. 3Com warrants that for a period of ninety (90) days
after receipt by JD of the Palm Software and Palm Materials (the "Warranty
Period") the media on which 3Com delivers the Palm Software and Palm Materials
to JD shall be free of defects in material and workmanship, and the Palm
Software will perform substantially in accordance with the Palm End-User
Documentation. As JD's sole and exclusive remedy for any breach of such
warranty, 3Com shall replace any such defective media and/or correct any such
performances problems in accordance with Sections 6.1 and 7 promptly following
receipt of written notice from JD of such defects during the Warranty Period.
EXCEPT FOR THE LIMITED WAS SET FORTH IN THIS SECTION 11, 3COM MAKES NO
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO ANY MATTER WHATSOEVER. IN
PARTICULAR, ANY AND ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
11.2 JD Product Warranty. JD shall be solely responsible for customer
warranty of any and all products manufactured by JD pursuant to this Agreement.
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<PAGE> 14
11.3 Year 2000 Warranty.
(a) 3Com warrants to JD that the Palm Software will continue
performing properly with regard to date-data on and after January 1, 2000,
provided that all other products used by JD in connection or combination with
the Palm Software accurately exchange date-data with the Palm Software. 3Com
makes no certification regarding the performance of any other 3Com products with
regard to date-data.
(b) If it appears that any Palm Software does not perform properly
with regard to date-data on and after January 1, 2000, and JD notifies 3Com
thereof before April 1, 2000, 3Com shall, at its option and expense, provide JD
with a software update which would effect the proper performance of the Palm
Software or deliver to JD equivalent software to replace the Palm Software. Any
such software update or equivalent software will be warranted pursuant to
subsection (a) above for ninety (90) days or until April 1, 2000, whichever is
later.
12. INDEMNIFICATION
12.1 By 3Com. 3Com shall, at its own expense, defend and indemnify JD
for damages and reasonable costs incurred in any suit, claim or proceeding
brought against JD alleging that the Palm Software, Palm Materials or 3Com
Trademarks licensed pursuant to this Agreement infringe (i) any patents in the
U.S., Canada, Japan, or the European Community, (ii) any copyrights worldwide,
or (iii) any trademarks in any countries in which 3Com markets products in
connection with the 3Com Trademarks, or misappropriate any trade secrets,
provided that 3Com is promptly notified, rendered reasonable assistance by JD as
required, and permitted to direct the defense or settlement negotiations. 3Com
shall have no liability for any infringement arising from: (a) the integration
or combination of the Palm Software, Palm Materials or Com, Trademarks together
with other software, materials or products not integrated or combined by 3Com,
if the infringement would have been avoided in the absence of such integration
or combination; (b) the use of other than a current unaltered release of the
software available from 3Com, if the infringement would have been avoided by the
use of the then-current release, and if 3Com has provided such current release
to JD; or (c) modifications to the Palm Software or Palm Materials requested by
JD.
12.2 Remedies. In the event 3Com reasonably believes that the use or
distribution of any Palm Software, Palm Materials or 3Com Trademarks is likely
to be enjoined, 3Com may, at its option, either: (i) substitute functionally
equivalent non-infringing Palm Software or Palm Materials, as the case may be;
(ii) modify the infringing item so that it no longer infringes but remains
functionally equivalent; (iii) obtain for JD, at 3Com's expense, the right to
continue use of such item; or (iv) if none of the foregoing is feasible, 3Com
may take back such infringing item or items and terminate only that portion of
the license associated with respect to such item or items, subject to a mutually
satisfactory equitable reduction in the Royalty and fees payable under this
Agreement. Should the use or distribution of any Palm Software, Palm Materials
or 3Com Trademarks be enjoined, 3Com shall, at its option, either: (i)
substitute functionally equivalent non-infringing Palm Software or Palm
Materials, as the case may be; (ii) modify the infringing item so that it no
longer infringes but remains functionally equivalent; (iii) obtain for
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<PAGE> 15
JD, at 3Com's expense, the right to continue use of such item; or (iv) if none
of the foregoing is feasible, 3Com may take back such infringing item or items
and terminate only that portion of the license associated with respect to such
item or items, subject to a mutually satisfactory equitable reduction in the
Royalty and fees payable under this Agreement. Notwithstanding the foregoing, JD
acknowledges that 3Com may undertake to obtain patent licenses from third
parties relating to the Palm Software, and in such event the royalty obligation
for the JD Products arising from such patent licenses shall be passed through
to, and paid at the direction of 3Com by JD; provided, however, that the
per-unit royalty obligation payable by JD shall not exceed the per-unit or
percentage royalty obligation (whichever is less) payable by 3Com for products
similar to the JD Products, and shall not in any event exceed [*]. SECTIONS 12.1
and 12.2 STATE JD'S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO CLAIMS OF
INFRINGEMENT OF PROPRIETARY RIGHTS OF ANY KIND, AND ALL WARRANTIES OF
NON-INFRINGEMENT, EXPRESS OR IMPLIED, ARE SPECIFICALLY DISCLAIMED AND EXCLUDED.
12.3 By JD. JD shall, at its own expense, defend and indemnify 3Com for
damages and reasonable costs incurred in any suit, claim or proceeding brought
against Palm Computing Inc., 3Com Corporation or its and their subsidiaries
alleging that the JD Products, JD Software and/or related materials infringe (i)
any patents in the U.S., Canada, Japan, or the European Community, (ii) any
copyrights worldwide, or (iii) any trademarks in any countries in which JD
markets products in connection with the 3Com Trademarks, or misappropriate any
trade secrets, provided that JD is promptly notified, rendered reasonable
assistance by 3Com as required, and permitted to direct the defense or
settlement negotiations. JD shall have no liability for any infringement arising
from: (a) the integration or combination of the JD Products or JD Software
together with other software, materials or products not integrated or combined
by JD, if the infringement would have been avoided in the absence of such
integration or combination; or (b) use or distribution of Palm Software or Palm
Materials. SECTION 12.3 STATES 3COM'S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO
CLAIMS OF INFRINGEMENT OF PROPRIETARY RIGHTS OF ANY KIND, AND ALL WARRANTIES OF
NONINFRINGEMENT, EXPRESS OR IMPLIED, ARE SPECIFICALLY DISCLAIMED AND EXCLUDED.
12.4 Other Indemnity. Each party shall indemnify and defend the other
against all claims, suits, losses, expenses and liabilities (including
reasonable attorneys' fees) for bodily injury, personal injury, death and
tangible property damage as a result of the negligence, intentional wrongful
acts or omissions, or misrepresentations of the indemnifying party or any person
for whose actions it is legally liable, provided that the indemnifying party is
promptly notified, rendered reasonable assistance by the indemnified party as
required, and permitted to direct the defense or settlement negotiations.
13. CONFIDENTIALITY
13.1 Confidential Information. Each party acknowledges that in the
course of the performance of this Agreement, it may obtain the Confidential
Information of the other party. The Receiving Party (as defined in Section 1.1
(Confidential Information)) shall, at all times,
* 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.
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<PAGE> 16
both during the term of this Agreement and thereafter for a period of three (3)
years keep in confidence and trust all of the Disclosing Party's (as defined in
Section 1.1 (Confidential Information)) Confidential Information received by it
(except for source code, which shall be kept in confidence and trust in
perpetuity). The Receiving Party shall not use the Confidential Information of
the Disclosing Party other than as expressly permitted under the terms of this
Agreement. The Receiving Party shall take reasonable steps to prevent
unauthorized disclosure or use of the Disclosing Party's Confidential
Information and to prevent it from falling into the public domain or into the
possession of unauthorized persons. The Receiving Party shall not disclose
Confidential Information of the Disclosing Party to any person or entity other
than its officers, employees, contractors, and consultants who need access to
such Confidential Information in order to effect the intent of this Agreement
and who have entered into confidentiality agreements which protect the
Confidential Information of the Disclosing Party sufficient to enable the
Receiving Party to comply with this Section 13.1 (Confidential Information). The
Receiving Party shall immediately give notice to the Disclosing Party of any
unauthorized use or disclosure of Disclosing Party's Confidential Information.
The Receiving Party agrees to assist the Disclosing Party to remedy such
unauthorized use or disclosure of its Confidential Information.
13.2 Exceptions to Confidential Information. The obligations set forth
in Section 13.1 (Confidential Information) shall not apply to the extent that
Confidential Information includes information which is: (a) now or hereafter,
through no unauthorized act or failure to act on the Receiving Party's part, in
the public domain; (b) known to the Receiving Party without an obligation of
confidentiality at the time the Receiving Party receives the same from the
Disclosing Party, as evidenced by written records; (c) hereafter furnished to
the Receiving Party by a third party as a matter of right and without
restriction on disclosure; (d) furnished to others by the Disclosing Party
without restriction on disclosure; or (e) independently developed by the
Receiving Party without use of the Disclosing Party's Confidential Information.
Nothing in this Agreement shall prevent the Receiving Party from disclosing
Confidential Information to the extent the Receiving Party is legally compelled
to do so by any governmental investigative or judicial agency pursuant to
proceedings over which such agency has jurisdiction; provided, however, that
prior to any such disclosure, the Receiving Party shall (i) assert the
confidential nature of the Confidential Information to the agency; (ii)
immediately notify the Disclosing Party in writing of the agency's order or
request to disclose; and (iii) cooperate fully with the Disclosing Party in
protecting against any such disclosure and/or obtaining a protective order
narrowing the scope of the compelled disclosure and protecting its
confidentiality.
13.3 Other Palm Software Source Code Restrictions. Except as permitted
in this Agreement, JD shall not use, make, have made, distribute or disclose any
copies of the source code of the Palm Software, in whole or in part, or the
information contained therein without the prior written authorization of 3Com.
JD shall inform its employees having access to such source code of JD's
limitations, duties and obligations regarding nondisclosure and copying of such
source code and shall obtain or have obtained their written agreement to comply
with such limitations, duties and obligations. JD shall maintain records of its
employees having access to such source code, and upon reasonable notice 3Com may
audit such records.
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14. LIMITATION OF LIABILITY
EXCEPT FOR LIABILITY FOR BREACH OF SECTION 13 (CONFIDENTIALITY) AND
EXCEPT AS SPECIFICALLY PROVIDED IN SECTION 12 (INDEMNIFICATION): (A) NEITHER
PARTY SHALL HAVE ANY LIABILITY FOR INCIDENTAL, CONSEQUENTIAL, INDIRECT, SPECIAL
OR PUNITIVE DAMAGES OF ANY KIND OR FOR LOSS OF REVENUE OR LOSS OF BUSINESS
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, REGARDLESS OF THE FORM OF
THE ACTION, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT PRODUCT
LIABILITY OR OTHERWISE, EVEN IF ANY REPRESENTATIVE OF A PARTY HERETO HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; AND (B) IN NO EVENT SHALL 3COM'S
LIABILITY UNDER THIS AGREEMENT EXCEED THE AMOUNTS PAID BY JD TO 3COM UNDER THIS
AGREEMENT.
15. EXPORT REGULATIONS
Neither party shall export, directly or indirectly, any technical data
or software acquired under this Agreement or the direct product of any such
technical data or software to any country for which the United States Government
or any agency thereof, at the time of export, requires an export license or
other government approval, without first obtaining such license or approval.
With respect to any export transactions under this Agreement, both parties will
cooperate in any reasonable manner to effect compliance with all applicable
export regulations.
16. TERM AND TERMINATION
16.1 Term. This Agreement shall be effective from the Effective Date for
a period of five (5) years ("Specified Term"), unless earlier terminated in
accordance with its terms. Thereafter, this Agreement may be renewed on its
anniversary dates for successive one (1) year terms if each party agrees to do
so by written notice to the other party no later than sixty (60) days prior to
any such anniversary date.
16.2 Termination Due to Bankruptcy, etc. In the event a party: (i)
becomes insolvent; (ii) voluntarily files or has filed against it a petition
under applicable bankruptcy or insolvency laws which such party fails to have
released within thirty (30) days after filing; (iii) proposes any dissolution,
composition or financial reorganization with creditors or if a receiver,
trustee, custodian or similar agent is appointed or takes possession with
respect to all or substantially all property or business of such party; or (iv)
such party makes a general assignment for the benefit of creditors, the other
party may terminate this Agreement by giving a termination notice, which
termination shall become effective ten (10) days after mailing.
16.3 Right to Terminate; [*] Termination.
(a) Either party shall have the right to terminate this Agreement
if the other party is in material breach of any term or condition of this
Agreement and fails to remedy such
* 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.
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<PAGE> 18
breach within thirty (30) days after receipt of written notice of such breach
given by the nonbreaching party.
(b) 3Com's obligations and JD's rights under Section 9 [*] shall
terminate if there is a material change in the ownership or control of JD such
that more than twenty percent (20%) or more of the voting equity stock of JD is
owned and/or controlled (directly or indirectly) by one or more Competitors.
"Competitor" means any entity or entities that develops, manufactures, markets,
and/or distributes handheld operating systems software that is licensed to third
parties on a stand-alone basis.
16.4 Effect of Termination. Upon the termination or expiration of this
Agreement: (i) the licenses and other provisions of this Agreement shall be
terminated and JD shall discontinue the use, manufacture, reproduction,
distribution and sublicensing of the JD Products, Palm Software, Palm Materials
and 3Com trademarks, except as specified in this Section 16; (ii) JD's
obligation to pay all sums due hereunder shall be accelerated and all such sums
shall be due and payable within forty-five (45) days of the end of the calendar
quarter in which the date of termination or expiration occurred; and (iii) the
Receiving Party shall, within fifteen (15) days of receipt of a written request
by the Disclosing Party to do so, return to the Disclosing Party or destroy all
full or partial copies, in whatever media, of any and all confidential materials
in the Receiving Party's possession which had been furnished to the Receiving
Party by the Disclosing Party pursuant to this Agreement, and the Receiving
Party shall warrant in writing to the Disclosing Party within thirty (30) days
after termination or expiration that all such materials have been returned to
the Disclosing Party or destroyed. In addition, upon any expiration or
termination (other than for JD's breach), JD may elect to retain the licenses
specified in Section 2 for two (2) years following such expiration or
termination for the versions of the Palm Software and the Palm Materials that
have been delivered to JD prior to such expiration or termination, on the
following terms: (a) the Royalty rates specified in Exhibit E will be [*]; (b)
3Com's obligations under Sections 6, 7 and 9, and JD's obligations under Section
4.2, will [*]; and (c) the remaining provisions of this Agreement will remain in
effect with regard to the JD Products for such two-year period.
16.5 Survival. Neither the termination or expiration of this Agreement
shall relieve either party from its obligations to pay the other any sums
accrued hereunder. The parties agree that their respective rights, obligations
and duties under Sections 4 (Royalties, Fees and Reports), 5.4 (Taxes), 8.2
(Publicity), 10 (Proprietary Rights), 11 (Warranty), 12 (Indemnification), 13
(Confidentiality), 14 (Limitation of Liability), 15 (Export Regulations), 16
(Term and Termination) and 17 (Miscellaneous), as well as any rights,
obligations and duties which by their nature extend beyond the termination or
expiration of this Agreement shall survive any termination or expiration and
remain in effect for a period of three (3) years thereafter or the period
specified in this Agreement, if longer.
17. MISCELLANEOUS
17.1 Notices. Any notice provided for or permitted under this Agreement
will be treated as having been given when (a) delivered personally, (b) sent by
confirmed telex or fax, (c)
* 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.
18
<PAGE> 19
sent by commercial overnight courier with written verification of receipt, or
(d) mailed postage prepaid by certified or registered mail, return receipt
requested, to the party to be notified, at the address set forth below, or at
such other place of which the other party has been notified in accordance with
the provisions of this Section 17.1 (Notices).
If to 3Com: Palm Computing, Inc.,
a subsidiary of 3Com Corporation
1565 Charleston Road
Mountain View, CA 94043
Attention: Vice President Strategic Alliances and Platform
Development
Fax: (650) 968-9791
with copies to: 3Com Corporation
5400 Bayfront Plaza
Santa Clara, CA 95052
Attention: General Counsel
Fax: (408) 326-6434
If to JD: JD Technology, Inc.
P.O. Box 7066
Menlo Park, CA 94026
Attention: Donna Dubinsky
Fax: (650) 470-0943
Such notice will be treated as having been received upon the earlier of actual
receipt or five (5) days after posting.
17.2 Amendment: Waiver. This Agreement may be amended or supplemented
only by a writing that is signed by duly authorized representatives of both
parties. No term or provision hereof will be considered waived by either party,
and no breach excused by either party, unless such waiver or consent is in
writing signed on behalf of the party against whom the waiver is asserted. No
consent by either party to, or waiver, of, a breach by either party, whether
express or implied, will constitute a consent to, waiver of, or excuse of any
other, different, or subsequent breach by either party.
17.3 Severability. If any provision of this Agreement is held invalid or
unenforceable for any reason, the remainder of the provision shall be amended to
achieve as closely as possible the economic effect of the original term and all
other provision shall continue in full force and effect.
17.4 Governing Law. This Agreement shall be governed by and construed
under the laws of the United States and the State of California as applied to
agreements entered into and to be performed entirely within California between
California residents. The parties agree that the
19
<PAGE> 20
United Nations Convention on Contracts for the International Sale of Goods is
specifically excluded from application to this Agreement.
17.5 Choice of Forum. The parties hereby submit to the jurisdiction of,
and waive any venue objections against, the United States District Court for the
Northern District of California, San Jose Branch and the Superior and Municipal
Courts of the State of California, Santa Clara County, in any litigation arising
out of the Agreement.
17.6 Injunctive Relief. The copying, disclosure, or use of the Palm
Software in a manner inconsistent with any provision of this Agreement may cause
irreparable injury to 3Com for which 3Com may not have an adequate remedy at
law. 3Com may be entitled to equitable relief in court, including but not
limited to temporary restraining orders, preliminary injunctions and permanent
injunctions.
17.7 Attorneys' Fees. In any action to enforce this Agreement, the
prevailing party shall be awarded all court costs and reasonable attorneys' fees
incurred, including such costs and attorneys' fees incurred in enforcing and
collecting any judgment.
17.8 Force Majeure. Except for the payment of money, neither party will
be liable for any failure or delay in performance under this Agreement due to
fire, explosion, earthquake, storm, flood or other weather, unavailability of
necessary utilities or raw materials, war, insurrection, riot, act of God or the
public enemy, law, act, order, proclamation, decree, regulation, ordinance, or
instructions of Government or other public authorities, or judgment or decree of
a court of competent jurisdiction (not arising out of breach by such party of
this Agreement) or any other event beyond the reasonable control of the party
whose performance is to be excused.
17.9 Assignment. 3Com may assign this Agreement without restriction,
provided the assignee agrees in writing to be bound by the terms of this
Agreement. JD may not assign this Agreement, whether by operation of law or
otherwise, without the prior written consent of 3Com, except after one year from
the Effective Date to a purchaser of substantially all the stock or assets of JD
who: (i) agrees in writing to be bound by the terms of this Agreement; (ii) is
not a Competitor (as defined in Section 16.3(b)); and (iii) uses the Palm
Software under this Agreement solely in the JD Products of JD Technology, Inc.
or its successor operations within such purchaser; and any attempt to do so
without such consent will be void. This Agreement will bind and inure to the
benefit of the parties and their respective successors and permitted assigns.
17.10 Relationship of the Parties. The parties to this Agreement are
independent contractors. There is no relationship of agency, partnership, joint
venture, employment, or franchise between the parties. Neither party has the
authority to bind the other or to incur any obligation on its behalf.
17.11 Allocation of Risk. The sections on limitation of liability,
warranties and disclaimer of warranties allocate the risks in the Agreement
between the parties. This allocation is an essential element of the basis of the
bargain between the parties.
20
<PAGE> 21
17.12 Construction of Agreement. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof shall
not be construed for or against any party. The titles and headings herein are
for reference purposes only and shall not in any manner limit the construction
of this Agreement, which shall be considered as a whole.
17.13 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument. If this Agreement is executed in
counterparts, no signatory hereto shall be bound until both the parties named
below have duly executed or caused to be duly executed a counterpart of this
Agreement.
17.14 Entire Agreement. This Agreement, including all Exhibits to this
Agreement, constitutes the entire agreement between the parties relating to this
subject matter and supersedes all prior or simultaneous representations,
discussions, negotiations, and agreements, whether written or oral.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the dates set forth below effective as of the Effective Date.
PALM COMPUTING, INC. JD TECHNOLOGY, INC.
a subsidiary of 3Com Corporation
By: /s/ Janice M. Roberts By: /s/ Donna L. Dubinsky
-------------------------------- --------------------------------
Name: Janice M. Roberts Name: Donna L. Dubinsky
------------------------------ ------------------------------
Title: SV President Title: CEO
----------------------------- -----------------------------
Date: 9/24/98 Date: 9/18/98
------------------------------ ------------------------------
<TABLE>
<CAPTION>
List of Exhibits
- ----------------
<S> <C>
A Palm Software
B Test Criteria
C 3Com Trademark Policy Guidelines
D Third Party Components
E Royalties and Fees
F 3Com Support Services
G Minimum Terms and Conditions of End User License
</TABLE>
21
<PAGE> 22
EXHIBIT A
PALM SOFTWARE
[*]
* 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.
22
<PAGE> 23
[*]
* 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.
23
<PAGE> 24
EXHIBIT B
TEST CRITERIA
[*]
* 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.
24
<PAGE> 25
EXHIBIT C
3COM TRADEMARK POLICY GUIDELINES
[to be attached]
25
<PAGE> 26
EXHIBIT D
THIRD PARTY COMPONENTS
[*] contained in the current [*] product and in 3Com's first shipped [*]
product.
* 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.
26
<PAGE> 27
EXHIBIT E
ROYALTIES AND FEES
[*]
* 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.
27
<PAGE> 28
EXHIBIT F
3COM SUPPORT SERVICES 1. Definitions.
"Severity One" Support is defined as-support required to address a fatal program
error in the Palm Software which has a critical business impact and precludes
significant useful work from being done or, significantly precludes developer
and/or end-user operations.
"Severity Two" Support is defined as support required to address a program error
in the Palm Software which has a significant business impact where important
features are unavailable with no acceptable workaround and development
operations are seriously impaired.
"Severity Three" Support is defined as support required to address a program
error in the Palm Software with some business impact, such as important features
unavailable but a workaround is available or less significant features are
unavailable with no reasonable workaround.
2. Support Response Times. The parties shall promptly agree in good faith to
share any information and/or documentation which may be required to permit 3Com
to identify and resolve any development support requests. The support response
period begins after 3Com (a) has enough information to profile the reported
error and (b) can recreate the reported error or has access to a facility where
the error can be recreated ("Start Date"). 3Com agrees to use commercially
reasonable efforts to recreate the reported error and respond based on the
following timetable:
"Severity One" Support. 3Com shall use reasonable commercial efforts to
resolve or reduce the severity via workaround and/or patch within two (2)
business days of the Start Date, or if unable to resolve such problem within
such timeframe, 3Com shall provide its action plan within such timeframe and
provide regular status updates. A final resolution shall be identified in the
action plan. 3Com and JD problem managers shall review incident after two (2)
business days and every two (2) business days thereafter until the error has
been resolved.
"Severity Two" Support. 3Com shall use reasonable commercial efforts to
resolve or reduce the severity via workaround and/or patch within five (5)
business days of the Start Date, or if unable to resolve such problem within
such timeframe, 3Com shall provide its action plan within such timeframe and
provide regular status updates. 3Com and JD problem managers shall review
incident after five (5) business days. A final engineering resolution shall be
identified in the action plan.
"Severity Three" Support. 3Com shall use reasonable commercial efforts
to acknowledge the error within ten (10) business days of receipt of notice.
3Com shall provide a final engineering resolution within three (3) months or
next scheduled release, whichever is sooner.
So long as 3Com is using reasonable commercial efforts to recreate
reported errors and resolve or reduce Severity One and Severity Two problems in
accordance with the action plan provided, 3Com's inability to resolve such
problems within the timeframes stated herein or the action plan shall not be
deemed a material breach of Section 6.1 the Agreement. The prescribed support
response times above may be extended as mutually agreed, such agreement not to
be unreasonably withheld, e.g., if resolution of the problem requires timely
hardware certification or test, or if resolution represents significant risk to
the essential functions. Any support requests that are attributable to any
matters other than errors in the unmodified Palm Software provided by 3Com to JD
hereunder are subject to billing at 3Com's standard time and materials rates.
3. Support Evaluation. The parties will attempt in good faith to
promptly resolve any controversy or claim relating to performance of the
technical support assistance provided by 3Com under this Agreement. Each party
may request the other party to involve appropriate senior executives of such
other party who shall have the authority to resolve the matter.
28
<PAGE> 29
EXHIBIT G
MINIMUM TERMS AND CONDITIONS OF END USER LICENSE
1. JD Technology, Inc. ("JD") grants the end user ("End User") a
nonexclusive license to use the software accompanying the JD Product
("Software"). With respect to the JD Product Desktop Software, End User may
reproduce and provide one (1) copy of such Software for each personal computer
or JD Product on which such Software is used as permitted hereunder. With
respect to the JD Product Device Software, End User may use such Software only
on one (1) JD Product. End User may assign its right under the End User License
Agreement to an assignee of all of End User's rights and interest to the
Software only if End User transfers all copies of the Software subject to the
End User License Agreement to such assignee and such assignee agrees in writing
to be bound by all the terms and conditions of the End User License Agreement.
2. End User agrees not to reverse engineer, decompile or disassemble the
Software. End User will not copy the Software except as necessary to use it in
accordance with this End User License Agreement. End User agrees that any such
copies of the Software shall contain the same proprietary notices which appear
on and in the original copy of the Software.
3. Except as stated above, the End User License Agreement does not grant
End User any rights (whether by license, ownership or otherwise) in or to
intellectual property with respect to the Software.
4. End User will not export or re-export the Software without all
appropriate United States and other foreign government licenses.
5. Title to and ownership of the Software and any copy thereof shall
remain with JD and its suppliers.
6. If the Software is licensed for a proposal or agreement with the
United States Government or any contractor therefor, the Software must be
legended, marked and licensed as described in Section 10.3 of the Agreement.
29
<PAGE> 30
AMENDMENT NO. 1
TO
SOFTWARE LICENSE AGREEMENT
This Amendment No. 1 ("Amendment") is entered into by and between Palm
Computing, Inc., a subsidiary of 3Com Corporation (collectively, "3Com"), a
California corporation with a place of business at 1565 Charleston Road,
Mountain View, California 94043, and Handspring, Inc. ("Licensee"), a California
corporation with a place of business at 299 California Avenue, Palo Alto,
California 94306. The effective date of this Amendment shall be September 24,
1998 ("Effective Date").
RECITALS
A. Effective as of September 24, 1998, 3Com and Licensee entered into a
Software License Agreement ("License Agreement"; capitalized terms used herein
and not defined shall have the meanings set forth in the License Agreement) with
regard to Licensee's developing, manufacturing and marketing handheld computing
products incorporating specified 3Com software and technology related to the
3Com Palm Computing platform.
B. Following the effective date of the License Agreement, Licensee
changed its corporate name from "JD Technology, Inc." to "Handspring, Inc."
C. Licensee has received, and hopes to receive in the future, from 3Com
certain source code for the Palm Software so that Licensee may examine such
source code to assist Licensee in developing products within the scope of the
License Agreement.
D. 3Com is willing to provide such source code to Licensee as specified
in this Amendment pursuant to the terms and conditions of the License Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereby amend the License Agreement as
follows:
1 SOURCE CODE DELIVERABLES. The following is added to Section 3 of the License
Agreement:
"3.3 Delivery of Palm Source Code. 3Com has provided, and may at its
sole option from time to time elect to provide, JD with certain source code for
certain Palm Software ("Palm Source Code".)"
"3.4 Delivery of Palm Source Code Documentation. 3Com may, at its
option, from time to time elect to provide JD with technical documentation
relating to the Palm Source Code ("Palm Source Code Documentation")."
1
<PAGE> 31
2. LICENSES. The following is added to Section 2 of the License Agreement:
"2.9 Source Code License.
(a) Right to Use. Subject to the terms and conditions of this
Agreement, 3Com hereby grants to JD a limited, non-exclusive, non-transferable,
fully-paid license to examine the Palm Source Code and the Palm Source Code
Documentation for the sole purpose of assisting JD in developing JD Products
within the scope of the License Agreement and to reproduce no more than three
(3) copies of the Palm Source Code and Palm Source Code Documentation.
(b) Limitations of License. JD shall not have the right to: (i)
sublicense any of its rights under this Section 2.9 to any third party; (ii)
incorporate any Palm Source Code or Palm Source Code Documentation in any
technology or products of JD or of any third party; (iii) disclose any Palm
Source Code or Palm Source Code Documentation to any third party; (iv) use or
reproduce any Palm Source Code or Palm Source Code Documentation other than as
permitted by subsection (a) above; or (iv) modify or distribute any Palm Source
Code or Palm Source Code Documentation in any manner.
(c) Inspection Rights. 3Com shall have the right, upon reasonable
advance notice, to inspect JD's records and facilities with respect to the use
of the Palm Source Code and Palm Source Code Documentation in order to verify
that such use is within the scope of this Agreement, and that there are
appropriate security procedures in place to protect the Palm Source Code and
Palm Source Code Documentation (including, but not limited to, the procedures
set forth in Section 13.3 below).
(d) No Other Licenses. The licenses granted under this Section 2.9
are specifically set forth herein, and no licenses are granted by 3Com to JD by
implication or estoppel to the Palm Source Code or Palm Source Code
Documentation."
3 SUPPORT. The following is added to Section 7 of the License Agreement:
"7.5 Source Code Support. 3Com shall have no obligation to provide JD
with any support or maintenance of any kind for the Palm Source Code or Palm
Source Code Documentation at any time."
4 PROPRIETARY RIGHTS. The following is added to Section 10 of the License
Agreement:
"10.5 Source Code. JD acknowledges that the Palm Source Code and Palm
Source Code Documentation are the valuable trade secrets and Confidential
Information of 3Com. 3Com shall be the sole and exclusive owner of the Palm
Source Code and Palm Source Code Documentation. JD agrees that it will not
remove, alter or otherwise obscure any proprietary rights notices appearing in
the Palm Source Code or Palm Source Code Documentation."
2
<PAGE> 32
5 WARRANTY. The following is added to Section 11 of the License Agreement:
"11.4 Source Code Warranty Disclaimer. 3COM MAKES NO WARRANTIES,
EXPRESS, IMPLIED OR STATUTORY, WHATSOEVER AS TO THE PALM SOURCE CODE OR PALM
SOURCE CODE DOCUMENTATION. IN PARTICULAR, ANY AND ALL WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, AND YEAR
2000 COMPLIANCE THEREFOR ARE EXPRESSLY EXCLUDED."
6 CONFIDENTIALITY. The following is added to the end of Section 13.3 of the
License Agreement after the period:
"In the event that 3Com provides JD with a copy of the [*] (the [*])
which contains all, substantially all or a significant portion of the Palm
Software in source code form, JD agrees to the following additional obligations
with respect to the [*] notwithstanding any other provision of this Agreement:
(i) JD shall only be entitled to use two (2) copies of the [*], (ii) JD shall
not make any additional copies of the [*], (iii) JD shall only use the [*] on
two (2) PC's at any one time, (iv) the following named individuals shall be the
only persons permitted to use or access the [*]: [*], and [*], (v) each copy of
the [*] shall be kept in a locked room or file cabinet when not in use, and (vi)
use of the [*] shall be password protected. JD shall have the right to change
the named individuals upon fifteen (15) days written notice to 3Com. Except as
otherwise set forth in this Section 13.3, the provisions of this Agreement that
apply to the Palm Source Code shall apply to the source code contained in the
[*]."
6 INJUNCTIVE RELIEF. The following is added to Section 17 of the License
Agreement:
"17.15 Injunctive Relief. The copying, disclosure, or use of the Palm
Source Code or Palm Source Code Documentation in a manner inconsistent with any
provision of this Agreement will cause irreparable injury to 3Com for which 3Com
will not have an adequate remedy at law. 3Com will be entitled to equitable
relief in court, including but not limited to temporary restraining orders,
preliminary injunctions and permanent injunctions."
7 ENTIRE AGREEMENT. The parties agree that this Amendment constitutes the entire
agreement between the parties relating to its subject matter and supersedes all
prior or simultaneous representations, discussions, negotiations, and
agreements, whether written or oral; provided, however, that the License
Agreement, except as modified by this Amendment, remains in full force and
effect. The parties acknowledge that the terms and conditions of the License
Agreement, including but not limited to Sections 2.8 (Limitations on Scope of
Agreement), 8.2 (Publicity), 13 (Confidentiality), 14 (Limitation of Liability),
15 (Export Regulations), and 16.5 (Survival) of the License Agreement, will
apply to the Palm Source Code or Palm Source Code Documentation.
* 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.
3
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the dates
set forth below effective as of the Effective Date.
PALM COMPUTING, INC., HANDSPRING, INC.
a subsidiary of 3Com Corporation
By: /s/ Mark Bercow By: /s/ Donna Dubinsky
-------------------------------- ---------------------------------
Name: Mark Bercow Name: Donna Dubinsky
------------------------------ -------------------------------
Title: VP Title: CEO
----------------------------- ------------------------------
Date: 1/14/99 Date: 1/8/99
------------------------------ -------------------------------
4
<PAGE> 34
AMENDMENT NO. 2
TO
SOFTWARE LICENSE AGREEMENT
This Amendment No. 2 ("Amendment") is entered into by and between Palm
Computing, Inc., a subsidiary of 3Com Corporation (collectively, "3Com"), a
California corporation with a place of business at 5400 Bayfront Plaza,
California 95052, and Handspring, Inc. ("Licensee"), a California corporation
with a place of business at 299 California Avenue, Palo Alto, California 94306.
The effective date of this Amendment shall be March 9, 1999 ("Effective Date").
RECITALS
A. Effective as of September 24, 1998, 3Com and Licensee entered into a
Software License Agreement, as amended ("License Agreement"; capitalized terms
used herein and not defined shall have the meanings set forth in the License
Agreement) with regard to Licensee's developing, manufacturing and marketing
handheld computing products incorporating specified 3Com software and technology
related to the 3Com Palm Computing platform.
B. Licensee has received, and hopes to receive in the future, from 3Com
certain source code for the Palm Software so that Licensee may modify certain
portions of such source code as specified in this Amendment pursuant to the
terms and conditions of the License Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereby amend the License Agreement as
follows:
1 DEFINITION. Each reference in the License Agreement to "JD" shall be
deleted and replaced with the word "Licensee."
2 SOURCE CODE MODIFICATION. The following is added to Section 2 of the
License Agreement:
"2.10 Source Code Modification License. Subject to the terms and
conditions of this Agreement, 3Com hereby grants to Licensee a limited,
non-exclusive, non-transferable (subject to Section 17.9), fully-paid license to
(i) modify those portions of the Palm Source Code as identified in an Attachment
hereto (the "Modifiable Source Code") but only for the limited purpose(s) set
forth in such Attachment with respect to such Modifiable Code, and (ii) use,
reproduce and distribute such modifications (the "Modifications") in object code
form to the same extent as Licensee is permitted to do so with respect to
Derivative Works pursuant to Section 2.2 above. For each set of Modifiable Code,
the parties shall execute separate sequentially numbered Attachments (e.g.
Attachment No. 1, Attachment No. 2, etc.). Licensee shall have no right to (a)
sublicense the rights granted in subsection (i) above to any third party, (b)
modify any Palm Source Code other than the Modifiable Source Code, or (c) modify
the Modifiable Source Code for any purpose other than as expressly set forth in
the applicable
1
<PAGE> 35
Attachment. The licenses granted under this Section 2.10 are specifically set
forth herein, and no licenses are granted by 3Com to Licensee by implication or
estoppel to the Modifiable Source Code."
3 OWNERSHIP. The following is added to the end of Section 10.1 of the License
Agreement:
"Subject always to 3Com's ownership of the Palm Software and the
restrictions set forth in Section 2 above, Licensee shall be the sole and
exclusive owner of the Modifications and the Modifications shall be deemed
"Licensee Software" for purposes of this Agreement. Licensee agrees to provide
3Com, upon 3Com's request, copies of all Modifications. Licensee hereby grants
to 3Com a worldwide, nonexclusive, fully paid, royalty free, perpetual and
irrevocable license to use, reproduce, modify, display and distribute the
Modifications in source code and/or executable form, including the right to
sublicense such rights through single or multiple tiers of distribution."
4 TERMINATION. Except as expressly provided in this Section 4, this Amendment,
and all rights and obligations under this Amendment, shall terminate and be of
no further force or effect if there is a material change in the ownership or
control of Licensee such that more than twenty percent (20%) or more of the
voting equity stock of Licensee is owned and/or controlled (directly or
indirectly) by one or more Competitors. In the event of such termination,
Licensee shall promptly (i) cease all modification of the Palm Source Code, (ii)
return all Modifiable Source Code to the extent such source code has not
previously been provided to Licensee under Amendment No. l to the License
Agreement, including, but not limited to, all copies thereof in whole and in
part, to 3Com, and (iii) destroy all copies thereof, in whole and in part,
residing within any computers in Licensee's control. Notwithstanding the
foregoing, in the event of termination of this Amendment pursuant to this
Section 4, in no event shall such termination affect Licensee's rights to
reproduce and distribute in object code form Modifications existing as of the
effective date of such termination pursuant to Section 2.10(ii).
5 ENTIRE AGREEMENT. The parties agree that this Amendment and any Attachments
made effective pursuant to this Agreement constitute the entire agreement
between the parties relating to its subject matter and supersedes all prior or
simultaneous representations, discussions, negotiations, and agreements, whether
written or oral; provided, however, that the License Agreement, except as
modified by this Amendment, remains in full force and effect.
2
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the dates set forth below effective as of the Effective Date.
PALM COMPUTING, INC., HANDSPRING, INC.
a subsidiary of 3Com Corporation
By: /s/ Mark Bercow By: /s/ Donna Dubinsky
-------------------------------- ---------------------------------
Name: Mark Bercow Name: Donna Dubinsky
------------------------------ -------------------------------
Title: VP Title: CEO
----------------------------- ------------------------------
3
<PAGE> 37
ATTACHMENT NO. 1
This Attachment No. 1 is an attachment to Amendment No.2 to the Software License
Agreement between Palm Computing, Inc., a subsidiary of 3Com Corporation and
Handspring, Inc.
[*]
[*]
PALM COMPUTING, INC., HANDSPRING, INC.
a subsidiary of 3Com Corporation
By: /s/ Gabriel Aroste-Lopez By: /s/ Donna Dubinsky
-------------------------------- ---------------------------------
Name: Gabriel Aroste-Lopez Name: Donna Dubinsky
------------------------------ -------------------------------
Title: Director Platform Development Title: CEO
Services
----------------------------- ------------------------------
Date: 3-16-99 Date: 3/9/99
------------------------------ -------------------------------
* 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.
4
<PAGE> 38
ATTACHMENT NO. 2
This Attachment No.2 is an attachment to Amendment No.2 to the Software License
Agreement between Palm Computing, Inc., a subsidiary of 3Com Corporation and
Handspring, Inc.
[*]
[*]
AMENDMENT TO AMENDMENT NO.2: For purposes of this Attachment No.2 only, the
following two sentences are deleted from Section 3 of Amendment No.2 with
respect to Modifications made by Licensee pursuant to this Attachment No.2:
"Licensee agrees to provide 3Com, upon 3Com's request, copies of all
Modifications. Licensee hereby grants to 3Com a worldwide, nonexclusive,
fully paid, royalty free, perpetual and irrevocable license to use,
reproduce, modify, display and distribute the Modifications in source
code and/or executable form, including the right to sublicense such
rights through single or multiple tiers of distribution."
Except as modified by this Attachment No.2 with respect to this Attachment No.2,
Amendment No.2 shall remain in full force and effect.
PALM COMPUTING, INC., HANDSPRING, INC.
a subsidiary of 3Com Corporation
By: /s/ Mark Bercow By: /s/ Donna Dubinsky
-------------------------------- ----------------------------------
Name: Mark Bercow Name: Donna Dubinsky
------------------------------ --------------------------------
Title: VP Title: CEO
----------------------------- -------------------------------
Date: 3/9/99 Date: 3/9/99
------------------------------ --------------------------------
* 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.
5
<PAGE> 39
ATTACHMENT NO. 3
This Attachment No.3 is an attachment to Amendment No.2 to the Software License
Agreement between Palm Computing, Inc., a subsidiary of 3Com Corporation and
Handspring, Inc.
[*]
[*]
AMENDMENT TO AMENDMENT NO.2: For purposes of this Attachment No.3 only, the
following two sentences are deleted from Section 3 of Amendment No.2 with
respect to Modifications made by Licensee pursuant to this Attachment No.3:
"Licensee agrees to provide 3Com, upon 3Com's request, copies of all
Modifications. Licensee hereby grants to 3Com a worldwide, nonexclusive,
fully paid, royalty free, perpetual and irrevocable license to use,
reproduce, modify, display and distribute the Modifications in source
code and/or executable form, including the right to sublicense such
rights through single or multiple tiers of distribution."
Except as modified by this Attachment No.3 with respect to this Attachment No.3,
Amendment No.2 shall remain in full force and effect.
PALM COMPUTING, INC., HANDSPRING, INC.
a subsidiary of 3Com Corporation
By: /s/ Mark Bercow By: /s/ Donna Dubinsky
-------------------------------- -----------------------------------
Name: Mark Bercow Name: Donna Dubinsky
------------------------------ ---------------------------------
Title: VP Title: CEO
----------------------------- --------------------------------
Date: 4/28/99 Date: 3/25/99
------------------------------ ---------------------------------
* 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> 40
AMENDMENT NO. 3
TO
SOFTWARE LICENSE AGREEMENT
This Amendment No. 3 ("Amendment") is entered into by and between Palm
Computing, Inc., a subsidiary of 3Com Corporation (collectively, "3Com"), a
California corporation with a place of business at 5400 Bayfront Plaza, Santa
Clara, California 95052, and Handspring, Inc. ("Licensee"), a California
corporation with a place of business at 299 California Avenue, Palo Alto,
California 94306. The effective date of this Amendment shall be 4/8, 1999
("Effective Date").
RECITALS
A. Effective as of September 24, 1998, 3Com and Licensee entered into a
Software License Agreement, as amended ("License Agreement"; capitalized terms
used herein and not defined shall have the meanings set forth in the License
Agreement) with regard to Licensee's developing, manufacturing and marketing
handheld computing products incorporating specified 3Com software and technology
related to the 3Com Palm Computing platform.
B. The parties desire to amend the License Agreement as set forth in
this Amendment.
The parties hereby amend the License Agreement as follows:
1 CONFIDENTIALITY. The following phrases are deleted from Section 13.3 of the
License Agreement:
"(iv) the following named individuals shall be the only persons
permitted to use or access the [*]: [*] and [*]"
"Licensee shall have the right to change the named individuals upon
fifteen (15) days written notice to 3Com."
2 ENTIRE AGREEMENT. The parties agree that this Amendment constitutes the entire
agreement between the parties relating to its subject matter and supersedes all
prior or simultaneous representations, discussions, negotiations, and
agreements, whether written or oral; provided, however, that the License
Agreement, except as modified by this Amendment, remains in full force and
effect.
* 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.
1
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the dates set forth below effective as of the Effective Date.
PALM COMPUTING, INC., HANDSPRING, INC.
a subsidiary of 3Com Corporation
By: /s/ Mark Bercow By: /s/ Donna Dubinsky
-------------------------------- -----------------------------------
Name: Mark Bercow Name: Donna Dubinsky
------------------------------ ---------------------------------
Title: VP Title: CEO
----------------------------- --------------------------------
Date: 4/28/99 Date: 4/8/99
------------------------------ ---------------------------------
2
<PAGE> 42
AMENDMENT NO. 4
TO
SOFTWARE LICENSE AGREEMENT
This Amendment No. 4 ("Amendment") is entered into by and between Palm
Computing, Inc., a subsidiary of 3Com Corporation (collectively, "3Com"), a
California corporation with a place of business .at 5400 Bayfront Plaza, Santa
Clara, California 95052, and Handspring, Inc. ("Licensee"), a California
corporation with a place of business at 299 California Avenue, Palo Alto,
California 94306. The effective date of this Amendment shall be _______________,
1999 ("Effective Date").
RECITALS
A. Effective as of September 24, 1998, 3Com and Licensee entered into a
Software License Agreement, as amended ("License Agreement"; capitalized terms
used herein and not defined shall have the meanings set forth in the License
Agreement) with regard to Licensee's developing, manufacturing and marketing
handheld computing products incorporating specified 3Com software and technology
related to the 3Com Palm Computing platform.
B. The parties desire to amend the License Agreement as set forth in
this Amendment.
The parties hereby amend the License Agreement as follows:
1 CONFIDENTIALITY. The last two sentences of 13.3 of the License Agreement are
deleted in their entirety and restated as follows:
"In the event that 3Com, from time to time, provides Licensee with a
copy of one or more CDs which contain all, substantially all or a significant
portion of the Palm Software in source code form, including any updates,
upgrades or new versions thereof (the "Palm Software CD"), Licensee agrees to
the following additional obligations with respect to the Palm Software CD
notwithstanding any other provision of this Agreement: (i) Licensee shall only
be entitled to use two (2) copies of the Palm Software CD, (ii) Licensee shall
not make any additional copies of the Palm Software CD, (iii) Licensee shall
only use the Palm Software CD on two (2) PC's at any one time, (iv) each copy of
the Palm Software CD shall be kept in a locked room or file cabinet when not in
use, and (v) use of the Palm Software shall be password protected. Except as
otherwise set forth in this Section 13.3, the provisions of this Agreement that
apply to the Palm Source Code shall apply to the source code contained in the
Palm Software CD."
2 ENTIRE AGREEMENT. The parties agree that this Amendment constitutes the entire
agreement between the parties relating to its subject matter and supersedes all
prior or simultaneous representations, discussions, negotiations, and
agreements, whether written or oral; provided, however, that the License
Agreement, except as modified by this Amendment, remains in full, force and
effect.
1
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the dates set forth below effective as of the Effective Date.
PALM COMPUTING, INC., HANDSPRING, INC.
a subsidiary of 3Com Corporation
By: /s/ Daniel S. Keller By: /s/ Donna Dubinsky
-------------------------------- ----------------------------------
Name: Daniel S. Keller Name: Donna Dubinsky
------------------------------ --------------------------------
Title: VP, Platform Engineering Title: CEO
----------------------------- -------------------------------
Date: 12/9/99 Date: 12/8/99
------------------------------ --------------------------------
2
<PAGE> 1
EXHIBIT 10.8
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of June 10, 1999, is entered
into by and between Handspring, Inc., a California corporation, with its chief
executive office and principal place of business located at 299 California
Avenue, Suite 300, Palo Alto, CA 94306 (the "Borrower") and Comdisco, Inc., a
Delaware corporation, with its principal place of business located at 6111 North
River Road, Rosemont, Illinois 60018 (the "Lender" or sometimes, "Comdisco"). In
consideration of the mutual agreements contained herein, the parties hereto
agree as follows:
RECITALS
WHEREAS, Borrower has requested Lender to make available to Borrower a
loan or loans up to an aggregate principal amount of SIX MILLION DOLLARS
($6,000,000) (as the same may from time to time be amended, modified,
supplemented or restated, individually or collectively referred to as the
"Loan(s)"), which would be evidenced by Subordinated Promissory Note(s) executed
by Borrower substantially in the form of EXHIBIT A hereto (as the same may from
time to time be amended, modified, supplemented or restated, the "Note(s)");
WHEREAS, Lender is willing to make the Loan(s) on the terms and
conditions set forth in this Agreement;
WHEREAS, Lender and Borrower agree any Loan(s) hereunder shall be
subordinate to Senior Debt (as defined herein) to the extent set forth in the
Subordination Agreement (as defined herein); and
WHEREAS, Borrower has also given Lender certain rights to purchase the
Borrower's Preferred Stock under terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
Unless otherwise defined herein, the following capitalized terms shall
have the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);
1.1 "ACCOUNT" means any "account" as such term is defined in Section
9-106 of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and, in any event, shall
include, without limitation, all accounts receivable, book debts and other forms
of obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Borrower (including, without limitation, under any trade
name, style or division thereof) whether arising out of goods sold or services
rendered by Borrower or from any other transaction, whether or not the same
involves the sale of goods or services by Borrower (including, without
limitation, any such obligation which may be characterized as an
<PAGE> 2
account or contract right under the UCC) and all of Borrower's rights in, to and
under all purchase orders or receipts now owned or hereafter acquired by it for
goods or services, and all of Borrower's rights to any goods represented by any
of the foregoing (including, without limitation, unpaid seller's rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), and all monies due or to become due
to Borrower under all purchase orders and contracts for the sale of goods or the
performance of services or both by Borrower (whether or not yet earned by
performance on the part of Borrower or in connection with any other
transaction), now in existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase orders and
contracts, and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
1.2 "ACCOUNT DEBTOR" means any "account debtor," as such term is defined
in Section 9-105(1)(a) of the UCC.
1.3 "ADVANCE" means each installment made by the Lender to Borrower
pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral.
1.4 "ADVANCE DATE" means the funding date of any Advance of the Loan.
1.5. "ADVANCE REQUEST" means the request by Borrower for an Advance
under the Loan, each to be substantially in the form of EXHIBIT B attached
hereto, as submitted by Borrower to Lender from time to time.
1.6 "CHATTEL PAPER" means any "chattel paper," as such term is defined
in Section 9-105(1)(b) of the UCC, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.
1.7 "CLOSING DATE" means the date hereof.
1.8 "COLLATERAL" shall have the meaning assigned to such term in Section
3 of this Agreement.
1.9 "CONTRACTS" means all contracts, undertakings, franchise agreements
or other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
1.10 "COPYRIGHTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or of any other country;
(ii) registrations, applications and recordings in the United States Copyright
Office or in any similar office or agency of the United States, any state
thereof or any other country; (iii) any continuations, renewals or extensions
thereof; and (iv) any registrations to be issued in any pending applications.
2
<PAGE> 3
1.11 "COPYRIGHT LICENSE" means any written agreement granting any right
to use any Copyright or Copyright registration now owned or hereafter acquired
by Borrower or in which Borrower now holds of hereafter acquires any interest.
1.12 "DOCUMENTS" means any "documents," as such term is defined in
Section 9-105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.13 "EQUIPMENT" means any "equipment," as such term is defined in
Section 9-109(2) of the UCC, now or hereafter owned or acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
1.14 "EXCLUDED AGREEMENTS" means the Master Lease Agreement dated as of
June 10, 1999 between Borrower, as lessee, and Lender, as lessor, including,
without limitation, any Equipment Schedules and Summary Equipment Schedules to
the Master Lease Agreement executed or delivered by Borrower pursuant thereto
and any other modifications or amendments thereof, whereby Borrower (as lessee)
leases equipment, software, or goods from Lender (as lessor) to Borrower (as
lessee).
1.15 "FACILITY FEE" means one percent (1.0%) of the Maximum Available
Loan. which shall be and due to Lender on the Closing Date, plus a transaction
fee of $7,500.
1.16 "FIXTURES" means any "fixtures," as such term is defined in Section
9-313(1)(a) of the UCC, now or hereafter owned or acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all purchases of the security constituted
thereby, immediately upon any acquisition or release thereof or any such
purchase, as the case may be.
1.17 "GENERAL INTANGIBLES" means any "general intangibles," as such term
is defined in Section 9-106 of the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest and,
in any event, shall include, without limitation, all right, title and interest
which Borrower may now or hereafter have in or under any contract, all customer
lists, Copyrights, Trademarks, Patents, rights to Intellectual Property,
interests in partnerships, joint ventures and other business associations,
Licenses, permits, trade secrets, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, software, data bases, data, skill,
expertise, recipes, experience, processes, models, drawings, materials and
records, goodwill (including, without limitation, the goodwill associated with
any Trademark, Trademark registration or Trademark licensed under any Trademark
License), claims in or under insurance policies, including unearned premiums,
uncertificated securities, cash and other forms of money or currency, deposit
accounts (including as defined in Section 9-105(e) of the UCC), rights to sue
for past, present and future infringement of Copyrights, Trademarks and Patents,
rights to receive tax refunds and other payments and rights of indemnification.
3
<PAGE> 4
1.18 "INITIAL PUBLIC OFFERING" means an initial public offering of
Borrower's securities.
1.19 "INSTRUMENTS" means any "instrument," as such term is defined in
Section 9-105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.20 "INTELLECTUAL PROPERTY" means all Copyrights, Trademarks, Patents,
trade secrets, source codes, customer lists, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
skill, expertise, experience, processes, models, drawings, materials and
records.
1.21 "INVENTORY" means any "inventory," as such term is defined in
Section 9-109(4) of the UCC, wherever located, now or hereafter owned or
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest, and, in any event, shall include, without limitation, all inventory,
goods and other personal property which are held by or on behalf of Borrower for
sale or lease or are furnished or are to be furnished under a contract of
service or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in Borrower's business, or the processing,
packaging, promotion, delivery or shipping of the same, and all furnished goods
whether or not such inventory is listed on any schedules, assignments or reports
furnished to Lender from time to time and whether or not the same is in transit
or in the constructive, actual or exclusive occupancy or possession of Borrower
or is held by Borrower or by others for Borrower's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of Borrower or of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents or other persons.
1.22 "LICENSE" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.
1.23 "LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, levy, lien or charge of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
1.24 "LOAN DOCUMENTS" shall mean and include this Agreement, the
Note(s), and any other documents executed in connection with the Secured
Obligations or the transactions contemplated hereby, as the same may from time
to time be amended, modified, supplemented or restated, provided, that the Loan
Documents shall not include any of the Excluded Agreements.
1.25 "MATERIAL ADVERSE EFFECT" means a material adverse effect upon: (i)
the business, operations, properties, prospects, assets or conditions (financial
or otherwise) of Borrower; or (ii) the ability of Borrower to perform, the
Secured Obligations.
4
<PAGE> 5
1.26 "MATURITY DATE" means the date thirty-six (36) months from the
Advance Date of each installment of the Loan.
1.27 "MAXIMUM LOAN AMOUNT" means Six Million and No/100 Dollars
($6,000,000.00).
1.28 "MERGER EVENT" means a (i) capital reorganization of the shares of
the Borrower's stock (other than a stock split, reverse stock split,
combination, reclassification, exchange, subdivision of shares or change of
state of incorporation), or (ii) a merger or consolidation of the Borrower with
or into another corporation (whether or not the Borrower is the surviving
corporation) in which the shareholders of the Borrower immediately before such
merger or consolidation own less than a majority of the surviving or resulting
entity's outstanding voting stock immediately thereafter, or (iii) the sale of
all or substantially all of the Borrower's properties and assets to any other
person.
1.29 "NEXT EVENT" means (i) a private equity financing of at least Five
Million Dollars ($5,000,000.00), (ii) a Merger Event, or (iii) Borrower's
Initial Public Offering.
1.30 "PATENT LICENSE" means any written agreement granting any right
with respect to any invention on which a Patent is in existence now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
1.31 "PATENTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) letters patent of, or rights corresponding thereto in, the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of, or rights corresponding thereto in the
United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country; (b) all reissues, continuations,
continuations-in-part or extensions thereof; (c) all petty patents, divisionals,
and patents of addition; and (d) all patents to issue in any such applications.
1.32 "PERMITTED LIENS" means any and all of the following:
(i) liens in favor of Lender;
(ii) liens related to, or arising in connection with, Senior
Debt;
(iii) liens for taxes, assessments or governmental charges or
claims, the payment of which are not, at the time,
delinquent or are being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be
required by generally accepted accounting principles shall
have been made therefor;
(iv) statutory liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other liens
imposed by law incurred in the ordinary course of business
for sums not yet delinquent or that are being contested in
good faith, if such reserve or other appropriate provision,
if any, as shall be required by generally accepted
accounting principles shall have been made therefor;
5
<PAGE> 6
(v) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social security,
or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and
return-of-money bonds and similar obligations (exclusive of
obligations for the payment of borrowed money);
(vi) liens securing purchase money debt if the only collateral
for such purchase money debt is the assets acquired
therewith;
(vii) leases or subleases granted to others not interfering in any
material respect with the ordinary conduct of business;
(viii) any interest or title of a lessor or sublessor under any
lease;
(ix) liens arising from filing Uniform Commercial Code financing
statements relating solely to leases;
(x) liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in
connection with the importation of goods; and
(xi) liens existing on the date of this Agreement, as disclosed
to Lender.
1.33 "PREFERRED STOCK" means the Borrower's Series A Preferred Stock.
1.34 "PROCEEDS" means "proceeds," as such term is defined in Section
9-306(1) of the UCC and, in any event, shall include, without limitation, (a)
any and all Accounts, Chattel Paper, Instruments, cash or other forms of money
or currency or other proceeds payable to Borrower from time to time in respect
of the Collateral, (b) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Borrower from time to time with respect to any
of the Collateral, (c) any and all payments (in any form whatsoever) made or due
and payable to Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any Person acting under color of
governmental authority), (d) any claim of Borrower against third parties (i) for
past, present or future infringement of any Copyright, Patent or Patent License
or (ii) for past, present or future infringement or dilution of any Trademark or
Trademark License or for injury to the goodwill associated with any Trademark,
Trademark registration or Trademark licensed under any Trademark License and (e)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
1.35 "PURCHASE OPTION" shall have the meaning assigned to such term in
Section 8 of this Agreement.
1.36 "RECEIVABLES" shall mean and include all of the Borrower's
accounts, instruments, documents, chattel paper and general intangibles whether
secured or unsecured, whether now existing or hereafter created or arising, and
whether or not specifically sold or assigned to Lender hereunder.
1.37 "SECURED OBLIGATIONS" shall mean and include all principal,
interest, fees, costs, or other liabilities or obligations for monetary amounts
owed by Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent,
6
<PAGE> 7
and all covenants and duties regarding such amounts, of any kind of nature,
present or future, arising under this Agreement, the Note(s), or any of the
other Loan Documents, whether or not evidenced by any Note(s), Agreement or
other instrument, as the same may from time to time be amended, modified,
supplemented or restated, provided, that the Secured Obligations shall not
include any indebtedness or obligations of Borrower arising under or in
connection with the Excluded Agreements.
1.38 "SENIOR CREDITOR" means a creditor identified to Lender in
accordance with the Subordination Agreement, that provides Senior Debt financing
to Borrower; provided, that a Senior Creditor shall not include any officer,
director, shareholder, venture capital investor, or insider of Borrower, or any
affiliate of the foregoing persons, except upon the express written consent of
Lender.
1.39 "SENIOR DEBT" means any and all indebtedness and obligations for
borrowed money (including, without limitation, principal, premium (if any),
interest, fees, charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to a Senior Creditor
under Senior Loan Documents, including, but not limited to, such amounts as may
accrue or be incurred before or after default or workout or the commencement of
any liquidation, dissolution, bankruptcy, receivership or reorganization by or
against Borrower in an amount that shall not, without Lender's consent, exceed
One Million Dollars ($1,000,000.00) in aggregate principal amount outstanding at
any one time. Notwithstanding the foregoing, so long as Lender receives prior
written notice from Borrower, Lender agrees to allow the following additional
debt of Borrower to Imperial Bank or a similar bank or institutional lender (not
to exceed Borrower's line of credit with Imperial Bank or a similar bank or
institutional lender) constituting: (i) account receivable lines of financing
not to exceed 80% of eligible receivables, (ii) inventory financing not to
exceed 80% of inventory, and (iii) merchant card financing not to exceed 80% of
merchant card debt.
1.40 "SENIOR LOAN DOCUMENTS" means the loan or other agreement between
Borrower and a Senior Creditor and any other agreement, security agreement,
document, promissory note, UCC financing statement, or instrument executed by
Borrower in favor of a Senior Creditor pursuant to or in connection with the
Senior Debt or such loan or other agreement, as the same may from time to time
be amended, modified, supplemented, extended, renewed, restated or replaced.
1.41 "SUBORDINATION AGREEMENT" means the Subordination Agreement of even
date herewith, entered into between Borrower and Lender for the benefit of
Senior Creditor.
1.42 "TRADEMARK LICENSE" means any written agreement granting any right
to use any Trademark or Trademark registration now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest.
1.43 "TRADEMARKS" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United
7
<PAGE> 8
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof and (b) any reissues, extensions or renewals thereof.
1.44 "UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois. Unless otherwise defined
herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.
SECTION 2. THE LOANS
2.1 Lender agrees to lend to Borrower a principal amount not to exceed
Six Million Dollars ($6,000,000) in the aggregate at any one time outstanding
for the purposes and upon the terms and subject to the conditions contained in
this Agreement.
2.2 The Loan(s) shall be available in minimum Advances of Five Hundred
Thousand Dollars ($500,000). Each Advance made by Lender to Borrower shall be
evidenced by a Note in the original principal amount of such Advance. The
principal balance of each Note shall bear interest thereon precomputed at the
rate of ten percent (10%) per annum, and each such Note shall be due and payable
in monthly installments of interest only, until the earlier of (i) the
completion of Borrower's Initial Public Offering, or (ii) eighteen (18) months
from the Advance Date, payable on the first day of each month, which shall be
followed by eighteen (18) equal monthly installments of principal and interest,
payable on the first day of each month, to and including the Maturity Date
(each, a "Payment Date"). If any payment under a Note shall be payable on a day
other than a business day, then such payment shall be due and payable on the
next succeeding business day.
2.3 In order to obtain an Advance under the Loans, Borrower shall
complete, sign and deliver an Advance Request to Lender. Each Advance Request
shall identify an Advance Date which is no less than five (5) business days from
the date of such notice. Upon receipt of an Advance Request, Lender shall verify
the information contained in the Advance Request and if Lender determines to
fund such Advance it shall deliver a Note dated the Advance Date evidencing such
Advance to Borrower for signature. Upon receipt of the signed Note, Lender will
fund the Advance in the manner requested by the Advance Request. Borrower agrees
that Lender may rely on any notice given by any Person it reasonably believes to
be an authorized officer of Borrower without the necessity of independent
investigation.
2.4 (a) Notwithstanding any provision in this Agreement, the Note(s), or
any other Loan Document, it is not the parties' intent to contract for, charge
or receive interest at a rate that is greater than the maximum rate permissible
by law which a court of competent jurisdiction shall deem applicable hereto
(which under the laws of the State of Illinois shall be deemed to be the laws
relating to permissible rates of interest on commercial loans) (the "Maximum
Rate"). If the Borrower actually pays Lender an amount of interest, chargeable
on the total aggregate principal Secured Obligations of Borrower under this
Agreement and the Note(s) (as said rate is calculated over a period of time from
the date of this Agreement through the end of time that any principal is
outstanding on the Note(s)), which amount of interest exceeds interest
calculated at the Maximum Rate on said principal chargeable over said period of
time, then such excess interest actually paid by Borrower shall be applied
first, to the payment of principal outstanding on the Note(s); second, after all
principal is repaid, to the payment of Lender's out of pocket costs, expenses,
and professional fees which are owed by
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Borrower to Lender under this Agreement or the Loan Documents; and third, after
all principal, costs, expenses, and professional fees owed by Borrower to Lender
are repaid, the excess (if any) shall be refunded to Borrower, and the effective
rate of interest will be automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at the rate set forth in Section 2.2.
(c) Upon and during the continuation of an Event of Default
hereunder, all Secured Obligations, including principal, interest, compounded
interest, and professional fees, shall bear interest at a rate per annum equal
to the rate set forth in Section 2.2 plus five percent (5%) per annum ("Default
Rate").
SECTION 3. SECURITY INTEREST
As security for the prompt, complete and indefeasible payment when due
(whether at stated payment dates or otherwise) of all the Secured Obligations
and in order to induce Lender to make the Loan(s) upon the terms and subject to
the conditions of the Note(s), Borrower hereby conveys, mortgages, pledges,
hypothecates and transfers to Lender for security purposes only, and hereby
grants to Lender a security interest in all of Borrower's right, title and
interest in, to and under each of the following (all of which being hereinafter
collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
(c) All Fixtures;
(d) All General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether tangible
or intangible and whether now or hereafter owned or existing, leased, consigned
by or to, or acquired by, Borrower and wherever located; and
(g) To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of each of the foregoing;
provided, however, the Collateral shall not include that certain Software
License Agreement, dated as of September 24, 1998, among 3Com Corporation and JD
Technology, Inc. as Borrower's predecessor in interest therein, and any License,
Equipment lease, real property lease, Chattel Paper or Contract to which
Borrower is or becomes a party as licensee, lessee other otherwise, to the
extent that (a) such License, Equipment lease, real property lease, Chattel
Paper or Contract or property subject thereto is not assignable or capable of
being encumbered as a matter of law or under the terms of the License, lease or
other agreement
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<PAGE> 10
applicable thereto (but solely to the extent that any such restriction shall be
enforceable under applicable law), without the consent of the licensor or lessor
thereof or other applicable party thereto and (b) such consent has not been
obtained; nevertheless, the foregoing grant of security interest shall extend
to, and the term "Collateral" shall include, (i) any and all proceeds of such
License, Equipment lease, real property lease, Chattel Paper or Contract and
property subject thereto to the extent that the assignment or encumbering of
such proceeds is not so restricted and (ii) upon the consent of any such
licensor, lessor or other applicable party with respect to any such otherwise
excluded License, Equipment lease, real property lease, Chattel Paper or
Contract being obtained (which consent shall be required only at Lender's
request following an Event of Default hereunder), thereafter such License,
Equipment lease, real property lease, Chattel Paper or contract and property
subject thereto as well as any and all proceeds thereof that might theretofore
have been excluded from such grant of a security interest shall be included
within the term "Collateral".
SECTION 4. CONDITIONS PRECEDENT TO LOAN
The obligations of the Lender to make Loans hereunder are subject to the
satisfaction by Borrower, or waiver by Lender, of the following conditions:
4.1 Borrower, on or prior to the Closing Date, shall have delivered to
Lender the following:
(a) executed originals of the Agreement, the Subordination
Agreement, and any other documents reasonably required by Lender to
effectuate the liens of Lender with respect to all Collateral;
(b) certified copy of resolutions of Borrower's board of directors
evidencing approval of the borrowing and other transactions evidenced by
the Loan Documents;
(c) certified copies of the Articles of Incorporation and the
Bylaws, as amended through the Closing Date, of Borrower;
(d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in
which it does business and where the failure to be qualified would have
a Material Adverse Effect;
(e) payment of the Facility Fee; and
(f) such other documents as Lender may reasonably request in
writing prior to the Closing Date.
4.2 On each Advance Date:
(a) The Lender shall have received (i) an Advance Request for such
Advance as required by Section 2.3, (ii) an executed Note evidencing
such Advance and (iii) any other documents Lender may reasonably request
in writing prior to such Advance Date.
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(b) The representations and warranties set forth in Section 5
hereof shall be true and correct in all material respects on and as of
the Advance Date with the same effect as though made on and as of such
date, except to the extent such representations and warranties expressly
relate to an earlier date.
(c) The Borrower shall be in material compliance with all the terms
and provisions set forth herein and in each other Loan Document on its
part to be observed or performed, and at the time of and immediately
after such Advance no Event of Default shall have occurred and be
continuing.
Each Advance Request shall be deemed to constitute a representation and warranty
by the Borrower on the Advance Date as to the matters specified in paragraphs
(b) and (c) of this Section 4.2.
4.3 PERFECTION OF SECURITY INTERESTS. Borrower shall have taken or
caused to be taken such actions requested by Lender to grant Lender a first
priority perfected security interest in the Collateral, subject only to
Permitted Liens. Such actions shall include, without limitation, the delivery to
Lender of all appropriate financing statements, executed by Borrower, as to the
Collateral granted by Borrower for all jurisdictions as may be necessary or
desirable to perfect the security interest of Lender in such Collateral.
4.4 ABSENCE OF EVENTS OF DEFAULTS. As of the Closing Date or the Advance
Date, as applicable, no fact or condition exists that would (or would, with the
passage of time, the giving of notice, or both) constitute an Event of Default
under this Agreement or any of the Loan Documents and no fact or condition
exists that would (or would, with the passage of time, the giving of notice, or
both) constitute a material default under the Senior Loan Documents between
Borrower and Senior Creditor.
4.5 MATERIAL ADVERSE EFFECT. As of the Closing Date or the Advance Date,
as applicable, no event which has had or could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing.
4.6 TERMINATION DATE. Notwithstanding anything in this Agreement to the
contrary, Lender's obligations to provide the Loan(s) shall terminate on the
earlier of (i) June 10, 2000 or (ii) the occurrence of an Event of Default
pursuant to Section 9, and no Advance Requests shall be accepted after such
date.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that:
5.1 Borrower owns all right, title and interest in and to the
Collateral, free of all liens, security interests, encumbrances and claims
whatsoever, except for Permitted Liens.
5.2 Borrower has the full power and authority to, and does hereby grant
and convey to the Lender, (and when the appropriate UCC Financing Statements are
properly filed) a perfected security interest in the Collateral as security for
the Secured Obligations, free of all liens, security interests, encumbrances and
claims, other than Permitted Liens and shall execute such Uniform Commercial
Code financing statements in connection herewith as the
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Lender may reasonably request. Except for Permitted Liens, no other lien,
security interest, adverse claim or encumbrance has been created by Borrower or
is known by Borrower to exist with respect to any Collateral.
5.3 Borrower is a corporation duly organized, legally existing and in
good standing under the laws of the State of California, and is duly qualified
as a foreign corporation in all jurisdictions in which the nature of its
business or location of its properties require such qualifications and where the
failure to be qualified would have a Material Adverse Effect.
5.4 Borrower's execution, delivery and performance of the Note(s), this
Agreement, all financing statements, all other Loan Documents, required to be
delivered or executed in connection herewith, have been duly authorized by all
necessary corporate action of Borrower, the individual or individuals executing
the Loan Documents were duly authorized to do so; and the Loan Documents
constitute legal, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization or other similar laws generally affecting the
enforcement of the rights of creditors (and rules of law concerning equitable
remedies).
5.5 This Agreement and the other Loan Documents do not and will not
violate any provisions of Borrower's Articles of Incorporation, bylaws or any
material contract, material agreement, law, regulation, order, injunction,
judgment, decree or writ to which the Borrower is subject, or result in the
creation or imposition of any lien, security interest or other encumbrance upon
the Collateral, other than those created by this Agreement.
5.6 The execution, delivery and performance of this Agreement and the
other Loan Documents do not require the consent or approval of any other person
or entity including, without limitation, any regulatory authority or
governmental body of the United States or any state thereof or any political
subdivision of the United States or any state thereof.
5.7 No event which has had a Material Adverse Effect has occurred and is
continuing.
5.8 No fact or condition exists that would (or would, with the passage
of time, the giving of notice, or both) constitute a material default under the
Senior Loan Documents.
5.9 (a) There are no actions, suits or proceedings at law or in equity
or by or before any governmental authority now pending or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or any business,
property or rights of the Borrower (i) which involve any Loan Document or (ii)
as to which there is a reasonable possibility of an adverse determination and
which, if adversely determined, could, individually or in the aggregate, result
in a Material Adverse Effect.
(b) The Borrower is not in violation of any law, rule or
regulation, or in default with respect to any judgment, writ, injunction or
decree of any governmental authority, where such violation or default could
result in a Material Adverse Effect.
5.10 (a) The Borrower is not a party to any agreement or instrument or
subject to any corporate restriction that has resulted in a Material Adverse
Effect.
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(b) The Borrower is not in default in any manner under any
provision of any indenture or other agreement or instrument evidencing
indebtedness, or any other material agreement or instrument to which it is a
party or by which it or any of its properties or assets are or may be bound,
where such default could result in a Material Adverse Effect.
5.11 No information, report, financial statement, exhibit or schedule
furnished by or on behalf of the Borrower to the Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained or contains any material misstatement of fact or omitted or
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were or are made, not
misleading.
5.12 All issued and outstanding shares of Common Stock, Preferred Stock
or any other securities of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. All outstanding shares of Common
Stock, Preferred Stock and any other securities were issued in full compliance
with all Federal and state securities laws. In addition:
(i) As of the date of this Agreement, the authorized capital stock
of the Company consists of 35,000,000 shares of Common Stock, no par
value (the "Common Stock"), of which [15,350,385] shares shall be issued
and outstanding, and 8,200,000 shares of Preferred Stock, no par value,
all of which shares shall have been designated as Series A Preferred
Stock of which 8,076,924 shares of are issued and outstanding. All of
the issued and outstanding shares of Preferred Stock have been duly
authorized and validly issued and are fully paid and nonassessable. All
of the issued and outstanding shares of Preferred Stock have been duly
authorized and validly issued and are fully paid and nonassessable. All
of the issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable. As
of the date of this Agreement there are 4,846,154 shares of Common Stock
reserved for issuance under the Company's 1998 Equity Incentive Plan, of
which 1,350,385 shares have been issued upon the exercise of options,
2,008,923 shares are subject to outstanding options and 1,486,846 shares
remain available for issuance. Except as set forth in this Agreement,
(i) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) the
Company has no obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such right
or to issue or distribute to holders of a share of its capital stock any
evidences of indebtedness or assets of the Company, and (iii) the
Company has no obligation (contingent or otherwise) to purchase, redeem
or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend to make any other distribution in respect
thereof. All of the issued and outstanding securities or the Company
have been offered, issued and sold by the Company is compliance with
applicable federal and state securities laws.
(ii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new
issuances of the Company's capital stock (with the exception of certain
shareholders who are signatories to that certain Investors' Rights
Agreement dated as of October 22, 1998).
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5.13 Borrower has filed and will file all tax returns, federal, state
and local, which it is required to file and has duly paid or fully reserved for
all taxes or installments thereof (including any interest or penalties) as and
when due, which have or may become due pursuant to such returns or pursuant to
any assessment received by Borrower for the three (3) years preceding the
Closing Date, if any (including any taxes being contested in good faith and by
appropriate proceedings).
SECTION 6. INSURANCE
6.1 So long as there are any Secured Obligations outstanding, Borrower
shall cause to be carried and maintained commercial general liability insurance
against risks customarily insured against in Borrower's line of business. Such
risks shall include, without limitation, the risks of death, bodily injury and
property damage. So long as there are any Secured Obligations outstanding,
Borrower shall also cause to be carried and maintained insurance upon the
Collateral and Borrower's business, covering casualty, hazard and such other
property risks in amounts equal to the full replacement cost of the Collateral.
Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU
438 or equivalent) naming Lender as loss payee and additional insured. Borrower
shall use commercially reasonable efforts to cause all policies evidencing such
insurance to provide for at least thirty (30) days prior written notice by the
underwriter or insurance company to Lender in the event of cancellation or
expiration. Such policies shall be issued by such insurers and in such amounts
as are reasonably acceptable to Lender.
6.2 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including, without limitation, such claims, costs,
expenses, damages and liabilities based on liability in tort, including without
limitation, strict liability in tort), including reasonable attorneys' fees,
arising out of the disposition or utilization of the Collateral by Borrower,
other than claims arising out of or caused by Lender's gross negligence or
willful misconduct.
SECTION 7. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:
7.1 Borrower shall furnish to Lender the financial statements listed
hereinafter, each prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):
(a) as soon as practicable (and in any event within forty-five (45)
days) after the end of each fiscal quarter (except the last quarter of
Borrower's fiscal year), unaudited interim financial statements
(prepared on a consolidated and consolidating basis, if applicable),
including balance sheet and related statements of income and cash flows
accompanied by a report detailing any material contingencies (including
the commencement of any material litigation by or against Borrower) or
any other occurrence that could reasonably be expected to have a
Material Adverse Effect, all certified by Borrower's Chief Executive
Officer or Chief Financial Officer to be true and correct;
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(b) as soon as practicable (and in any event within ninety (90)
days) after the end of each fiscal year, unqualified audited financial
statements as of the end of such year (prepared on a consolidated and
consolidating basis, if applicable), including balance sheet and related
statements of income and cash flows, and setting forth in comparative
form the corresponding figures for the preceding fiscal year, certified
by a firm of independent certified public accountants selected by
Borrower and reasonably acceptable to Lender, accompanied by any
management report from such accountants;
(c) promptly after the sending or filing thereof, as the case may
be, copies of any proxy statements or financial statements which
Borrower has made available to its shareholders and copies of any
regular, periodic and special reports or registration statements which
Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any
national securities exchange; and
(d) promptly, any additional financial information, (including, but
not limited, to tax returns and names of principal creditors) as is
reasonably necessary for Lender to evaluate Borrower's continuing
ability to meet its financial obligations.
7.2 Borrower shall permit any authorized representative of Lender and
its attorneys and accountants on reasonable notice to inspect, examine and make
copies and abstracts of the books of account and records of Borrower reasonably
related to Lender's security interest in the Collateral at reasonable times
during normal business hours. In addition, such representative of Lender and its
attorneys and accountants shall have the right to meet with management and
officers of the Borrower at reasonable times during normal business hours to
discuss such books of account and records.
7.3 Borrower will from time to time execute, deliver and file, alone or
with Lender, any financing statements, security agreements or other documents
reasonably requested by Lender; procure any instruments or documents as may be
reasonably requested by Lender; and take all further action that may be
necessary or desirable that Lender may reasonably request, to confirm, perfect,
preserve and protect the security interests intended to be granted hereby, and
in addition, and for such purposes only, Borrower hereby authorizes Lender to
execute and deliver on behalf of Borrower and to file such financing statements,
security agreement and other documents without the signature of Borrower either
in Lender's name or in the name of Borrower as agent and attorney-in-fact for
Borrower. The parties agree that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.
7.4 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Collateral free and clear
from any legal process, liens or encumbrances whatsoever (except any placed
thereon by Lender and Permitted Liens) and shall give Lender immediate written
notice thereof.
7.5 Without Lender's prior written consent, Borrower shall not (a) grant
any material extension of the time of payment of any of the Receivables
involving an amount owing to Borrower in excess of $100,000, (b) to any material
extent, compromise, compound or settle the same for less than the full amount
thereof, or (c) release, wholly or partly, any Person liable
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for the payment thereof, or allow any credit or discount whatsoever thereon
other than trade discounts granted in the ordinary course of business of
Borrower.
7.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition (taking into consideration ordinary wear
and tear) and from time to time make or cause to be made all necessary and
proper repairs, renewals and replacements thereto and shall competently manage
and care for its property in accordance with prudent industry practices.
7.7 Borrower shall notify Lender a minimum of thirty (30) days prior to
the closing date of a Merger Event and request Lender's consent to the
assignment of all of Borrower's Secured Obligations hereunder to the successor
entity in form and substance satisfactory to Lender. In the event Lender does
not consent to such assignment, which consent shall not be unreasonably
withheld, and a Merger Event as described in the preceding sentence is closed
and consummated, the parties agree Borrower shall prepay the Loan in accordance
with Section 2.2 hereof; provided that such consent by the Lender shall not be
required in any transaction in which the surviving entity or its parent
corporation has a Moody's Bond rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lender.
7.8 Borrower shall not, without the prior written consent of Lender,
such consent not to be unreasonably withheld, declare or pay any cash dividend
or make a distribution of cash or property on any class of stock, other than
pursuant to employee repurchase plans upon an employee's death or termination of
employment or transfer, sell, lease, lend or in any other manner convey any
equitable, beneficial or legal interest in any material portion of the assets of
Borrower (except inventory sold in the normal course of business).
7.9 Upon the request of Lender, Borrower shall, during business hours,
make the Inventory and Equipment available to Lender for inspection at the place
where it is normally located and shall make Borrower's log and maintenance
records pertaining to the Inventory and Equipment available to Lender for
inspection. Borrower shall take all action necessary to maintain such logs and
maintenance records in a correct and complete fashion.
7.10 Borrower covenants and agrees to pay when due, all taxes, fees or
similar charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower or Lender with
respect to or the Collateral or upon Borrower's ownership, possession, use,
operation or disposition thereof or upon Borrower's rents, receipts or earnings
arising therefrom. Borrower shall file on or before the due date therefor all
personal property tax returns in respect of the Collateral. Notwithstanding the
foregoing, Borrower may contest, in good faith and by appropriate proceedings,
taxes for which Borrower maintains adequate reserves therefor.
7.11 Borrower shall not relocate any material item of the Collateral
(other than sale or movement of inventory, raw materials or component parts in
the ordinary course of business) except: (i) with the prior written consent of
the Lender not to be unreasonably withheld; and (ii) if such relocation shall be
within the continental United States. If permitted to relocate Collateral
pursuant to subparts (i) or (ii) of the foregoing sentence, unless otherwise
agreed in writing by Lender, Borrower shall first (a) cause to be filed and/or
delivered to the Lender all Uniform Commercial Code financing statements,
certificates or other documents or instruments
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necessary to continue in effect the perfected security interest of the Lender in
the Collateral, and (b) have given the Lender no less than thirty (30) days
prior written notice of such relocation.
SECTION 8. PURCHASE OPTION
8.1 Subject to the provisions of Section 8.10, Lender shall have the
right to purchase shares of Borrower's Preferred Stock with an aggregate value
of up to twenty-five percent (25%) of the Maximum Loan Amount (subject to
increase as provided in Section 8.2) at any time, at Lender's sole and absolute
discretion (the "Purchase Option"). The Purchase Option shall be exercisable at
a purchase price as set forth below:
(a) If Borrower closes the Next Event on or before July 15,
1999, the purchase price will be equal to seventy percent
(70%) of the price per share of the Next Event, but at no
greater than a $300 million (fully diluted) pre money
valuation. For purposes of this Section 8.1(a), a "fully
diluted" valuation shall be based on a calculation including
(1) all outstanding Common Stock, (2) all outstanding
preferred stock as if converted to Common Stock and (3) the
total number of shares subject to outstanding options and
shares remaining available for grant.
(b) If Borrower closes the Next Event after July 15, 1999 but
before June 30, 2000, the purchase price will be equal to
the lesser of:
(i) $4.46 per share;
(ii) the price per share equal to seventy percent (70%) of
the Next Event; or
(iii) the price per share equal to seventy percent (70%) of
any future private equity financing round prior to an
IPO.
(c) If Borrower does not complete the Next Event on or before
June 30, 2000, the purchase price will be equal to $2.79 per
share.
The Purchase Option will terminate upon the date thirty (30) days from
receipt by Lender of notice from Borrower of an Initial Public Offering or a
Merger Event, subject to the terms set forth in Section 8.9 hereof.
The number and purchase price of such shares are subject to adjustment
as provided in this Section 8.
8.2 If the Borrower has not repaid the outstanding principal amount
under a Note in its entirety by the Maturity Date (as defined in the applicable
Note(s)), then for each additional month, or portion thereof, thereafter that
the outstanding principal is not paid, Lender shall have the right to purchase
from the Borrower, at the Purchase Price (adjusted, as set forth and defined in
Section 8.3 herein), an additional amount of Preferred Stock with a value equal
to the product of (x) the outstanding principal amount which is due but unpaid
and (y) one percent (1%).
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8.3 The Purchase Price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) If the Borrower at any time shall, by stock split, reverse
stock split, combination, reclassification, exchange or subdivision of
the securities as to which purchase rights under this Purchase Option
exist into the same or a different number of securities of any other
class or classes, this Purchase Option shall thereafter represent the
right to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities
which were subject to the purchase rights under this Purchase Option
immediately prior to such classification, exchange, subdivision or other
change.
(b) If the Borrower at any time shall combine or subdivide its
Preferred Stock, the Purchase Price shall be proportionately decreased
in the case of a subdivision, or proportionately increased in the case
of a combination.
(c) If the Borrower at any time shall pay a dividend payable in, or
make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Borrower's
stock, then the Purchase Price shall be adjusted, from and after the
record date of such dividend or distribution, to that price determined
by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction (i) the numerator of which shall be the total
number of all shares of the Borrower's stock outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of
which shall be the total number of all shares of the Borrower's stock
outstanding immediately after such dividend or distribution. The Lender
shall thereafter be entitled to purchase, at the Purchase Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the
Purchase Price in effect immediately prior to such adjustment by the
number of shares of Preferred Stock issuable upon the exercise hereof
immediately prior to such adjustment and dividing the product thereof by
the Purchase Price resulting from such adjustment.
(d) Additional antidilution rights applicable to the Preferred
Stock purchasable hereunder are as set forth in the Borrowers Articles
of Incorporation, as may be amended from time to time through the date
of this Agreement, a true and complete copy of the current Articles of
Incorporation which is attached hereto AS EXHIBIT C (the "Charter"). The
Borrower shall promptly provide the Lender with any restatement,
amendment, modification or waiver of the Charter. The Borrower shall
provide Lender with prior written notice of any issuance of its stock or
other equity security to occur after the Effective Date of this Purchase
Option, which notice shall 'include (i) the price at which such stock or
security is to be sold, (ii) the number of shares to be issued, and
(iii) such other information as necessary for Lender to determine if a
dilutive event has occurred.
(e) If: (i) the Borrower shall declare any dividend or distribution
upon its stock, whether in cash, property, stock or other securities;
(ii) the Borrower shall offer for subscription prorata to the holders of
any class of its preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any
Merger Event; (iv) there shall be an Initial Public Offering; or (v)
there shall be any voluntary
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<PAGE> 19
dissolution, liquidation or winding up of the Borrower; then, in
connection with each such event, the Borrower shall send to the Lender:
(A) at least twenty (20) days' prior written notice of the date on which
the books of the Borrower shall close or a record shall be taken for
such dividend, distribution, subscription rights (specifying the date on
which the holders of Preferred Stock shall be entitled thereto) or for
determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; (B) in the case of any such dissolution,
liquidation or winding up, at least thirty (30) days' prior written
notice of the date when the same shall take place (and specifying the
date on which the holders of Preferred Stock shall be entitled to
exchange their Preferred Stock for securities or other property
deliverable upon dissolution, liquidation or winding up); and (C) in the
case of a Initial Public Offering or Merger Event, the Borrower shall
give the Lender at least thirty (30) days written notice prior to the
effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Purchase Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Lender, at the address as shown on the books of the Lender.
(f) Failure to timely provide such notice required by subsection
(e) above shall entitle Lender to retain the benefit of the applicable
notice period notwithstanding anything to the contrary contained in any
insufficient notice received by Lender. The notice period shall begin on
the date Lender actually receives a written notice containing all the
information specified above.
8.5 The Purchase Option is exercisable by the Lender, in whole or in
part, at any time, or from time to time, prior to the earlier of thirty (30)
days after receipt of notice from Borrower of (i) an Initial Public Offering, or
(ii) a Merger Event. Lender may exercise its Purchase Option by tendering to the
Borrower at its principal office a notice of exercise in the form attached
hereto as EXHIBIT D (the "Notice of Purchase"), duly completed and executed
together with payment in an amount equal to the Purchase Price for that portion
of the Purchase Option so exercised, in cash or by bank cashier's or certified
check; provided that Lender may satisfy all or a portion of the Purchase Price
by tender of one or more Note(s), the outstanding principal and interest of
which shall be credited against the Purchase Price, with the balance, if any, of
the Purchase Price payable in cash or by check as provided above. In such event,
the Note(s) so tendered will be deemed satisfied in full and will be cancelled
by the Borrower and the Borrower will have no further obligation to the Lender
under such Note(s).
Promptly upon receipt of the Notice of Purchase and the payment of the
Purchase Price in accordance with the terms set forth below, Borrower shall
execute the acknowledgment of exercise in the form attached hereto as EXHIBIT E
(the "Acknowledgment of Purchase") indicating the number of shares which remain
subject to future purchases, if any. Subject to Lender's right of rescission of
its election pursuant to Section 8.9, no later than twenty-one (21) days
thereafter, the Borrower shall issue to the Lender a certificate for the number
of shares of Preferred Stock purchased.
8.6 (a) During the term of this Purchase Option, the Borrower will at
all times have authorized and reserved a sufficient number of shares of its
Preferred Stock to provide for the exercise of the rights to purchase Preferred
Stock as provided for herein.
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<PAGE> 20
(b) If any shares of Preferred Stock required to be reserved
hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration
under the Securities Act of 1933, as amended ("1933 Act"), as then in
effect, or any similar Federal statute then enforced, or any state
securities law, required by reason of any transfer involved in such
purchase), or listing on any domestic securities exchange, before such
shares may be issued upon purchase, the Borrower will, at its expense
and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such
domestic securities exchange, as the case may be.
8.7 No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of the Purchase Option, but in lieu of such
fractional shares the Borrower shall make a cash payment therefor upon the basis
of the Purchase Price then in effect.
8.8 This Purchase Option does not entitle the Lender to any voting
rights or other rights as a shareholder of the Borrower prior to the exercise of
the Purchase Option.
8.9 In the event Lender has exercised the Purchase Option based upon
receipt of notice from Borrower of an Initial Public Offering or Merger Event
and if such transaction is not consummated, the Borrower shall promptly notify
the Lender that such proposed transaction has been terminated, and the Lender
may rescind any exercise of its Purchase Option promptly after such notice of
termination of the proposed transaction.
8.10 (a) If Lender for any reason has refused to make an Advance (a
"Refused Advance") to Borrower pursuant to a proper Advance Request, then
Lender's Purchase Option under this Section 8 shall be reduced by a value equal
to the amount of such Refused Advance.
(b) In order to effectuate the reduction of the Purchase Option set
forth in subclause (a) above, if Lender exercises the Purchase Option prior to
the termination date set forth in Section 4.6, the shares issuable upon such
exercise shall be subject to a repurchase right in favor of the Borrower at a
price per share equal to the price paid by Lender in such exercise and shall be
held in escrow by the Borrower.
8.11 Lender hereby agrees that it shall not, to the extent requested by
Borrower or an underwriter of securities of Borrower, sell or otherwise transfer
or dispose of any shares of Preferred Stock issued upon exercise of the Purchase
Option for such period of time not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Borrower filed
under the 1933 Act for the Borrower's underwritten initial public offering
provided, however, that:
(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.
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<PAGE> 21
In order to enforce the foregoing covenant, Borrower shall have the
right to place restrictive legends on the certificates representing the shares
subject to this Section 8.11 and to impose stop transfer instructions with
respect to such shares.
SECTION 9. DEFAULT
The occurrence of any one or more of the following events (herein called
"Events of Default") shall constitute a default hereunder and under the Note(s)
and other Loan Documents:
9.1 Borrower defaults in the payment of any principal, interest or other
Secured Obligation involving the payment of money under this Agreement, the
Note(s) or any of the other Loan Documents, and such default continues for more
than five (5) days after the due date thereof; or
9.2 Borrower defaults in the performance of any other covenant or
Secured Obligation of Borrower hereunder or under the Note(s) or any of the
other Loan Documents, and such default continues for more than thirty (30) days
after Lender has given notice of such default to Borrower.
9.3 Any representation or warranty made herein by Borrower shall prove
to have been false or misleading in any material respect; or
9.4 Borrower shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation pertinent to such circumstances, or shall seek
or consent to or acquiesce in the appointment of any trustee, receiver, or
liquidator of Borrower or of all or any substantial part (33-1/3% or more) of
the properties of Borrower; or Borrower or its directors or majority
shareholders shall take any action initiating the dissolution or liquidation of
Borrower; or
9.5 Sixty (60) days shall have expired after the commencement of an
action by or against Borrower seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, without such action being dismissed or all
orders or proceedings thereunder affecting the operations or the business of
Borrower being stayed; or a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or Borrower shall file any answer admitting or not contesting the
material allegations of a petition filed against Borrower in any such
proceedings; or the court in which such proceedings are pending shall enter a
decree or order granting the relief sought in any such proceedings; or
9.6 Sixty (60) days shall have expired after the appointment, without
the consent or acquiescence of Borrower, of any trustee, receiver or liquidator
of Borrower or of all or any substantial part of the properties of Borrower
without such appointment being vacated; or
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<PAGE> 22
9.7 The material default by Borrower under any Excluded Agreement(s),
any other promissory note or agreement for borrowed money, or any other
agreement between Borrower and Lender; or
9.8 The occurrence of any material default under any lease or other
agreement or obligation of Borrower having an outstanding obligation to Borrower
in excess of $100,000.00 or having a Material Adverse Effect; or the entry of
any judgment against Borrower involving an award in excess of $100,000.00 that
would have a Material Adverse Effect, that has not been bonded or stayed on
appeal within thirty (30) days; or
9.9 The occurrence of any material default under the Senior Loan
Documents.
SECTION 10. REMEDIES
Upon the occurrence of any one or more Events of Default, Lender, at its
option, may declare the Note and all of the other Secured Obligations to be
accelerated and immediately due and payable (provided, that upon the occurrence
of an Event of Default of the type described in Sections 9.4 or 9.5, the Note(s)
and all of the other Secured Obligations shall automatically be accelerated and
made due and payable without any further act), whereupon the unpaid principal of
and accrued interest on such Note(s) and all other outstanding Secured
Obligations shall become immediately due and payable, and shall thereafter bear
interest at the Default Rate set forth in, and calculated according to, Section
2.4 (c) of this Agreement. Lender may pursue all rights and remedies with
respect to the Collateral under the Loan Documents or otherwise available to it
under applicable law, including the right to release, hold or otherwise dispose
of all or any part of the Collateral and the right to occupy, utilize, process
and commingle the Collateral.
Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonable
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere. Borrower agrees that any such public or private sale may occur upon
ten (10) calendar days' prior written notice to Borrower. Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
designated by Lender which is reasonably convenient to Lender and Borrower. The
proceeds of any sale, disposition or other realization upon all or any part of
the Collateral shall be distributed by Lender in the following order of
priorities:
First, to Lender in an amount sufficient to pay in full Lender's costs
and professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Secured Obligations in such order and priority as Lender may choose in
its sole discretion; and
Finally, upon payment in full of all of the Secured Obligations, to
Borrower or its representatives or as a court of competent jurisdiction
may direct.
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<PAGE> 23
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies
with the obligations of a secured party under Section 9-207 of the UCC.
Lender's rights and remedies hereunder are subject to the terms of the
Subordination Agreement.
SECTION 11. MISCELLANEOUS
11.1 CONTINUATION AND TERMINATION OF SECURITY INTEREST. This is a
continuing Agreement and the grant of a security interest hereunder shall remain
in full force and effect and all the rights, powers and remedies of Lender
hereunder shall continue to exist until the Secured Obligations are paid in full
as the same become due and payable and until Lender has executed a written
termination statement (which Lender shall execute within thirty (30) days after
full payment of the Secured Obligations hereunder or within 10 days upon request
of Borrower), reassigning to Borrower, without recourse, the Collateral and all
rights conveyed hereby and returning possession of the Collateral to Borrower.
The rights, powers and remedies of Lender hereunder shall be in addition to all
rights, powers and remedies given by statute or rule of law and are cumulative.
The pursuit of any one or more of the rights, powers and remedies provided
herein shall not be construed as a waiver of or election of remedies with
respect to any other rights, powers and remedies of Lender. When all Secured
Obligations have been paid in full and discharged, all security interests and
other Liens granted to Lender under this Agreement will terminate. Upon the full
and final discharge of all of the Secured Obligations, Lender will execute and
deliver such documents as may be reasonably necessary and requested by Borrower
to release the Collateral from the security interest and Lien granted to Lender
in this Agreement, and return (or cause to be returned) to Borrower any
Collateral in the possession of Lender or its agents.
11.2 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11.3 NOTICE. Except as otherwise provided herein, all notices and
service of process required, contemplated, or permitted hereunder or with
respect to the subject matter hereof shall be in writing, and shall be deemed to
have been validly served, given or delivered upon the earlier of: (i) the first
business day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
(a) IF TO LENDER:
COMDISCO, INC.
Legal Department
Attention: General Counsel
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5088
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<PAGE> 24
WITH A COPY TO:
COMDISCO, INC./COMDISCO VENTURES
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5465
(b) IF TO BORROWER:
HANDSPRING, INC.
Attention: Donna Dubinsky
299 California Avenue, Suite 300
Palo Alto, CA 94306
Facsimile: (650) 566-8100
Phone: (650) 566-2222
or to such other address as each party may designate for itself by like notice.
11.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Note(s), and the
other Loan Documents constitute the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof, and
supersede and replace in their entirety any prior proposals, term sheets,
letters, negotiations or other documents or agreements, whether written or oral,
with respect to the subject matter hereof or thereof (including, without
limitation, Lender's proposal letter dated April 22, 1999), all of which are
merged herein and therein. None of the terms of this Agreement, the Note(s) or
any of the other Loan Documents may be amended except by an instrument executed
by each of the parties hereto.
11.5 HEADINGS. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
11.6 NO WAIVER. The powers conferred upon Lender by this Agreement are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any such powers. No omission, or delay, by Lender at any
time to enforce any right or remedy reserved to it, or to require performance of
any of the terms, covenants or provisions hereof by Borrower at any time
designated, shall be a waiver of any such right or remedy to which Lender is
entitled, nor shall it in any way affect the right of Lender to enforce such
provisions thereafter.
11.7 SURVIVAL. All agreements, representations and warranties contained
in this Agreement, the Note(s) and the other Loan Documents or in any document
delivered pursuant hereto or thereto shall be for the benefit of Lender and
shall survive the execution and delivery of this Agreement and the expiration or
other termination of this Agreement.
11.8 SUCCESSOR AND ASSIGNS. The provisions of this Agreement and the
other Loan Documents shall inure to the benefit of and be binding on Borrower
and its permitted assigns (if any). Borrower shall not assign its obligations
under this Agreement, the Note(s) or any of the
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<PAGE> 25
other Loan Documents without Lender's express written consent, and any such
attempted assignment shall be void and of no effect. Subject to the
Subordination Agreement, Lender may assign, transfer, or endorse its rights
hereunder and under the other Loan Documents without prior notice to Borrower,
and all of such rights shall inure to the benefit of Lender's successors and
assigns; provided, however, that any such successors or assigns shall be bound
by and expressly assume all obligations under the Subordination Agreement.
11.9 FURTHER INDEMNIFICATION. Borrower agrees to pay, and to save Lender
harmless from any and all liabilities with respect to, or resulting from any
delay in paying, any and all excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.
11.10 GOVERNING LAW. This Agreement, the Note(s) and the other Loan
Documents have been negotiated and delivered to Lender in the State of Illinois,
and shall not become effective until accepted by Lender in the State of
Illinois. Payment to Lender by Borrower of the Secured Obligations is due in the
State of Illinois. This Agreement, the Note(s) and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Illinois, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
11.11 CONSENT TO JURISDICTION AND VENUE. All judicial proceedings
arising in or under or related to this Agreement, the Note(s) or any of the
other Loan Documents may be brought in any state or federal court of competent
jurisdiction located in the State of Illinois. By execution and delivery of this
Agreement, each party hereto generally and unconditionally: (a) consents to
personal jurisdiction in Cook County, State of Illinois; (b) waives any
objection as to jurisdiction or venue in Cook County, State of Illinois; (c)
agrees not to assert any defense based on lack of jurisdiction or venue in the
aforesaid courts; and (d) irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, the Note(s) or the other
Loan Documents. Service of process on any party hereto in any action arising out
of or relating to this agreement shall be effective if given in accordance with
the requirements for notice set forth in Section 11.3, above and shall be deemed
effective and received as set forth in Section 11.3, above. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of either party to bring proceedings in the courts of any other
jurisdiction.
11.12 MUTUAL WAIVER OF JURY TRIAL. Because disputes arising in
connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert person and the parties wish applicable
state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such applicable laws.
EACH OF BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL
BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY
CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST
LENDER OR ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This
waiver extends to all such Claims, including any other Claims which involve
Borrower and Lender and additional persons or entities ; Claims which arise out
of or are in any way related to the relationship between Borrower and Lender and
other persons or creditors under the Loan Documents; and any Claims for damages,
breach of contract arising out of this Agreement, any other Loan
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<PAGE> 26
Document or any of the Excluded Agreements, specific performance, or any
equitable or legal relief of any kind.
11.13 CONFIDENTIALITY. Lender acknowledges that certain items of
Collateral, including, but not limited to trade secrets, source codes, customer
lists and certain other items of Intellectual Property, and any Financial
Statements provided pursuant to Section 7 hereof, constitute proprietary and
confidential information of the Borrower (the "Confidential Information").
Accordingly, Lender agrees that any Confidential Information it may obtain in
the course of acquiring, perfecting or foreclosing on the Collateral or
otherwise provided under this Agreement, provided such Confidential Information
is marked as confidential by Borrower at the time of disclosure, shall be
received in the strictest confidence and will not be disclosed to any other
person or entity in any manner whatsoever, in whole or in part, without the
prior written consent of the Borrower, unless and until Lender has acquired
indefeasible title thereto.
11.14 COUNTERPARTS. This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
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<PAGE> 27
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and
delivered this Agreement as of the day and year first above written.
BORROWER: HANDSPRING, INC.
Signature: /s/ Donna L. Dubinsky
--------------------------
Print Name: Donna L. Dubinsky
-------------------------
Title: CEO
------------------------------
ACCEPTED IN ROSEMONT, ILLINOIS:
LENDER: COMDISCO, INC.
Signature: /s/ James Labe
--------------------------
Print Name: James Labe, President
Comdisco Ventures
Division
-------------------------
Title: June 14, 1999
------------------------------
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EXHIBIT A
SUBORDINATED PROMISSORY NOTE
$_______ DATE: _________
DUE: _________
FOR VALUE RECEIVED, Handspring, Inc., a California corporation (the "Borrower")
hereby promises to pay to the order of Comdisco, Inc., a Delaware corporation
(the "Lender") at P.O. Box 91744, Chicago, IL 60693 or such other place of
payment as the holder of this Secured Promissory Note (this "Note") may specify
from time to time in writing, in lawful money of the United States of America,
the principal amount of __________ and 00/100 Dollars ($ _______) together with
interest at ten percent (10%) per annum from the date of this Note to maturity
of each installment on the principal hereof remaining from time to time unpaid,
such principal and interest to be paid in monthly installments of interest only
until the earlier of (i) completion of Borrower's Initial Public Offering, or
(ii) eighteen (18) months from the Advance Date in the amount of $_________
each, commencing ____________and on the same day of each month thereafter to and
including, _____________________ which shall be followed by 18 equal monthly
installments of principal and interest in the amount of $_________ each,
commencing ______________ and on the same day of each month thereafter to and
including ________________, such installments to be applied first to accrued and
unpaid interest and the balance to unpaid principal. Interest shall be computed
on the basis of a year consisting of twelve months of thirty days each. This
Note is the Note referred to in, and is executed and delivered in connection
with, that certain Subordinated Loan and Security Agreement dated June 10, 1999
by and between Borrower and Lender (as the same may from time to time be
amended, modified, supplemented or restated in accordance with its terms, the
"Loan Agreement"), and is entitled to the benefit and security of the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement), to
which reference is made for a statement of all of the terms and conditions
thereof. All terms defined in the Loan Agreement shall have the same definitions
when used herein, unless otherwise defined herein.
THIS NOTE IS EXPRESSLY SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION
AGREEMENT BY AND BETWEEN LENDER AND BORROWER FOR THE BENEFIT OF SENIOR CREDITOR.
IN THE EVENT OF ANY CONTRADICTION OR INCONSISTENCY BETWEEN THIS NOTE AND THE
SUBORDINATION AGREEMENT, THE TERMS OF THE SUBORDINATION AGREEMENT SHALL CONTROL.
The Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest and any other notice as permitted under the UCC or
any applicable law.
-1-
<PAGE> 29
This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and enforced
in accordance with, the laws of the State of Illinois, excluding any conflicts
of law rules or principles that would cause the application of the laws of any
other jurisdiction.
BORROWER: HANDSPRING, INC.
299 California Avenue, Suite 300
Palo Alto, CA 94306
Signature: __________________________
Print Name: __________________________
Title: __________________________
-2-
<PAGE> 30
EXHIBIT B
ADVANCE REQUEST
Date:___________________
To: Lender:
Comdisco, Inc.
% Comdisco Ventures
3000 Sand Hill Road
Menlo Park, CA 94025
Attention: Vika Tonga
Facsimile (650) 854-4026
Borrower hereby requests from Comdisco, Inc. ("Lender") an Advance in
the amount of $________________________ on__________________________(the
"Advance Date") under that Subordinated Loan and Security Agreement between
Borrower and Lender dated June 10, 1999 (the "Agreement").
Please:
(a) Issue a check payable to Borrower ______________
or
(b) Wire Funds to Borrower's account ______________
Bank:
Address:______________________________
______________________________
ABA Number:___________________________
Account Number:_______________________
Account Name:_________________________
Borrower hereby represents that the Conditions Precedent to Loan set
forth in Section 4 of the Agreement are satisfied and will be satisfied upon the
making of such Loans, except and to the extent described on Schedule 1 to this
Advance Request. Borrower understands and acknowledges that Lender has the right
to review such Schedule and based upon such review in its reasonable discretion
Lender may decline to fund the requested Advance if a condition precedent
thereto as set forth in Section 4 of the Agreement has not been satisfied.
Executed this _____ day of___________, 199__ by:
BORROWER: HANDSPRING, INC.
BY: _________________________________
TITLE: _________________________________
PRINT: _________________________________
28
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EXHIBIT C
(INSERT CHARTER)
29
<PAGE> 32
ENDORSED - FILED
IN THE OFFICE OF THE
SECRETARY OF STATE
OF THE STATE OF CALIFORNIA
OCTOBER 16, 1998
BILL JONES, SECRETARY OF STATE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF JD TECHNOLOGY, INC.
Donna L. Dubinsky and Jeffrey C. Hawkins certify that:
1. They are the President and Secretary, respectively, of JD Technology,
Inc., a California corporation.
2. The Articles of Incorporation of the corporation, as amended to the
date of the filing of this certificate, including amendments set forth herein
but not separately filed (and with the omissions required by Section 910 of the
California Corporations Code), are restated in their entirety as set forth in
Exhibit "1" attached hereto and made a part hereof by this reference.
3. The Restated Articles of Incorporation set forth herein have been
duly approved by the Board of Directors of the corporation.
4. The amendments to the Articles of Incorporation included in the
Restated Articles of Incorporation set forth herein (other than omissions
required by Section 910 of the Corporations Code) have been duly approved by the
required vote of the shareholders of the corporation in accordance with Sections
902 and 903 of the California Corporations Code. The corporation has one class
of stock, and the number of outstanding shares is 14,000,000 shares of Common
Stock. The number of shares voting in favor of the Restated Articles of
Incorporation set forth herein equaled or exceeded the vote required. The
percentage vote required was more than 50% of the outstanding shares of Common
Stock.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Dated: October 16, 1998 /s/ Donna L. Dubinsky
----------------------------------------------
Donna L. Dubinsky, President
/s/ Jeffrey C. Hawkins
----------------------------------------------
Jeffrey C. Hawkins, Secretary
<PAGE> 33
EXHIBIT "1"
---------------------
AMENDED AND RESTATED ARTICLES OF INCORPORATION
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ARTICLE I
The name of the corporation is JD Technology, Inc.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Unless applicable law otherwise provides, any amendment, repeal or modification
of this Article III shall not adversely affect any right or protection of a
director under this Article III that existed at or prior to the time of such
amendment, repeal or modification.
ARTICLE IV
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, by agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits on such excess indemnification set forth in Section 204 of the California
Corporations Code. Unless applicable law otherwise provides, any amendment,
repeal or modification of any provision of this Article IV shall not adversely
affect any contract or other right to indemnification of an agent of the
corporation that existed at or prior to the time of such amendment, repeal or
modification.
ARTICLE V
This corporation is authorized to issue two classes of shares,
designated "Common Stock" and "Preferred Stock," respectively, both of which
shall have no par value. The number of shares of Common Stock authorized to be
issued is 35,000,000 shares. The number of shares of Preferred Stock authorized
to be issued is 8,200,000 shares, all of which are designated as "Series A
Preferred Stock."
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ARTICLE VI
The rights, preferences, privileges and restrictions granted to and
imposed on the Series A Preferred Stock and the Common Stock are as follows:
1. DEFINITIONS. For purposes of this Article VI, 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, no par value, of
the Company.
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).
1.6 "ORIGINAL ISSUE DATE" shall mean the date on which the first
share of Series A Preferred Stock is issued by the Company.
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).
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.
1.10 "SERIES A PREFERRED STOCK" shall mean the Series A Preferred
Stock, no par value, of the Company.
1.11 "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.
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2. DIVIDEND RIGHTS.
2.1 Series A Preferred Stock. In each calendar year, the holders of
the then outstanding Series A 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 the Series A 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 shall have first been paid or declared and set apart for payment
to the holders of the Series A Preferred Stock during that calendar year;
provided, however, that this restriction shall not apply to Permitted
Repurchases. Dividends on the Series A Preferred Stock shall not be mandatory or
cumulative, and no rights or interest shall accrue to the holders of the Series
A Preferred Stock by reason of the fact that the Company shall fail to declare
or pay dividends on the Series A Preferred Stock in the amount of the annual
Dividend Rate for the Series A Preferred Stock 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 Series A 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 Series A 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 Series A 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 Series A 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 shareholders (the
"AVAILABLE FUNDS AND ASSETS") shall be distributed to shareholders in the
following manner:
3.1 Series A Preferred Stock. The holders of each share of Series A
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 to the Original Issue Price of the Series A Preferred Stock plus all
declared but unpaid dividends on the Series A Preferred Stock. If upon any
liquidation, dissolution or winding up of the Company, the Available Funds and
Assets shall be insufficient to permit the
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payment to holders of the Series A 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 Series A
Preferred Stock pro rata, according to the number of outstanding shares of
Series A Preferred Stock held by each holder thereof.
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 Series A 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 shareholders 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 shareholders 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.
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(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 Series A Preferred Stock written notice of an impending liquidation,
dissolution or winding up of the Company not later than ten (10) days prior to
the shareholders' 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 Series A
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 such
Series A 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 Series A 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 Series A Preferred Stock could
be converted pursuant to the provisions of Section 5 below at the record date
for the determination of the shareholders 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 shareholders is solicited.
4.3 General. Subject to the foregoing provisions of this Section 4,
each holder of Series A 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 shareholders' 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 Series A
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 five (5). The Company shall not alter the authorized number of
directors in its Articles 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.
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(a) Election. So long as at 2,000,000 shares of Series A
Preferred Stock are outstanding (such number of shares being subject to
proportional adjustment to reflect combinations or subdivisions of such Series A
Preferred Stock or dividends declared in shares of such stock), (i) the holders
of the Series A Preferred Stock, voting as a separate series (with cumulative
voting rights as among themselves in accordance with Section 708 of the
California Corporations Code), shall be entitled to elect two (2) directors of
the Company; (ii) the holders of the Common Stock, voting as a separate class
(with cumulative voting rights as among themselves in accordance with Section
708 of the California Corporations Code), shall be entitled to elect two (2)
directors of the Company; and (iii) the holders of the Series A Preferred Stock
and the Common Stock, voting together as a single class (with cumulative voting
rights as among themselves in accordance with Section 708 of the California
Corporations Code) 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 Series A Preferred Stock or Common Stock then
outstanding, respectively, shall constitute a quorum of the Series A Preferred
Stock or Common Stock, as the case may be, for the election of directors to be
elected solely by the holders of the Series A Preferred Stock or Common Stock,
respectively, and (B) of holders of Series A Preferred Stock and Common Stock
representing a majority of each of the voting power of all the then-outstanding
shares (1) of Series A 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 unanimous written consent
of the holders of shares of such Specified Stock, except that, if such vote is
to fill a vacancy on the Board other than a vacancy created by removal of a
director pursuant to Section 305(b) of the California Corporations Code, such
vacancy may be filled by election 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
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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 303 of the California
Corporations Code, 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 shareholders duly called for
that purpose or pursuant to a written consent of shareholders 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 California Corporations Code and applicable law
regarding shareholder meetings and shareholder 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 shareholders of the Company
in compliance with applicable law and the Articles 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 Series A 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 Series
A 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.
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(b) Each holder of Series A 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 Series A 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 Series A 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 Series A 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 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 Series A
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 Series A Preferred Stock shall not be
deemed to have converted such shares of Series A 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 Series A 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 $6.69 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 Series A Preferred Stock to
the conversion of all then outstanding Series A 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 Series A 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 Series A Preferred Stock are either
delivered to the Company or its transfer agent as provided below, or the holder
notifies the Company or its
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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 Series A Preferred Stock, the
holders of Series A Preferred Stock shall surrender the certificates
representing such shares at the office of the Company or any transfer agent for
the Series A 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 Series A Preferred
Stock surrendered were convertible on the date on which such automatic
conversion occurred.
5.3 Conversion Price. Each share of Series A 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 A Preferred Stock by the conversion price for such
Series A Preferred Stock that is in effect at the time of conversion (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. The
Conversion Price of the Series A 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), the Conversion Price of the Series
A Preferred Stock shall, simultaneously with the happening of such Common Stock
Event, be adjusted by multiplying the Conversion Price of such Series A
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 A
Preferred Stock. The Conversion Price for the Series A 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 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 Series A
Preferred Stock been converted into Common Stock on the date of such event (or
such record date, as applicable) and had they
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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 Series A 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 Series A 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 Series A 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 Series
A Preferred 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 Series A Preferred Stock thereafter shall be entitled to
receive, upon conversion of the Series A 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 Series A
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 the Series
A 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
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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 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 A 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 A 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 (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 Series A Preferred Stock; and (B) shares
of Common Stock (or options, warrants or rights therefor) issued 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;
(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.
11
<PAGE> 44
(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 Series A 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.
(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 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 the Series A 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 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:
12
<PAGE> 45
(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 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 Series A
Preferred Stock.
5.9 Certificate of Adjustment. In each case of an adjustment or
readjustment of the Conversion Price for the Series A 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 Series A Preferred Stock at the holder's address as shown in the Company's
books.
13
<PAGE> 46
5.10 Fractional Shares. No fractional shares of Common Stock shall
be issued upon any conversion of Series A 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 Series A 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 Series A 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 Series A
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.
5.12 Notices. Any notice required by the provisions of this Section
5 to be given to the holders of shares of the Series A 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 Series A
Preferred Stock remain outstanding, the Company shall not, without the approval,
by vote or written consent, of the holders of a majority of the Series A
Preferred Stock then outstanding, voting as a single class:
(1) amend its Articles of Incorporation or Bylaws in any
manner that would alter, change or affect any of the rights, preferences,
privileges or restrictions of the Series A 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 the Series A 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 or on
14
<PAGE> 47
a parity with the Series A Preferred Stock as to dividend rights, liquidation
preferences, redemption or voting;
(4) 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
shareholders 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;
(5) sell all or substantially all the Company's assets in a
single transaction or series of related transactions;
(6) liquidate or dissolve; or
(7) 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.
7. MISCELLANEOUS
7.1 No Reissuance of Preferred Stock. No share or shares of Series
A 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
Series A Preferred Stock shall, by virtue of its acceptance of a stock
certificate evidencing Series A Preferred Stock, be deemed to have consented,
for purposes of Sections 502, 503 and 506 of the California Corporations Code,
to all Permitted Repurchases.
-----------------------------------
[STATE SEAL]
15
<PAGE> 48
EXHIBIT D
NOTICE OF EXERCISE OF PURCHASE OPTION
TO: ________________ ("Borrower")
(1) The undersigned Lender hereby elects to exercise its Purchase Option
with respect to _______________ shares of the Series __ Preferred Stock
of Borrower, pursuant to the terms of the Subordinated Loan and Security
Agreement dated the 10th day of June, 1999 (the "Loan Agreement")
between Borrower and the Lender, and tenders herewith payment of the
purchase price for such shares in full, together with all applicable
transfer taxes, if any.
(2) In exercising its rights with respect to the Purchase Option, the
undersigned hereby represents and warrants to Borrower as follows:
(a) The right to acquire Preferred Stock or the Preferred Stock
issuable upon exercise of the Lender's rights contained herein will be
acquired for investment and not with a view to the sale or distribution
of any part thereof, and the Lender has no present intention of selling
or engaging in any public distribution of the same except pursuant to a
registration or exemption.
(b) The Lender understands (i) that the Preferred Stock issuable
upon exercise of its Purchase Option is not registered under the 1933
Act nor qualified under applicable state securities laws on the ground
that the issuance contemplated by its Purchase Option will be exempt
from the registration and qualifications requirements thereof, and (ii)
that the Borrower's reliance on such exemption is predicated on the
representations set forth in this notice.
(c) The Lender has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
its investment, and has the ability to bear the economic risks of its
investment.
(d) The Lender understands that if the Borrower does not register
with the Securities and Exchange Commission pursuant to Section 12 of
the 1934 Act (the "1934 Act"), or file reports pursuant to Section
15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell
(i) the rights to purchase Preferred Stock pursuant to this its Purchase
Option, or (ii) the Preferred Stock issuable upon exercise of the right
to purchase, if may be required to hold such securities for an
indefinite period. The Lender also understands that any sale of its
rights of the Lender to purchase Preferred Stock or Preferred Stock
which might be made by it in reliance upon Rule 144 under the 1933 Act
may be made only in accordance with the terms and conditions of that
Rule.
(e) Lender is an "accredited investor" within the meaning of the
Rule 501 of Regulation D of the Securities Act of 1933, as presently in
effect.
(3) Subject to our review and acceptance of your Acknowledgement Certificate
with respect to this Notice, please issue a certificate or certificates
representing said shares of Series A
30
<PAGE> 49
Preferred Stock in the name of the undersigned or in such other name as is
specified below.
---------------------------------
(Name)
---------------------------------
(Address)
LENDER: COMDISCO, INC.
By: ___________________________
Title: ___________________________
Date: ___________________________
31
<PAGE> 50
EXHIBIT E
ACKNOWLEDGMENT OF RECEIPT OF NOTICE
OF EXERCISE OF PURCHASE OPTION
The undersigned _________________ ("Borrower") hereby acknowledges
receipt of the "Notice of Purchase" from Comdisco, Inc. ("Lender") to exercise
its Purchase Option with respect to shares of the Series Preferred Stock of
_________________________, pursuant to the terms of the Subordinated Loan and
Security Agreement dated June 10, 1999 (the "Agreement'). Borrower further
acknowledges that ______ shares remain subject to purchase under the terms of
the Agreement.
In connection with such Purchase Option the undersigned hereby
represents, warrants and agrees as follows:
(a) All representations and warranties of the Borrower made
pursuant to the Agreement are true and correct in all material respects
on and as of the date of this Acknowledgment with the same effect as
though made on and as of this date (except as set forth in Schedule 1 to
this Acknowledgment).
(b) The Preferred Stock issuable upon exercise of the Lender's
rights has been duly and validly reserved and, when issued in accordance
with the provisions of the Purchase Option, will be validly issued,
fully paid and non-assessable, and will be free of any taxes, liens,
charges or encumbrances of any nature whatsoever; provided, however,
that the Preferred Stock issuable pursuant to the Purchase Option may be
subject to restrictions on transfer under state and/or Federal
securities laws. The Borrower has made available to the Lender true,
correct and complete copies of its Charter and Bylaws, as amended. The
issuance of certificates for shares of Preferred Stock upon Purchase of
the Purchase Option shall be made without charge to the Lender for any
issuance tax in respect thereof, or other cost incurred by the Borrower
in connection with such Purchase and the related issuance of shares of
Preferred Stock. The Borrower shall not be required to pay any tax which
may be payable in respect of any transfer involved and the issuance and
delivery of any certificate in a name other than that of the Lender.
(c) The issuance to Lender of the right to acquire the shares of
Preferred Stock, has been duly authorized by all necessary corporate
action on the part of the Borrower, and the Purchase Option is not
inconsistent with the Borrower's Charter or Bylaws, does not contravene
any law or governmental rule, regulation or order applicable to it, does
not and will not contravene any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument to which it
is a party or by which it is bound, and the Purchase Option constitutes
a legal, valid and binding agreement of the Borrower, enforceable in
accordance with its terms.
(d) No consent or approval of, giving of notice to, registration
with, or taking of any other action in respect of any state, Federal or
other governmental authority or agency is required with respect to the
execution, delivery and performance by the Borrower of its obligations
under the Purchase Option, except for the filing of notices
32
<PAGE> 51
pursuant to Regulation D under the 1933 Act and any filing required by
applicable state securities law, which filings will be effective by the
time required thereby.
(e) Except as set forth in that certain Investors' Rights Agreement
dated as of October 22, 1998 by and among Borrower and certain Preferred
Stock shareholders of Borrower, the Borrower is not, pursuant to the
terms of any other agreement currently in existence, under any
obligation to register under the 1933 Act any of its presently
outstanding securities or any of its securities which may hereafter be
issued.
(f) Subject to the accuracy of the Lender's representations in its
Notice, the issuance of the Preferred Stock upon exercise of the
Purchase Option will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon
Section 4(2) thereof, and (ii) the qualification requirements of the
applicable state securities laws.
(g) If Lender proposes to sell Preferred Stock issuable upon the
exercise of the Purchase Option in compliance with Rule 144 promulgated
by the Securities and Exchange Commission, the Borrower shall furnish to
the Lender, within fifteen (15) days after receipt of a written request,
a written statement confirming the Borrower's compliance with the filing
requirements of the Securities and Exchange Commission as set forth in
such Rule, as such Rule may be amended from time to time.
Borrower acknowledges that Lender has the right to review Schedule 1 to
this Certificate and that Lender may in its sole discretion withdraw its notice
of exercise of Purchase Option within the ten business days after Lender's
receipt of this Acknowledgment.
BORROWER: HANDSPRING, INC.
By: ________________________________
Title: ________________________________
Date: ________________________________
33
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.9
FLEXTRONICS INTERNATIONAL MANUFACTURING CONTRACT
REV. 6 - 7/1/99
This Manufacturing Agreement ("Agreement") is entered into this 29th day of
June, 1999 by and between Handspring, Inc. having its place of business 299
California Avenue, Ste. 300, Palo Alto, CA 95306 USA ("Handspring") and
Flextronics (Malaysia)SDN.BHD having its place of business Lot Plo 37, Dirizab,
Jalan Kawasan Perindustrian Senai, 81400 Senai J.B. Malaysia ("Flextronics").
Handspring has created a market for Handspring handheld computer products
(hereinafter "Products") and is solely responsible for the sales and marketing
of the Products. Flextronics has developed processes and practices for
manufacturing products for many different electronic applications and at
Handspring's request desires to manufacture Handspring's Products in accordance
with Handspring's specifications. Handspring acknowledges that Flextronics'
expertise is manufacturing and that Flextronics' responsibility related to the
Handspring's Products is limited to this extent. The parties agree as follows:
1.0 WORK, LICENSE
Flextronics agrees to use reasonable commercial efforts to perform the work
(hereinafter "Work") pursuant to purchase orders or changes thereto issued by or
for Handspring and accepted by Flextronics. Work shall mean to procure
components, materials, equipment and other supplies, and to manufacture,
assemble, test and deliver Products pursuant to detailed written specifications,
workmanship standards and quality requirements for each such Product (ref;
Addendum B) which are provided by Handspring and accepted by Flextronics. For
each Product or revision thereof, written specifications shall include, but are
not limited to, bills of materials, schematics, assembly drawings, process
documentation, test specifications, current revision number, and approved vendor
list (hereinafter "Specifications") as attached hereto.
Flextronics is granted by Handspring a non-exclusive license during the term of
this Agreement to use all of Handspring's patents, trade secrets and other
intellectual property in the Products, solely in connection with and to the
extent required to perform Flextronics' obligations under this Agreement.
2.0 FORECASTS, ORDERS, MATERIAL PROCUREMENT
2.1 FORECAST. Handspring shall provide Flextronics, on a monthly basis, a
non-binding, rolling twelve (12) month Product order forecast.
2.2 PURCHASE ORDERS. Handspring will issue, or have a designated 3rd party
distribution partner issue, written purchase orders once a month which specify
all Work to be completed. Handspring's designated 3rd party distribution
partners must meet Flextronics credit worthiness guidelines, or Handspring will
guarantee purchase orders according to the terms of this Agreement. Handspring
will ensure purchase orders cover a minimum four (4) month rolling time period.
Each purchase order shall reference this Agreement, and the applicable written
Specifications as described in Section 1.0. Purchase orders shall normally be
deemed accepted by Flextronics, provided however that Flextronics may reject any
order does not conform to the lead-time, flexibility or cancellation terms of
this Agreement. Flextronics shall notify Handspring of rejection of any purchase
order within five (5) working days of receipt of such order.
Handspring, or its' designated 3rd party distribution partners, may use its'
standard purchase order form to release items, quantities, prices, schedules,
change notices, specifications, or other notice provided for hereunder. The
parties agree that the terms and conditions contained in this Agreement shall
prevail over any terms and conditions of any purchase order, acknowledgment form
or other instrument.
<PAGE> 2
2.3 MATERIAL PROCUREMENT. Purchase orders issued by Handspring or its'
designated 3rd party distribution partners in conformance to this Agreement will
constitute authorization for Flextronics to procure, using standard purchasing
practices, the components, subassemblies, materials and supplies necessary for
the manufacture of Products ("Inventory") covered by such purchase orders.
2.4 LONG LEAD TIME COMPONENTS. As Handspring's strategic materials management
partner, Flextronics may be required to purchase Long Lead Time Components in
order to achieve the schedule flexibility requirements identified in Section
3.2. For the purposes of this Agreement, "Long Lead Time Components" shall mean
components, subassemblies, materials and supplies with lead times greater than
ninety (90) days at the time an order is placed. At the time of this Agreement,
no components, subassemblies, materials or supplies have lead times greater than
ninety (90) days. During the term of this Agreement, if any lead times for
components, subassemblies, materials or supplies exceed ninety (90) days due to
changes in market conditions, Flextronics may reasonably purchase minimum lot
sizes from suppliers ("Minimum Order Inventory"), even if greater than the
amount necessary to meet purchase orders, in order to ensure the schedule
flexibility requirements identified in Section 3.2 are achieved. Flextronics
will notify Handspring in writing if lead times for any components,
subassemblies, materials or supplies exceed ninety (90) days and will quantify
how much additional cancellation liability Handspring will incur above and
beyond the cancellation liability terms defined in Section 3.3. If lead times
for components, subassemblies, materials or supplies do not exceed ninety (90)
days during term of this Agreement, or any extensions thereof, Flextronics and
Handspring agree to abide by the reschedule flexibility and cancellation
liability terms defined in Sections 3.2 and 3.3.
3.0 SHIPMENTS, RESCHEDULE FLEXIBILITY, CANCELLATION
3.1 SHIPMENTS. All Products delivered pursuant to the terms of this Agreement
shall be suitably packed for shipment in accordance with Handspring's
Specifications, marked for shipment to Handspring's destination specified in the
applicable purchase order and delivered to a carrier or forwarding agent.
Shipment will be F.O.B. Flextronics' Malaysia manufacturing plant at which time
risk of loss and title will pass to Handspring or Handspring's designated 3rd
party distribution partners. All freight, insurance and other shipping expenses
from the F.O.B. point, will be paid by Handspring.
Flextronics is expected to achieve 100% on-time delivery performance to the
designated F.O.B. point. "On-time" deliver is defined as within 2 days early and
0 days late of scheduled delivery date on purchase orders placed by Handspring
in accordance to this Agreement. If delivery of Product is early, Handspring or
its designated 3rd party distribution partners, may return said Product to
Flextronics for re-delivery on the scheduled delivery date with Flextronics
bearing all cost of Product return and re-delivery. If Product is late,
Handspring may require Flextronics to air ship late for reasons with Flextronics
control, Product to locations specified by Handspring or its' designated 3rd
party distribution partners with Flextronics bearing the incremental cost
between standard cost versus premium air shipment. Handspring will not
unreasonably require Flextronics to air ship product unless Handspring needs
Product to meet customer commitments.
3.2 QUANTITY INCREASES AND SHIPMENT SCHEDULE CHANGES. For any purchase order
issued in accordance to this Agreement, Handspring may (i) increase the quantity
of Products or (ii) reschedule the quantity of Products and their shipment date
as provided in the table below:
<TABLE>
<CAPTION>
Maximum Allowable Variance From Purchase Order Quantities/Shipment Dates
- ----------------------------------------------------------------------------
# of days before Allowable Maximum Maximum
Shipment Date on Quantity Reschedule Reschedule
Purchase Order Increases Quantity Period
- -------------- --------- -------- ------
<S> <C> <C> <C>
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
</TABLE>
* 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> 3
Any purchase order quantities increased or rescheduled pursuant to this Section
may not be subsequently increased or rescheduled without the prior written
approval of Flextronics. All other changes in quantity or shipment date require
Flextronics' prior written consent. Any re-schedules that exceed the above
period on 3.2 will be subject to a one percent inventory carrying charge.
Flextronics will use reasonable commercial efforts to meet quantity increases.
If there are extra costs to meet a schedule increase in excess of the above
limits, Flextronics will inform Handspring for its approval in advance.
3.3 CANCELLATION LIABILITY. In the event Handspring cancels any purchase orders,
or portions thereof, Handspring and Flextronics agree to the following
cancellation terms:
<TABLE>
<CAPTION>
# days from the
day of notice Handspring cancellation liability:
- ------------------- ----------------------------------
<S> <C>
[*] [*]
[*] [*]
[*] [*]
[*] [*]
</TABLE>
4.0 ENGINEERING CHANGES
Handspring may request, in writing, that Flextronics incorporate engineering
changes into the Product. Such request will include a description of the
proposed engineering change sufficient to permit Flextronics to evaluate its
feasibility and cost. Flextronics' evaluation shall be in writing and shall
state the costs and time of implementation and the impact on the delivery
schedule and pricing of the Product. Flextronics will not be obligated to
proceed with the engineering change until the parties have agreed upon the
changes to the Product's Specifications, delivery schedule and Product pricing
and upon the implementation costs to be borne by the Handspring including,
without limitation, the cost of Inventory and Special Inventory on-hand and
on-order that becomes obsolete.
As Handspring's strategic manufacturing engineering partner, Flextronics is
expected to make recommendations to Product design which would make Product more
manufacturable, reduce material costs and/or improve quality. Handspring will
evaluate such recommendations and incorporate such recommendations into Product
design as appropriate. Flextronics will not make changes to product design or
manufacturing processes which affect the form, fit, function, performance or
reliability of the Product without prior written authorization from Handspring.
5.0 TOOLING, NON-RECURRING EXPENSES, SOFTWARE
Flextronics shall provide non-Product specific tooling at its expense.
Handspring shall pay for or obtain and consign to Flextronics any Product
specific tooling and other reasonably necessary non-recurring expenses, to be
set forth in Flextronics' quotation. All software which Handspring provides to
Flextronics is and shall remain the property of Handspring. Handspring grants
Flextronics a license to copy, modify and use such software solely in connection
with and to the extent required to perform Flextronics' obligations under this
Agreement. All software developed by Flextronics to support the process tooling
or otherwise shall be and remain the property of Flextronics.
* 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> 4
6.0 PRODUCT ACCEPTANCE AND WARRANTIES
6.1 PRODUCT ACCEPTANCE. Handspring agrees that the product is deemed acceptable
if Handspring has not exercised said right with in 20 days.
6.2 Flextronics is expected to deliver 100% quality Product in conformance to
all Products specifications, workmanship standards and quality requirements set
forth in Addendum B. As Handspring's strategic quality partner, Flextronics is
expected to institute appropriate quality controls at the factory to stop any
defective Product from shipping to Handspring or its designated 3rd party
distribution partners. Handspring's intent is not to inspect each shipment
coming from Flextronics, however, Handspring reserves the right to audit
Flextronics' facilities, conduct source inspection and/or inspect Product at
designated distribution or field repair centers. Handspring and Flextronics will
work together to jointly determine if Product is defective. Handspring may
return defective Products, freight collect, after obtaining a return material
authorization number from Flextronics to be displayed on the shipping container
and completing a failure report. Flextronics will not unreasonably withhold such
return material authorization numbers. Rejected Products will be promptly
repaired or replaced, at Flextronics' option, and returned freight pre-paid.
6.2 EXPRESS LIMITED WARRANTY. Flextronics warrants that the Products will
conform to Handspring's applicable Specifications and will be free from defects
in workmanship for a period of [*]. Materials are warranted to the same extent
that the original manufacturer warrants the materials. This express limited
warranty does not apply to (a) materials consigned or supplied by Handspring to
Flextronics; (b) defects resulting from Handspring's design of the Products; (c)
Product that has been abused, damaged, altered or misused by any person or
entity after title passes to Handspring. With respect to first articles,
prototypes, pre-production units, test units or other similar Products,
Flextronics makes no representations or warranties whatsoever. Notwithstanding
anything else in this Agreement, Flextronics assumes no liability for or
obligation related to the performance, accuracy, specifications, failure to meet
specifications or defects of or due to tooling, designs or instructions produced
or supplied by Handspring and Handspring shall be liable for costs or expenses
incurred by Flextronics related thereto. Upon any failure of a Product to comply
with the above warranty, Flextronics' sole obligation, and Handspring's sole
remedy, is for Flextronics, at its option, to promptly repair or replace such
unit and return it to Handspring freight collect. Flextronics will bear all
costs of repairing defective Product within warranty. Handspring shall return
Products covered by the warranty freight pre-paid after completing a failure
report and obtaining a return material authorization number from Flextronics to
be displayed on the shipping container.
FLEXTRONICS MAKES NO OTHER WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS,
IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION
WITH HANDSPRING, AND FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR
CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
7.0 PAYMENT TERMS, ADDITIONAL COSTS AND PRICE CHANGES
7.1 PRICE AND PAYMENT TERMS. The price for Products to be manufactured is set
forth in Addendum A and may be changed from time to time through purchase orders
issued by Handspring and accepted by Flextronics. All pricing changes must be
mutually agreed to by both parties. Flextronics is expected to cut in material
cost reductions negotiated by either Handspring or Flextronics in accordance
with established material lead-times. All prices quoted are exclusive of
federal, state and local excise, sales, use and similar taxes, and any duties,
and Handspring shall be responsible for all such items. Payment for any
Products, services or other costs to be paid by Handspring hereunder is due
thirty (30) days net from the date of invoice and shall be made in lawful U.S.
currency. Handspring agrees to pay 1% monthly interest on all late payments.
7.2 ADDITIONAL COSTS. Handspring is responsible for (a) any expediting charges
reasonably necessary because of a change in Handspring's requirements, if such
changes do not conform to established flexibility terms defined in section 3.2
which charges are pre-approved (b) any reasonable overtime or downtime charges
incurred as a result of delays in the normal production or interruption in the
workflow process and caused by: (1) Handspring's change in
* 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> 5
the Specifications; or (2) Handspring's failure to provide sufficient quantities
or a reasonable quality level of consigned materials where applicable to sustain
the production schedule. Handspring caused delays as a result of consigned
inventory will result in a special charge to the Handspring of 1% of the cost of
materials for each month, or part thereof, delayed.
7.3 PRICE CHANGES. The price of Products to Handspring may be increased by
Flextronics if (a) the market price of fuels, materials, raw materials,
equipment, labor and other production costs, increase beyond normal variations
in pricing and (b) the parties agree to the increase after good faith
negotiation.
COST REDUCTIONS. Flextronics agrees to seek ways to reduce the cost of
manufacturing Products by methods such as elimination of components, obtaining
alternate sources of materials, redefinition of Specifications, and improved
assembly or test methods. Upon implementation of cost reductions initiated by
Flextronics, Flextronics will receive fifty percent of the demonstrated cost
reduction for a period of 6 months, at which time Handspring will receive one
hundred percent of the demonstrated cost reduction. Handspring will receive one
hundred percent of demonstrated cost reductions initiated by Handspring
immediately upon implementation of said cost reductions.
8.0 TERM AND TERMINATION
8.1 TERM. The term of this Agreement shall commence on the date hereof above and
shall continue for one (1) year thereafter until terminated as provided in
Section 8.2 or 10.9. After the expiration of the initial term hereunder (unless
this Agreement has been terminated) this Agreement shall be automatically
renewed for separate but successive one-year terms.
8.2 TERMINATION. This Agreement may be terminated by either party (a) for any
reason upon ninety (90) days written notice to the other party, or (b) if the
other party defaults in any payment to the terminating party and such default
continues without a cure for a period of thirty (30) days after the delivery of
written notice thereof by the terminating party to the other party, or (c) if
the other party defaults in the performance of any other material term or
condition of this Agreement and such default continues un-remedied for a period
of thirty (30) days after the delivery of written notice thereof by the
terminating party to the other party. Termination of this Agreement for any
reason shall not affect the obligations of either party which exist as of the
date of termination. Upon termination for any reason whatsoever, Handspring
shall be responsible for the finished Products and Inventory in existence at the
date of termination in the same manner as for cancellations as set forth in
Section 3.3. Any purchase orders shall be fulfilled by Flextronics unless
cancelled as provided in section 3.3. Notwithstanding termination of this
Agreement, Sections 6.2, 9.0, and 10.1 shall survive said termination.
9.0 LIABILITY LIMITATION
9.1 PATENTS, COPYRIGHTS, TRADE SECRETS, OTHER PROPRIETARY RIGHTS. Handspring
shall defend, indemnify and hold harmless Flextronics from all costs, judgments
and attorney's fees arising from any claim that Flextronics' manufacture of the
Products under this Agreement directly infringes any third party patents, patent
rights, copyrights or trade secrets. Flextronics shall promptly notify
HandSpring in writing of the initiation of any such claims, give Handspring sole
control of any defense or settlement, and provide Handspring reasonable
information and assistance in resolving such claim. The preceding indemnity
shall not apply, however, to any claims arising from the use by Flextronics of
any materials, components or manufacturing processes not expressly specified by
Handspring.
THE FOREGOING STATES THE ENTIRE LIABILITY OF HANDSPRING CONCERNING INFRINGEMENT
OF PATENT, COPYRIGHT, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHTS.
<PAGE> 6
9.2 PRODUCT LIABILITY. Handspring agrees that, if notified promptly in writing
and given sole control of the defense and all related settlement negotiations,
it will defend Flextronics from any claim or action and will hold Flextronics
harmless from any third party loss, damage or injury, including death, which
arises from any alleged defect of Handspring's design of any Products.
Similarly, Flextronics agrees that, if notified promptly in writing and given
sole control of the defense and all related settlement negotiations, it will
defend Handspring from any claim or action and will hold Handspring harmless
from any third party loss, damage, or injury, including death, which arises from
any alleged workmanship defect of any Products.
9.3 NO OTHER LIABILITY. EXCEPT FOR THE EXPRESS WARRANTIES CREATED UNDER THIS
AGREEMENT AND EXCEPT AS SET FORTH OTHERWISE IN THIS AGREEMENT, IN NO EVENT SHALL
EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL
OR PUNITIVE DAMAGES OF ANY KIND OR NATURE ARISING OUT OF THIS AGREEMENT OR THE
SALE OF PRODUCTS, WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT,
TORT (INCLUDING THE POSSIBILITY OF NEGLIGENCE OR STRICT LIABILITY), OR
OTHERWISE, EVEN IF THE PARTY HAS BEEN WARNED OF THE POSSIBILITY OF ANY SUCH LOSS
OR DAMAGE, AND EVEN IF ANY OF THE LIMITED REMEDIES IN THIS AGREEMENT FAIL OF
THEIR ESSENTIAL PURPOSE.
10.0 MISCELLANEOUS
10.1 CONFIDENTIALITY. All written information and data exchanged between the
parties for the purpose of enabling Flextronics to manufacture and deliver
Products under this Agreement that is marked "Confidential" or the like, shall
be deemed to be Confidential Information. The party which receives such
Confidential Information agrees not to disclose it directly or indirectly to any
third party, or to use it for any purpose other than as required under this
Agreement, without the prior written consent of the disclosing party.
Confidential Information disclosed pursuant to this Agreement shall be
maintained confidential for a period of three years after the disclosure
thereof.
10.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the Parties with respect to the transactions contemplated hereby and supersedes
all prior agreements and understandings between the parties relating to such
transactions. Both parties shall hold the existence and terms of this Agreement
confidential, unless it obtains the other party's express written consent
otherwise. In all respects, this Agreement shall govern, and any other documents
including, without limitation, preprinted terms and conditions on Handspring's
purchase orders and Flextronics acknowledgements shall be of no effect.
10.3 AMENDMENTS. This Agreement may be amended only by written consent of both
parties.
10.4 INDEPENDENT CONTRACTOR. Neither party shall, for any purpose, be deemed to
be an agent of the other party and the relationship between the parties shall
only be that of independent contractors. Neither party shall have any right or
authority to assume or create any obligations or to make any representations or
warranties on behalf of any other party, whether express or implied, or to bind
the other party in any respect whatsoever.
10.5 EXPENSES. In the event a dispute between the parties hereunder with respect
to this Agreement must be resolved by litigation or other proceeding, the
prevailing party shall be entitled to receive reimbursement for all associated
reasonable attorneys fees from the other party.
10.6 GOVERNING LAW. This Agreement shall be governed by and construed under the
laws of the State of California, excluding its choice of law principles. The
parties consent to the exclusive jurisdiction of the state and Federal courts in
Santa Clara County, California.
<PAGE> 7
10.7 SUCCESSORS, ASSIGNMENT. This Agreements shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns and
legal representatives. Neither party shall have the right to assign or otherwise
transfer its rights or obligations under this Agreement except with the prior
written consent of the other party, not to be unreasonably withheld.
10.8 FORCE MAJEURE. If the event that either party is prevented from performing
or is unable to perform any of its obligations under this Agreement (other than
a payment obligation) due to any Act of God, fire, casualty, flood, earthquake,
war, strike, lockout, epidemic, destruction of production facilities, riot,
insurrection, material unavailability, or any other cause beyond the reasonable
control of the party invoking this section, and if such party shall have used
its commercially reasonable efforts to mitigate its effects, such party shall
give prompt written notice to the other party, its performance shall be excused,
and the time for the performance shall be extended for the period of delay or
inability to perform due to such occurrences. Regardless of the excuse of Force
Majeure, if such party is not able to perform within ninety (90) days after such
event, the other party may terminate the Agreement. Termination of this
Agreement shall not affect the obligations of either party which exist as of the
date of termination.
ACCEPTED AND AGREED TO:
HANDSPRING, INC.: FLEXTRONICS MALAYSIA SDN.BHD:
/s/ Michael Galluci /s/ Ash Bhardwaj
- ----------------------------------- ------------------------------------
By: Michael Gallucci By: Ash Bhardwaj
-------------------------------- ---------------------------------
Title: Vice President, Manufacturing Title: President, Asia Pacific
& Logistics ------------------------------
<PAGE> 8
ADDENDUM A
LEGO PRICING SCHEDULE
[*]
* 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> 9
ADDENDUM B
LEGO PRODUCT SPECIFICATIONS, WORKMANSHIP STANDARDS, QUALITY REQUIREMENTS
<PAGE> 10
QUALITY REQUIREMENTS
1. General Quality Requirements:
a. The supplier shall meet the quality requirements outlined in Handspring
Document 81-0002-01, Manufacturing Supplier Quality Procedure.
Exceptions to the requirements in this document must be approved in
writing by Handspring Quality.
b. At least 2 samples of the pilot built shall be submitted to Handspring
for inspection and approval to workmanship standards.
2. Design Validation Test (DVT):
a. Supplier will perform design validation tests at each stage of the
development cycle. The product stages are defined as engineering
prototype, pilot and production release. The DVT testing shall include
electrical, mechanical, thermal and packaging tests. Supplier may be
requested to perform all or part of some tests in the Handspring viewer.
Any change to the product affecting form, fit and/or function may
necessitate performing all or part of DVT tests.
b. For more detailed description of test requirements, please refer to
Handspring Document 81-0001-01, New Product Qualification Testing
Procedure.
3. Reliability Demonstration:
a. Calculated Mean Time Between Failures. Handspring requires calculated
(predicted) mean time between failure for each product design using the
following method: Bellcore Reliability Prediction Procedure TR-332, with
preference to part stress Method I.
b. Demonstrated Mean Time Between Failures. The specified MTBF needs to be
demonstrated by actually performing test on a predetermined number of
units prior to release. The MTBF shall be demonstrated to [*] at the
release with the intention of successfully completing the test to [*]. A
detailed test plan needs to be worked out and approved by Handspring
before the start of a demonstrated MTBF test.
4. Process Capability Index Cp and Cpk:
a. Supplier will perform process capability index for critical electrical
and mechanical parameters that are being measured in production. This
should be performed on early production units. Generally any Cpk of less
than 1.33 will be flagged as a potential problem and corrective action
will be expected before release of the product.
5. Production Stress Testing:
a. Initial production stress testing may be required for products that
exhibit uncorrected thermally induced problems in DVT testing. In these
circumstances, production stress testing would be required until the
test data substantiates discontinuance.
6. ORT (Ongoing Reliability Test):
a. Once approved and in production, the supplier will perform an ORT test
on a pre-determined number of units. A sample of product will be
periodically randomly pulled from the production line and tested for a
minimum of 1000 hours at 50 degrees C oven temperature. The purpose of
this test is to demonstrate MTBF every quarter and identify any
manufacturing anomalies prior to shipping significant quantities.
* 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.
Handspring Confidential Page 1
<PAGE> 11
7. Yield data:
a. Supplier shall provide monthly internal yield data for each product. The
yield data shall include details of specific component failures or
process-related issues. The yield data shall include the failure details
and corrective actions for following manufacturing activities:
In-circuit Test
In-Process Inspection / Auditing
Stress Testing (if applicable)
Functional Test
Final Inspection / Out-of-Box Audits
b. The monthly report shall also include the number of customer returns for
repair during the month against the number of new products shipped the
prior month, and cumulative customer return and shipment totals.
Handspring Confidential Page 2
<PAGE> 12
- --------------------------------------------------------------------------------
[HANDSPRING LOGO] 81-0002-01
HANDSPRING
- --------------------------------------------------------------------------------
SUPPLIER QUALITY
PROCEDURE
- --------------------------------------------------------------------------------
VERSION 1.0 Any printed copy of this document is uncontrolled. The
current controlled released version can be found on the
Handspring Document Server.
VERSION HISTORY
- --------------------------------------------------------------------------------
Version: Author: Date: Comments: Approval:
1.0 Dave Cook 4/21/99 Initial release Mike Gallucci
- --------------------------------------------------------------------------------
Handspring, Inc. CONFIDENTIAL
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1.0 Description 3
2.0 Scope 3
3.0 References 3
4.0 Procedure
4.1 Value Proposition 3
4.2 Responsibilities Matrix 4
4.3 Management Communication 4
4.4 Workmanship Standards 4
4.4 Repair and Rework 4
4.5 Design for Manufacturability (DFM) and Value Engineering 5
4.6 AVL 5
4.7 Process Qualification & Controls 5
4.8 Test/Quality Data Collection & Reporting 5
4.9 Product Inspection / Process Auditing 6
4.10 RMA Processing 6
4.11 Supplier Corrective Action Requests 6
5.0 Records
Appendix A: Product Development Flow Diagram & Input Matrix 7
Appendix B: Corrective Action Request (CAR) Form 8
</TABLE>
Handspring, Inc. CONFIDENTIAL
<PAGE> 14
1.0 DESCRIPTION
1.1 This procedure outlines the generic product and process quality requirements
for key commodity parts supplied to and/or manufactured for Handspring, Inc.
2.0 SCOPE
2.1 This procedure applies to contract manufacturing partners and other key
suppliers to Handspring, Inc. It may also be applied, at Handspring's
discretion, to products specifically developed for Handspring by OEMs and other
third party providers.
2.2 If a conflict arises between any requirement outlined in this procedure and
a specific supplier contract signed by Handspring Inc., the contract provisions
take precedence.
3.0 REFERENCES
3.1 Acceptability of Printed Boards (Class 2) ANSI/IPC-A-600E
3.2 Acceptability of Printed Circuit Assemblies (Class 2) ANSI/IPC-A-610B
3.3 Suggested Guidelines for Modification, Rework and Repair of Printed
Boards and Assemblies (Level C) ANSI/IPC-R-700C
3.4 ANSI/IPC-T-50D (Terms and Definitions for Interconnecting and Packaging
Electronic Circuits)
4.0 PROCEDURE
4.1 Value Proposition
4.1.1 The Handspring supply chain value proposition is to establishing
supplier partnerships characterized by the following:
- Open and honest communication
- Strong "values based" management
- On-time delivery of quality products
- End user customer focus
- Timely data driven decision making
- Mutual respect and responsiveness
- Ongoing mutual total life cycle cost reduction
4.1.2 We believe that relationships with these characteristics will enable us
to establish a world class supply chain management system and provide
products and services that consistently meet or exceed our customer's
requirements.
Outputs/Inputs Your Outputs/Inputs
Supplier --------------> (Value Added --------------> Customers
Process)
4.1.3 We believe that everyone in a supply chain is a customer for the work
done by an "upstream" internal employee or external supplier. As such,
you have a right to expect good work from them and an obligation to
deliver work of high caliber to your internal and/or external customer.
4.1.4 Sustained quality excellence requires continuous process improvement.
This means, regardless of how good present performance, it can become
even better. "You can manage what you can measure." Align what you
measure to the individual behaviors you want to support.
Handspring, Inc. CONFIDENTIAL
<PAGE> 15
4.2 RESPONSIBILITIES MATRIX
4.2.1 Contract manufacturing and other key suppliers are expected to actively
participate in the Handspring product development process. We depend on
your ideas, recommendations and contributions to optimize the quality,
cost and delivery of Handspring products.
4.2.2 APPENDIX A contains a high level flow diagram of the Handspring Product
development stages. The matrix below the flow diagram outlines
opportunities for key supplier input to the design process.
4.3 MANAGEMENT COMMUNICATION
4.3.1 Our goal is to create a communication process to establish and sustain
mutually profitable and rewarding business relationships. We want to
become your best customer, and we want you to become our best supplier.
4.3.2 To this end, Handspring will participate in periodic management
communication meetings with key suppliers. These meetings will include a
review of quality, cost and delivery performance metrics and ongoing
improvement plans.
4.3.3 Unless otherwise specified, the following performance metrics apply:
[*]
4.4 WORKMANSHIP STANDARDS
4.4.1 Printed Wiring Boards shall meet the requirements of ANSI/IPC-A-600E,
Class 2.
4.4.2 Printed Circuit Assemblies shall meet the requirements of
ANSI/IPC-A-600E, Class 2
4.4.3 Unless otherwise specified, workmanship standards for other commodities
shall default to standard industry practices for each commodity.
Supplier specific workmanship standards should be identified and
communicated to Handspring, Inc. prior to production.
4.5 REPAIR AND REWORK
4.5.1 ANSI/IPC-T-50D (Terms and Definitions for Interconnecting and Packaging
Electronic Circuits) contains the following definitions:
Repair(ing): The act of restoring the functional capability of
a defective article in a manner that precludes compliance with
applicable drawings or specifications.
Rework(ing): The act of reprocessing non-complying articles,
through the use of original or alternate equivalent
processing, in order to bring the article into compliance with
applicable drawings and specifications.
4.5.2 ANSI/IPC-R-700C (Suggested Guidelines for Modification, Rework and
Repair of Printed Boards and Assemblies) categorizes modifications,
rework and repairs into three levels (A, B and C). Paragraph 1.1.3
states; "Class 2 products should use level C modifications or repairs --
for assured safety and dependability but Level B or A modifications or
repairs can be used if it has been determined that they are suitable for
the specific product's performance and capability applications."
4.5.3 Handspring will accept PWB fab and assemblies that have been reworked
(not repaired), using Level C techniques outlined in ANSI/IPC-R-700C.
Level A and B rework techniques may be authorized by Handspring, only
through prior Handspring Engineering or Quality approval.
4.5.4 All rework must meet the workmanship requirements of ANSI/IPC-A-600E,
Class 2 and/or ANSI/IPC-A-610B, Class 2. Any rework or repair method not
contained in ANSI/IPC-R-700-X must be authorized by Handspring Quality
before being used on any Handspring product.
4.5.4.1 Rework Examples : Welding conductors is a Level C rework method outlined
in Procedure 4.2.5 of ANSI/IPC-R-700-X. As a Level C method, it is authorized on
internal or external layers of Handspring bare boards, without prior approval
from Handspring.
* 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.
Handspring, Inc. CONFIDENTIAL
<PAGE> 16
4.5.4.2 Surface conductor (foil jumper method) is a Level C rework method
outlined in Procedure 4.2.2. As a Level C method, it is authorized on
external layers only of Handspring bare boards, without prior approval.
4.5.4.3 Surface jumper wires are a Level B repair (Procedure 4.2.6.1). Surface
jumper wires are not authorized on field shippable production units. Any
exceptions to this policy must be obtained in writing from Handspring
Quality prior to implementation.
4.6 DESIGN FOR MANUFACTURABILITY (DFM) AND VALUE ENGINEERING
4.6.1 Contract manufacturing suppliers shall conduct Design for
Manufacturability analysis for every new Handspring board design and/or
significant ECO. Other key suppliers should participate in these
reviews, as appropriate and/or conduct similar reviews for their
respective products.
4.6.2 Suppliers are expected to initiate and/or participate in periodic value
engineering efforts to reduce the current and future Handspring cost of
goods sold (COGS). The timing and content of this activity shall be
determined on a case by case basis.
4.7 AUTHORIZED VENDOR LIST (AVL)
4.7.1 Contract manufacturers and other partners who supply critical components
to Handspring must use Handspring's AVL, as required. Notification of
this requirement will be made in advance.
4.7.2 Handspring will consider AVL change recommendations from any supplier.
Change requests must be submitted in writing and approved by Handspring
prior to implementation.
4.7.3 Handspring reserves the right to refuse materials or require rework at
no additional cost of any materials supplied with non-AVL approved
content. This will be considered a serious offense and may have a
negative impact on the offending supplier relationship with Handspring.
4.8 PROCESS QUALIFICATION & CONTROLS
4.8.1 Handspring may require certain documentation from selected suppliers
prior to commencing production.
4.8.2 The following supporting documentation may be requested:
- Production process flow diagram
- Product qualification testing plan and results
- Supplier version of BOM's and AVL's used to produce Handspring
products
- Process characterization documentation [e.g. SMT stencil,
solder paste, SMT and through-hole reflow, board cleaning,
rework, etc.]
- Production test specifications and instructions, and
in-process quality plan
- Assembly process flow diagram
- Other documentation as appropriate
4.9 TEST/QUALITY DATA COLLECTION & REPORTING
4.9.1.1 Suppliers will be required to provide periodic test and inspection yield
information to Handspring, upon request. Typical test and inspection
results requested would be:
- Functional Test
- Environmental Stress Screening
- Incoming Inspection
- In-circuit Test
- In-Process Audit Results
- Test Failure Pareto Charts [debug/rework]
- Quality Inspection Pareto Charts
- Final Inspection Results
- Corrective Action Status
- Third Party Audit Results
4.9.1.2 Performance reporting charts and graphs should generically include the
following information:
- Goals: benchmarks of best in class performance
- Targets: interim goal for a given period
Handspring, Inc. CONFIDENTIAL
<PAGE> 17
- Actions: actions that are necessary to realize these
improvements with owners assigned and planned completion dates
- Progress: measured by relative improvements (delta) each
period
4.10 PRODUCT INSPECTION / PROCESS AUDITING
4.10.1 Handspring reserves the right to conduct planned and short notice
product inspection and/or process audits of supplier facilities engaged
in producing supplied parts or Handspring final products. These
activities would be conducted with prior notification of the respective
supplier. Discrepancies found during these audits will result in a
Corrective Action Request (CAR) (see Paragraph 4.11 below.)
4.11 RETURN MATERIAL AUTHORIZATION (RMA) PROCESSING
4.11.1 Handspring will contact suppliers with RMA requests via telephone,
e-mail and/or fax, depending upon the specific arrangements made.
4.11.2 Unless otherwise specified, suppliers shall provide RMA numbers to
Handspring within one workday (24 hrs.) from receipt of the request.
4.11.3 Suppliers shall repair or replace the defective part within five (5)
working days of receipt of the defective product.
4.11.4 Suppliers shall maintain records of all RMA requests and provide
in-process and completion status of Handspring RMA's.
4.12 CORRECTIVE ACTION REQUESTS (CARS)
4.12.1 Handspring will issue a Corrective Action Request (CAR) whenever a
discrepant product or unsatisfactory supplier process condition is
discovered. The CAR Form may be transmitted to the supplier via e-mail
or fax. (SEE APPENDIX B.)
4.12.2 The CAR Log and numbering system shall be administered by Handspring
Quality. CAR numbers shall be in the following format: XXX-MM/YY-ZZZ
[XXX= supplier abbreviation, ZZZ= sequential number]
4.12.3 Unless otherwise specified, suppliers shall acknowledge receipt and
provide a preliminary assessment and immediate corrective action of the
discrepancy within one working day (24 hrs.) of receipt. Unless
otherwise specified, the preventative measures shall be completed and
the documentation submitted no later than ten (10) working days of a CAR
receipt.
6.0 RECORDS
6.1 Handspring shall maintain Supplier Corrective Action Request records on
the document server for a minimum of one (1) year.
Handspring, Inc. CONFIDENTIAL
<PAGE> 18
SUPPLIER QUALITY PROCEDURE - APPENDIX A
RESPONSIBILITIES MATRIX
PRODUCT DEVELOPMENT PROCESS FLOW
Concept --------- Engineering --------- Design ---------A
Validation Validation
Test (EVT) Test (DVT)
A --------- Production
Validation --------- Volume --------- EOL
Test (DVT) Production
<TABLE>
<CAPTION>
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
CONCEPT EVT DVT PVT VOLUME EOL
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
"Manufacturing Manufacturing Define Finalize Ongoing Materials
Technology" Test Strategy manufacturing Manufacturing procurement & excess and
input process flow process flow scheduling of obsolescence
and materials plans
documentation
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
Supply base DFX (Design For Procure Ensure all Inventory "Mothball" or
eval/development Everything) materials, volume control of sell tooling
for new technology Analysis build & test materials are materials in as appropriate
DVT units on order raw, WIP &
finished goods
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
Identify key Identify Develop test Implement final Quarterly Execute final
Engineering and critical programs and Mfg Test Plans reviews of EOL spare
Manufacturing material fixtures (ICT, non-strategic parts buys
resources availability Functional and suppliers where
risks OBQ) appropriate
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
Identify volume Establish Establish Qualify testers Monthly review EOL Field
manufacturing Preliminary AVL manufacturing in high volume of cost, Service &
facility capacity and manufacturing quality, & Warranty
flexibility facility delivery Support Plan
plans performance
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
Preliminary Implement DFX Volume purchase Yield
cost estimate and cost contracts in improvement
(materials, reduction plans place initiatives
labor, O/H, (non-strategic
NRE, tooling, commodities)
etc.)
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
Identify all Finalize BOM/AVL Verify Mfg Cost reduction
unique and/or Process QA & value
critical path Plans (SPC, engineering
mfg process training,
issues calibration,
etc.
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
Electrical Finalize COGS Procure Flexibility
simulation/models (materials and materials, improvement and
transformation build and test E&O management
cost) PVT units in
volume facility
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
Cost Reduction Ensure long Define Ongoing Implement ORT
& Value lead time Reliability Testing program
Engineering volume Testing (ORT)
materials are Plan
on order
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
Evaluate EVT Supplier Qual Implement 2nd ECO
boards to gain and Incoming Sourcing Implementation
learning for Procedures Strategy for Process
future builds non-critical
commodities
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
Service Repair Evaluate DVT Production Product
Planning boards for Readiness Review transition/EOL
future builds plan
- ------------------- ----------------- ----------------- ----------------- ----------------- ---------------
</TABLE>
Handspring, Inc. CONFIDENTIAL
<PAGE> 19
[Handspring Logo]
HANDSPRING
SUPPLIER QUALITY PROCEDURE - APPENDIX B
CORRECTIVE ACTION REQUEST
- --------------------------------------------------------------------------------
DATE: CAR#
------------------------------ ------------------------------------
SUPPLIER:
-----------------------------------
DISCREPANT MODEL/PART NUMBER: # PARTS AFFECTED
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WHERE USED (HIGHER ASSEMBLIES):
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PROBLEM STATEMENT:
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RECURRING PROBLEM? YES [ ] NO [ ]
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INITIAL ASSESSMENT (POSSIBLE CAUSES):
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SHORT TERM CORRECTIVE ACTION:
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PREVENTIVE MEASURES:
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INITIATED BY:
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RESPONSIBLE SUPPLIER REPRESENTATIVE: DATE RECEIVED:
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INITIAL ASSESSMENT DUE DATE:
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COMPLETION DUE DATE: ACTUAL COMPLETION DATE:
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Please return hard or soft copy of completed form to Handspring Quality. You
will receive formal notification of closure upon satisfactory review of the
actions.
Handspring, Inc. CONFIDENTIAL
<PAGE> 20
ADDENDUM C
LONG LEAD TIME MATERIALS
At the time of this Agreement, no components, subassemblies, materials or
supplies have lead times greater than ninety (90) days. During the term of this
Agreement, Flextronics will notify Handspring in writing if lead times for any
components, subassemblies, materials or supplies exceed ninety (90) days.
<PAGE> 1
EXHIBIT 10.10
FOUNDER'S RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made and entered into as of August 21, 1998 (the
"EFFECTIVE DATE") between JD Technology (the "COMPANY"), a California
corporation, and Donna Dubinsky ("PURCHASER").
1. PURCHASE OF SHARES. On the Effective Date and subject to the
terms and conditions of this Agreement, Purchaser hereby purchases from the
Company, and Company hereby sells to Purchaser, an aggregate of 2,450,000 shares
of the Company's common stock (the "SHARES") at an aggregate purchase price of
$24,500.00 (the "PURCHASE PRICE") or $0.01 per Share (the "PURCHASE PRICE PER
SHARE"). As used in this Agreement, the term "Shares" refers to the Shares
purchased under this Agreement and includes all securities received (a) in
replacement of the Shares, (b) as a result of stock dividends or stock splits in
respect of the Shares, and (c) in replacement of the Shares in a
recapitalization, merger, reorganization or the like.
2. PAYMENT OF PURCHASE PRICE; CLOSING.
(a) DELIVERIES BY PURCHASER. Purchaser hereby delivers to the
Company the full Purchase Price in cash in the amount of $24,500.00.
(b) DELIVERIES BY THE COMPANY. Upon its receipt of the entire
Purchase Price and all the documents to be executed and delivered by Purchaser
to the Company under Section 2(a), the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser registered in
Purchaser's name in accordance with Section 19, with such certificate to be
placed in escrow as provided in Section 8 until expiration or termination of
both the Company's Repurchase Option and Right of First Refusal described in
Sections 5 and 6.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to the Company that:
(a) PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act of 1933, as amended (the "1933
ACT"). Purchaser has no present intention of selling or otherwise disposing of
all or any portion of the Shares and no one other than Purchaser has any
beneficial ownership of any of the Shares.
(b) ACCESS TO INFORMATION. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
<PAGE> 2
(c) UNDERSTANDING OF RISKS. Purchaser is a founder of the
Company and is fully aware of: (i) the highly speculative nature of the
investment in the Shares; (ii) the financial hazards involved; (iii) the lack of
liquidity of the Shares and the restrictions on transferability of the Shares
(e.g., that Purchaser may not be able to sell or dispose of the Shares or use
them as collateral for loans); (iv) the qualifications and backgrounds of the
management of the Company; and (v) the tax consequences of investment in the
Shares.
(d) PURCHASER'S QUALIFICATIONS. Purchaser has a preexisting
personal or business relationship with the Company and/or certain of its
officers and/or directors of a nature and duration sufficient to make Purchaser
aware of the character, business acumen and general business and financial
circumstances of the Company and/or such officers and directors. By reason of
Purchaser's business or financial experience, Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.
(e) NO GENERAL SOLICITATION. At no time was Purchaser
presented with or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general advertising or solicitation in
connection with the offer, sale and purchase of the Shares.
(f) COMPLIANCE WITH SECURITIES LAWS. Purchaser understands and
acknowledges that, in reliance upon the representations and warranties made by
Purchaser herein, the Shares are not being registered with the Securities and
Exchange Commission ("SEC") under the 1933 Act or being qualified under the
California Corporate Securities Law of 1968, as amended (the "LAW"), but instead
are being issued under an exemption or exemptions from the registration and
qualification requirements of the 1933 Act and the Law or other applicable state
securities laws] which impose certain restrictions on Purchaser's ability to
transfer the Shares.
(g) RESTRICTIONS ON TRANSFER. Purchaser understands that
Purchaser may not transfer any Shares unless such Shares are registered under
the 1933 Act or qualified under the Law or unless, in the opinion of counsel to
the Company, exemptions from such registration and qualification requirements
are available. Purchaser understands that only the Company may file a
registration statement with the SEC or the California Commissioner of
Corporations and that the Company is under no obligation to do so with respect
to the Shares. Purchaser has also been advised that exemptions from registration
and qualification may not be available or may not permit Purchaser to transfer
all or any of the Shares in the amounts or at the times proposed by Purchaser.
(h) RULE 144. In addition, Purchaser has been advised that SEC
Rule 144 promulgated under the 1933 Act, which permits certain limited sales of
unregistered securities, is not presently available with respect to the Shares
and, in any event, requires that the Shares be held for a minimum of one year,
and in certain cases two years, after they have been purchased and paid for
(within the meaning of Rule 144), before they may be resold under Rule 144.
Purchaser understands that Rule 144 may indefinitely restrict transfer of the
Shares so long as
<PAGE> 3
Purchaser remains an "affiliate" of the Company and "current public information"
about the Company (as defined in Rule 144) is not publicly available.
4. COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE SALE OF THE
SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT, IF NOT YET QUALIFIED WITH THE
CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION,
IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.
5. COMPANY'S REPURCHASE OPTION. The Company has the option to
repurchase all or a portion of the Unvested Shares (as defined below) on the
terms and conditions set forth in this Section (the "REPURCHASE OPTION") if
Purchaser ceases to be employed by the Company (as defined herein) for any
reason, or no reason, including without limitation Purchaser's death,
disability, voluntary resignation or termination by the Company with or without
cause.
(a) DEFINITION OF "EMPLOYED BY THE COMPANY"; "TERMINATION
DATE". For purposes of this Agreement, Purchaser will be considered to be
"employed by the Company" if the Board of Directors of the Company determines
that Purchaser is rendering substantial services as an officer, director,
employee, consultant or independent contractor to the Company or to any parent,
subsidiary or affiliate of the Company. In case of any dispute as to whether
Purchaser is employed by the Company, the Board of Directors of the Company will
have discretion to determine whether Purchaser has ceased to be employed by the
Company or any parent, subsidiary or affiliate of the Company and the effective
date on which Purchaser's employment terminated (the "TERMINATION DATE").
(b) UNVESTED AND VESTED SHARES. Shares that are not Vested
Shares (as defined in this Section) are "Unvested Shares". On the Effective
Date, twenty percent (20%) of the Shares will be Vested Shares. If Purchaser has
been continuously employed by the Company at all times from the Effective Date
until July 13, 1999 (the "FIRST VESTING DATE"), then on the First Vesting Date,
an additional twenty (20%) of the Shares will become Vested Shares; and
thereafter, for so long (and only for so long) as Purchaser remains continuously
employed by the Company at all times after the First Vesting Date, an additional
1.667% of the Shares will become Vested Shares upon the expiration of each full
calendar month elapsed after the First Vesting Date. No Shares will become
Vested Shares after the Termination Date.
(c) ADJUSTMENTS. The number of Shares that are Vested Shares
or Unvested Shares will be proportionally adjusted to reflect any stock
dividend, stock split, reverse stock split or recapitalization of the common
stock of the Company occurring after the Effective Date.
(d) EXERCISE OF REPURCHASE OPTION AT ORIGINAL PRICE. At any
time within thirty (30) days after the Termination Date, the Company may elect
to repurchase any or all of
<PAGE> 4
the Unvested Shares by giving Purchaser written notice of exercise of the
Repurchase Option. The Company and/or its assignee(s) will then have the option
to repurchase from Purchaser (or from Purchaser's personal representative as the
case may be) any or all of the Unvested Shares at the Purchaser's original
Purchase Price Per Share (as adjusted to reflect any stock dividend, stock
split, reverse stock split or recapitalization of the common stock of the
Company occurring after the Effective Date).
(d) PAYMENT OF REPURCHASE PRICE. The repurchase price payable
to purchase Unvested Shares upon exercise of the Repurchase Option will be
payable, at the option of the Company or its assignee(s), by check or by
cancellation of all or a portion of any outstanding indebtedness of Purchaser to
the Company (or to such assignee) or by any combination thereof. The repurchase
price will be paid without interest within sixty (60) days after the Termination
Date.
(f) RIGHT OF TERMINATION UNAFFECTED. Nothing in this Agreement
will be construed to limit or otherwise affect in any manner whatsoever the
right or power of the Company (or any parent, subsidiary or affiliate of the
Company) to terminate Purchaser's employment at any time for any reason or no
reason, with or without cause.
(g) ACCELERATION.
(i) In the event of an Acquisition Event (as defined
herein), then immediately prior to such event, twenty-five percent (25%) of the
Shares originally issued immediately become Vested Shares and the Company will
have no right to repurchase such Shares pursuant to this Section. Any Unvested
Shares shall continue to vest on the original vesting schedule.
(ii) The term "ACQUISITION EVENT" means (A) any
consolidation or merger of the Company with or into any other corporation or
corporations 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 of such consolidation or merger or stock
representing a majority of the voting power of a corporation that wholly owns,
directly or indirectly, the surviving corporation of such consolidation or
merger; (B) the sale, transfer or assignment of securities of the Company
representing a majority of the voting power of all the Company's outstanding
voting securities by the holders thereof to an acquiring party in a single
transaction or series of related transactions; (C) any other sale, transfer or
assignment of securities of the Company representing over two-thirds (2/3) of
the voting power of the Company's then outstanding voting securities by the
holders thereof to an acquiring party; or (D) the sale of all or substantially
all the Company's assets.
6. RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or
otherwise transferred by Purchaser without the Company's prior written consent.
Before any Vested Shares held by Purchaser or any transferee of such Shares
(either being sometimes referred to herein as the "HOLDER") may be sold or
otherwise transferred (including without limitation a transfer by gift or
operation of law), the Company and/or its assignee(s) will have a right of first
refusal to
<PAGE> 5
purchase the Shares to be sold or transferred (the "OFFERED SHARES") on the
terms and conditions set forth in this Section (the "RIGHT OF FIRST REFUSAL").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares will
deliver to the Company a written notice (the "NOTICE") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer the Offered Shares; (ii) the
name of each proposed purchaser or other transferee ("PROPOSED TRANSFEREE");
(iii) the number of Offered Shares to be transferred to each Proposed
Transferee; (iv) the bona fide cash price or other consideration for which the
Holder proposes to transfer the Offered Shares (the "OFFERED PRICE"); and (v)
that the Holder will offer to sell the Offered Shares to the Company and/or its
assignee(s) at the Offered Price as provided in this Section.
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all
(but not less than all) of the Offered Shares proposed to be transferred to any
one or more of the Proposed Transferees named in the Notice, at the purchase
price determined in accordance with subsection (c) below.
(c) PURCHASE PRICE. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If the Offered Price
includes consideration other than cash, then the value of the non-cash
consideration as determined in good faith by the Company's Board of Directors
will conclusively be deemed to be the cash equivalent value of such non-cash
consideration.
(d) PAYMENT. Payment of the purchase price for Offered Shares
will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company (or to such assignee, in the case of a
purchase of Offered Shares by such assignee) or by any combination thereof. The
purchase price will be paid without interest within sixty (60) days after the
Company's receipt of the Notice, or, at the option of the Company and/or its
assignee(s), in the manner and at the time(s) set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 120 days after the date of the
Notice, and provided further, that: (i) any such sale or other transfer is
effected in compliance with all applicable securities laws; and (ii) the
Proposed Transferee agrees in writing that the provisions of this Section will
continue to apply to the Offered Shares in the hands of such Proposed
Transferee. If the Offered Shares described in the Notice are not transferred to
the Proposed Transferee within such 120 day period, then a new Notice must be
given to the Company, and the Company will again be offered the Right of First
Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
<PAGE> 6
(f) EXEMPT TRANSFERS. Notwithstanding anything to the contrary
in this Section, the following transfers of Shares will be exempt from the Right
of First Refusal: (i) the transfer of any or all of the Shares during
Purchaser's lifetime by gift or on Purchaser's death by will or intestacy to
Purchaser's "immediate family" (as defined below) or to a trust for the benefit
of Purchaser or Purchaser's immediate family, provided that each transferee or
other recipient agrees in a writing satisfactory to the Company that the
provisions of this Section will continue to apply to the transferred Shares in
the hands of such transferee or other recipient; (ii) any transfer of Shares
made pursuant to a statutory merger or statutory consolidation of the Company
with or into another corporation or corporations (except that the Right of First
Refusal will continue to apply thereafter to such Shares, in which case the
surviving corporation of such merger or consolidation shall succeed to the
rights or the Company under this Section unless the agreement of merger or
consolidation expressly otherwise provides); or (iii) any transfer of Shares
pursuant to the winding up and dissolution of the Company. As used herein, the
term "immediate family" will mean Purchaser's spouse, lineal descendant or
antecedent, father, mother, brother or sister, adopted child or grandchild, or
the spouse of any child, adopted child, grandchild or adopted grandchild of
Purchaser.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal will terminate as to all Shares on the earlier of (i) and Acquisition
Event or (ii) the effective date of the first sale of common stock of the
Company to the general public pursuant to a registration statement filed with
and declared effective by the SEC under the 1933 Act (other than a registration
statement relating solely to the issuance of common stock pursuant to a business
combination or an employee incentive or benefit plan).
(h) ENCUMBRANCES ON VESTED SHARES. Purchaser may grant a lien
or security interest in, or pledge, hypothecate or encumber Vested Shares only
if each party to whom such lien or security interest is granted, or to whom such
pledge, hypothecation or other encumbrance is made, agrees in a writing
satisfactory to the Company that: (i) such lien, security interest, pledge,
hypothecation or encumbrance will not apply to such Vested Shares after they are
acquired by the Company and/or its assignees) under this Section; and (ii) the
provisions of this Section will continue to apply to such Vested Shares in the
hands of such party and any transferee of such party. Purchaser may not grant a
lien or security interest in, or pledge, hypothecate or encumber, any Unvested
Shares.
7. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of
this Agreement, Purchaser will have all of the rights of a shareholder of the
Company with respect to the Shares from and after the date that Purchaser
delivers payment of the Purchase Price until such time as Purchaser disposes of
the Shares or the Company and/or its assignee(s) exercise(s) the Repurchase
Option or Right of First Refusal. Upon an exercise of the Repurchase Option or
the Right of First Refusal, Purchaser will have no further rights as a holder of
the Shares so purchased upon such exercise, except the right to receive payment
for the Shares so purchased in accordance with the provisions of this Agreement,
and Purchaser will promptly surrender the stock certificate(s) evidencing the
Shares so purchased to the Company for transfer or cancellation.
<PAGE> 7
8. ESCROW. As security for Purchaser's faithful performance of this
Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company ("ESCROW HOLDER"), who is hereby appointed to
hold such certificate(s) and Stock Powers in escrow and to take all such actions
and to effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. Escrow Holder will act solely for
the Company as its agent and not as a fiduciary. Purchaser and the Company agree
that Escrow Holder will not be liable to any party to this Agreement (or to any
other party) for any actions or omissions unless Escrow Holder is grossly
negligent or intentionally fraudulent in carrying out the duties of Escrow
Holder under this Section. Escrow Holder may rely upon any letter, notice or
other document executed by any signature purported to be genuine and may rely on
the advice of counsel and obey any order of any court with respect to the
transactions contemplated by this Agreement. The Shares will be released from
escrow upon termination of both the Repurchase Option and the Right of First
Refusal.
9. TAX CONSEQUENCES. Purchaser hereby acknowledges that Purchaser
has been informed that, unless an election is filed by the Purchaser with the
Internal Revenue Service (and, if necessary, the proper state taxing
authorities), within 30 days of the purchase of the Shares, electing pursuant to
Section 83(b) of the Internal Revenue Code (and similar state tax provisions, if
applicable) to be taxed currently on any difference between the Purchase Price
of the Shares and their fair market value on the date of purchase, there will be
a recognition of taxable income to the Purchaser, measured by the excess, if
any, of the fair market value of the Vested Shares, at the time they cease to be
Unvested Shares, over the purchase price for such Shares. Purchaser represents
that Purchaser has consulted any tax consultant(s) Purchaser deems advisable in
connection with Purchaser's purchase of the Shares and the filing of the
election under Section 83(b) and similar tax provisions. A form of Election
under Section 83(b) is attached hereto as Exhibit 3 for reference. PURCHASER
HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING SUCH ELECTION AND PAYING ANY TAXES
RESULTING FROM SUCH ELECTION OR FOR FAILING TO FILE THE ELECTION AND PAYING
TAXES RESULTING FROM THE LAPSE OF THE REPURCHASE RESTRICTIONS ON THE UNVESTED
SHARES.
10. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Purchaser understands and agrees that the Company
will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that may
be required by state or federal securities laws, the Company's Articles of
Incorporation or Bylaws, any other agreement between Purchaser and the Company
or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR
<PAGE> 8
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES
MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON PUBLIC RESALE, TRANSFER, RIGHT OF
REPURCHASE AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE
ISSUER AND/OR ITS ASSIGNEE(S) AS SET FORTH IN A FOUNDER'S
RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND
THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
PUBLIC SALE AND TRANSFER RESTRICTIONS AND THE RIGHT OF
REPURCHASE AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.
(b) STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, in
order to ensure compliance with the restrictions imposed by this Agreement, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company will not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares, or to accord the right to vote or pay dividends, to any
purchaser or other transferee to whom such Shares have been so transferred.
<PAGE> 9
11. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with
any registration of the Company's securities under the 1933 Act that, upon the
request of the Company or the underwriters managing any registered public
offering of the Company's securities, Purchaser will not sell or otherwise
dispose of any Shares without the prior written consent of the Company or such
managing underwriters, as the case may be, for a period of time (not to exceed
180 days) after the effective date of such registration requested by such
managing underwriters and subject to all restrictions as the Company or the
managing underwriters may specify for employee-shareholders generally.
12. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer
of the Shares will be subject to and conditioned upon compliance by the Company
and Purchaser with all applicable state and federal laws and regulations and
with all applicable requirements of any stock exchange or automated quotation
system on which the Company's common stock may be listed or quoted at the time
of such issuance or transfer.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement, including its rights to repurchase Shares under the
Repurchase Option and the Right of First Refusal. This Agreement will be binding
upon and inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement will be
binding upon Purchaser and Purchaser's heirs, executors, administrators,
successors and assigns.
14. GOVERNING LAW; SEVERABILITY. This Agreement will be governed by
and construed in accordance with the internal laws of the State of California
excluding that body of laws pertaining to conflict of laws. If any provision of
this Agreement is determined by a court of law to be illegal or unenforceable,
then such provision will be enforced to the maximum extent possible and the
other provisions will remain fully effective and enforceable.
15. NOTICES. Any notice required or permitted hereunder will be given
in writing and will be deemed effectively given upon personal delivery, three
(3) days after deposit in the United States mail by certified or registered mail
(return receipt requested), one (1) business day after its deposit with any
return receipt express courier (prepaid), or one (1) business day after
transmission by telecopier, addressed to the other party at its address (or
facsimile number, in the case of transmission by telecopier) as shown below its
signature to this Agreement, or to such other address as such party may
designate in writing from time to time to the other party.
16. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
17. HEADINGS. The captions and headings of this Agreement are
included for ease of reference only and will be disregarded in interpreting or
construing this Agreement. All references herein to Sections will refer to
Sections of this Agreement.
18. ENTIRE AGREEMENT. This Agreement, together with all its Exhibits,
constitutes the entire agreement and understanding of the parties with respect
to the subject
<PAGE> 10
matter of this Agreement, and supersedes all prior understandings and
agreements, whether oral or written, between the parties hereto with respect to
the specific subject matter hereof.
19. TITLE TO SHARES. The exact spelling of the name(s) under which
Purchaser will take title to the Shares is: Dubinsky Trust Agreement dated
10/24/90, Donna Dubinsky, Trustee
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[X] Alone or with spouse as trustee(s) of the following trust
(including date): Dubinsky Trust Agreement 10/24/90
[ ] Other; please specify: ____________________________________________
___________________________________________________________________
Purchaser's social security number is:
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in duplicate by its duly authorized representative and Purchaser has executed
this Agreement in duplicate, as of the Effective Date.
COMPANY PURCHASER
By: /s/ DONNA DUBINSKY /s/ DONNA DUBINSKY
--------------------- -------------------
Name: Donna Dubinsky
Title: President and Chief Financial Officer Name: Donna Dubinsky
Address: 420 Florence Avenue, Suite 100 Address:
Palo Alto, CA 94301
Fax: (650) 470-0943 Fax: (____) ___________
[Signature Page to JD Technology, Inc. Founders'
Restricted Stock Purchase Agreement]
<PAGE> 11
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spousal Consent
Exhibit 3: Election Under Section 83(b) of the Internal Revenue Code
<PAGE> 12
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Founder's Restricted
Stock Purchase Agreement dated as of __________, 199 , (the "Agreement"), the
undersigned hereby sells, assigns and transfers unto _____________________,
__________ shares of the common stock of ________________, a California
corporation (the "Company"), standing in the undersigned's name on the books of
the Company represented by Certificate No(s). ____ delivered herewith, and does
hereby irrevocably constitute and appoint the Secretary of the Company as the
undersigned's attorney-in-fact, with full power of substitution, to transfer
said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.
Dated: ______________________
/s/ DONNA L. DUBINSKY
----------------------------------------
(Signature)
DONNA L. DUBINSKY,
----------------------------------------
(Please Print Name)
as an individual and as Trustee for the
Amended and Restated Dubinsky Trust
Agreement, dated May 23, 1995
----------------------------------------
(Spouse's Signature, if any)
----------------------------------------
(Please Print Spouse's Name)
INSTRUCTION: Please do not fill in any blanks other than the signature line. The
purpose of this Stock Power and Assignment is to enable the Company and/or its
assignee(s) to acquire the shares upon exercise of the "Repurchase Option"
and/or "Right of First Refusal" set forth in the Agreement without requiring
additional signatures on the part of the undersigned or undersigned's spouse (if
any).
<PAGE> 13
EXHIBIT 2
CONSENT OF SPOUSE
I, the undersigned, am the spouse of Donna Dubinsky ("Purchaser"). I
have read and hereby consent to and approve all the terms and conditions of: the
Founder's Restricted Stock Purchase Agreement (the "Agreement") dated
______________, 1998 between Purchaser and JD Technology, Inc., a California
corporation (the "Company"), pursuant to which Purchaser has purchased 2,450,000
shares of the Company's common stock (the "Shares").
In consideration of the Company granting my spouse the right to purchase
the Shares under the Agreement, I hereby agree to be irrevocably bound by all
the terms and conditions of the Agreement (including but not limited to the
Company's Repurchase Option, the Right of First Refusal and the market standoff
agreements contained therein) and further agree that any community property
interest I may have in the Shares will be similarly bound by the Agreement.
I hereby appoint Purchaser as my attorney-in-fact, to act in my name,
place and stead with respect to any amendment of the Agreement and with respect
to the making and filing of an election under Internal Revenue Code Section
83(b) in connection with the purchase of the Shares.
Dated: _________________, 1998
----------------------------------------
Signature of Spouse [Sign Here]
----------------------------------------
Name of Spouse [Please Print]
[X] Check this box if you do not have a spouse.
<PAGE> 1
EXHIBIT 10.11
FOUNDER'S RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made and entered into as of August 20, 1998 (the
"EFFECTIVE DATE") between JD Technology (the "COMPANY"), a California
corporation, and Jeff Hawkins ("PURCHASER").
1. PURCHASE OF SHARES. On the Effective Date and subject to the terms
and conditions of this Agreement, Purchaser hereby purchases from the Company,
and Company hereby sells to Purchaser, an aggregate of 4,550,000 shares of the
Company's common stock (the "SHARES") at an aggregate purchase price of
$45,500.00 (the "PURCHASE PRICE") or $0.01 per Share (the "PURCHASE PRICE PER
SHARE"). As used in this Agreement, the term "Shares" refers to the Shares
purchased under this Agreement and includes all securities received (a) in
replacement of the Shares, (b) as a result of stock dividends or stock splits in
respect of the Shares, and (c) in replacement of the Shares in a
recapitalization, merger, reorganization or the like.
2. PAYMENT OF PURCHASE PRICE; CLOSING.
(a) DELIVERIES BY PURCHASER. Purchaser hereby delivers to the
Company the full Purchase Price in cash in the amount of $45,500.00.
(b) DELIVERIES BY THE COMPANY. Upon its receipt of the entire
Purchase Price and all the documents to be executed and delivered by Purchaser
to the Company under Section 2(a), the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser registered in
Purchaser's name in accordance with Section 19, with such certificate to be
placed in escrow as provided in Section 8 until expiration or termination of
both the Company's Repurchase Option and Right of First Refusal described in
Sections 5 and 6.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to the Company that:
(a) PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act of 1933, as amended (the "1933
ACT"). Purchaser has no present intention of selling or otherwise disposing of
all or any portion of the Shares and no one other than Purchaser has any
beneficial ownership of any of the Shares.
(b) ACCESS TO INFORMATION. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
<PAGE> 2
(c) UNDERSTANDING OF RISKS. Purchaser is a founder of the
Company and is fully aware of: (i) the highly speculative nature of the
investment in the Shares; (ii) the financial hazards involved; (iii) the lack of
liquidity of the Shares and the restrictions on transferability of the Shares
(e.g., that Purchaser may not be able to sell or dispose of the Shares or use
them as collateral for loans); (iv) the qualifications and backgrounds of the
management of the Company; and (v) the tax consequences of investment in the
Shares.
(d) PURCHASER'S QUALIFICATIONS. Purchaser has a preexisting
personal or business relationship with the Company and/or certain of its
officers and/or directors of a nature and duration sufficient to make Purchaser
aware of the character, business acumen and general business and financial
circumstances of the Company and/or such officers and directors. By reason of
Purchaser's business or financial experience, Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.
(e) NO GENERAL SOLICITATION. At no time was Purchaser
presented with or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general advertising or solicitation in
connection with the offer, sale and purchase of the Shares.
(f) COMPLIANCE WITH SECURITIES LAWS. Purchaser understands and
acknowledges that, in reliance upon the representations and warranties made by
Purchaser herein, the Shares are not being registered with the Securities and
Exchange Commission ("SEC") under the 1933 Act or being qualified under the
California Corporate Securities Law of 1968, as amended (the "LAW"), but instead
are being issued under an exemption or exemptions from the registration and
qualification requirements of the 1933 Act and the Law or other applicable state
securities laws] which impose certain restrictions on Purchaser's ability to
transfer the Shares.
(g) RESTRICTIONS ON TRANSFER. Purchaser understands that
Purchaser may not transfer any Shares unless such Shares are registered under
the 1933 Act or qualified under the Law or unless, in the opinion of counsel to
the Company, exemptions from such registration and qualification requirements
are available. Purchaser understands that only the Company may file a
registration statement with the SEC or the California Commissioner of
Corporations and that the Company is under no obligation to do so with respect
to the Shares. Purchaser has also been advised that exemptions from registration
and qualification may not be available or may not permit Purchaser to transfer
all or any of the Shares in the amounts or at the times proposed by Purchaser.
(h) RULE 144. In addition, Purchaser has been advised that SEC
Rule 144 promulgated under the 1933 Act, which permits certain limited sales of
unregistered securities, is not presently available with respect to the Shares
and, in any event, requires that the Shares be held for a minimum of one year,
and in certain cases two years, after they have been purchased and paid for
(within the meaning of Rule 144), before they may be resold under Rule 144.
Purchaser understands that Rule 144 may indefinitely restrict transfer of the
Shares so long as
<PAGE> 3
Purchaser remains an "affiliate" of the Company and "current
public information" about the Company (as defined in Rule 144) is not publicly
available.
4. COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE SALE OF THE
SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT, IF NOT YET QUALIFIED WITH THE
CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION,
IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.
5. COMPANY'S REPURCHASE OPTION. The Company has the option to
repurchase all or a portion of the Unvested Shares (as defined below) on the
terms and conditions set forth in this Section (the "REPURCHASE OPTION") if
Purchaser ceases to be employed by the Company (as defined herein) for any
reason, or no reason, including without limitation Purchaser's death,
disability, voluntary resignation or termination by the Company with or without
cause.
(a) DEFINITION OF "EMPLOYED BY THE COMPANY"; "TERMINATION
DATE". For purposes of this Agreement, Purchaser will be considered to be
"employed by the Company" if the Board of Directors of the Company determines
that Purchaser is rendering substantial services as an officer, director,
employee, consultant or independent contractor to the Company or to any parent,
subsidiary or affiliate of the Company. In case of any dispute as to whether
Purchaser is employed by the Company, the Board of Directors of the Company will
have discretion to determine whether Purchaser has ceased to be employed by the
Company or any parent, subsidiary or affiliate of the Company and the effective
date on which Purchaser's employment terminated (the "TERMINATION DATE").
(b) UNVESTED AND VESTED SHARES. Shares that are not Vested
Shares (as defined in this Section) are "Unvested Shares". On the Effective
Date, twenty percent (20%) of the Shares will be Vested Shares. If Purchaser has
been continuously employed by the Company at all times from the Effective Date
until July 13, 1999 (the "FIRST VESTING DATE"), then on the First Vesting Date,
an additional twenty (20%) of the Shares will become Vested Shares; and
thereafter, for so long (and only for so long) as Purchaser remains continuously
employed by the Company at all times after the First Vesting Date, an additional
1.667% of the Shares will become Vested Shares upon the expiration of each full
calendar month elapsed after the First Vesting Date. No Shares will become
Vested Shares after the Termination Date.
(c) ADJUSTMENTS. The number of Shares that are Vested Shares
or Unvested Shares will be proportionally adjusted to reflect any stock
dividend, stock split, reverse stock split or recapitalization of the common
stock of the Company occurring after the Effective Date.
(d) EXERCISE OF REPURCHASE OPTION AT ORIGINAL PRICE. At any
time within thirty (30) days after the Termination Date, the Company may elect
to repurchase any or all of
<PAGE> 4
the Unvested Shares by giving Purchaser written notice of exercise of the
Repurchase Option. The Company and/or its assignee(s) will then have the option
to repurchase from Purchaser (or from Purchaser's personal representative as the
case may be) any or all of the Unvested Shares at the Purchaser's original
Purchase Price Per Share (as adjusted to reflect any stock dividend, stock
split, reverse stock split or recapitalization of the common stock of the
Company occurring after the Effective Date).
(e) PAYMENT OF REPURCHASE PRICE. The repurchase price payable
to purchase Unvested Shares upon exercise of the Repurchase Option will be
payable, at the option of the Company or its assignee(s), by check or by
cancellation of all or a portion of any outstanding indebtedness of Purchaser to
the Company (or to such assignee) or by any combination thereof. The repurchase
price will be paid without interest within sixty (60) days after the Termination
Date.
(f) RIGHT OF TERMINATION UNAFFECTED. Nothing in this Agreement
will be construed to limit or otherwise affect in any manner whatsoever the
right or power of the Company (or any parent, subsidiary or affiliate of the
Company) to terminate Purchaser's employment at any time for any reason or no
reason, with or without cause.
(g) ACCELERATION.
(i) In the event of an Acquisition Event (as defined
herein), then immediately prior to such event, twenty-five percent (25%) of the
Shares originally issued immediately become Vested Shares and the Company will
have no right to repurchase such Shares pursuant to this Section. Any Unvested
Shares shall continue to vest on the original vesting schedule.
(ii) The term "ACQUISITION EVENT" means (A) any
consolidation or merger of the Company with or into any other corporation or
corporations 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 of such consolidation or merger or stock
representing a majority of the voting power of a corporation that wholly owns,
directly or indirectly, the surviving corporation of such consolidation or
merger; (B) the sale, transfer or assignment of securities of the Company
representing a majority of the voting power of all the Company's outstanding
voting securities by the holders thereof to an acquiring party in a single
transaction or series of related transactions; (C) any other sale, transfer or
assignment of securities of the Company representing over two-thirds (2/3) of
the voting power of the Company's then outstanding voting securities by the
holders thereof to an acquiring party; or (D) the sale of all or substantially
all the Company's assets.
6. RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or otherwise
transferred by Purchaser without the Company's prior written consent. Before any
Vested Shares held by Purchaser or any transferee of such Shares (either being
sometimes referred to herein as the "HOLDER") may be sold or otherwise
transferred (including without limitation a transfer by gift or operation of
law), the Company and/or its assignee(s) will have a right of first refusal to
<PAGE> 5
purchase the Shares to be sold or transferred (the "OFFERED SHARES") on the
terms and conditions set forth in this Section (the "RIGHT OF FIRST REFUSAL").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares will
deliver to the Company a written notice (the "NOTICE") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer the Offered Shares; (ii) the
name of each proposed purchaser or other transferee ("PROPOSED TRANSFEREE");
(iii) the number of Offered Shares to be transferred to each Proposed
Transferee; (iv) the bona fide cash price or other consideration for which the
Holder proposes to transfer the Offered Shares (the "OFFERED PRICE"); and (v)
that the Holder will offer to sell the Offered Shares to the Company and/or its
assignee(s) at the Offered Price as provided in this Section.
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all
(but not less than all) of the Offered Shares proposed to be transferred to any
one or more of the Proposed Transferees named in the Notice, at the purchase
price determined in accordance with subsection (c) below.
(c) PURCHASE PRICE. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If the Offered Price
includes consideration other than cash, then the value of the non-cash
consideration as determined in good faith by the Company's Board of Directors
will conclusively be deemed to be the cash equivalent value of such non-cash
consideration.
(d) PAYMENT. Payment of the purchase price for Offered Shares
will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company (or to such assignee, in the case of a
purchase of Offered Shares by such assignee) or by any combination thereof. The
purchase price will be paid without interest within sixty (60) days after the
Company's receipt of the Notice, or, at the option of the Company and/or its
assignee(s), in the manner and at the time(s) set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 120 days after the date of the
Notice, and provided further, that: (i) any such sale or other transfer is
effected in compliance with all applicable securities laws; and (ii) the
Proposed Transferee agrees in writing that the provisions of this Section will
continue to apply to the Offered Shares in the hands of such Proposed
Transferee. If the Offered Shares described in the Notice are not transferred to
the Proposed Transferee within such 120 day period, then a new Notice must be
given to the Company, and the Company will again be offered the Right of First
Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
<PAGE> 6
(f) EXEMPT TRANSFERS. Notwithstanding anything to the contrary
in this Section, the following transfers of Shares will be exempt from the Right
of First Refusal: (i) the transfer of any or all of the Shares during
Purchaser's lifetime by gift or on Purchaser's death by will or intestacy to
Purchaser's "immediate family" (as defined below) or to a trust for the benefit
of Purchaser or Purchaser's immediate family, provided that each transferee or
other recipient agrees in a writing satisfactory to the Company that the
provisions of this Section will continue to apply to the transferred Shares in
the hands of such transferee or other recipient; (ii) any transfer of Shares
made pursuant to a statutory merger or statutory consolidation of the Company
with or into another corporation or corporations (except that the Right of First
Refusal will continue to apply thereafter to such Shares, in which case the
surviving corporation of such merger or consolidation shall succeed to the
rights or the Company under this Section unless the agreement of merger or
consolidation expressly otherwise provides); or (iii) any transfer of Shares
pursuant to the winding up and dissolution of the Company. As used herein, the
term "immediate family" will mean Purchaser's spouse, lineal descendant or
antecedent, father, mother, brother or sister, adopted child or grandchild, or
the spouse of any child, adopted child, grandchild or adopted grandchild of
Purchaser.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal will terminate as to all Shares on the earlier of (i) and Acquisition
Event or (ii) the effective date of the first sale of common stock of the
Company to the general public pursuant to a registration statement filed with
and declared effective by the SEC under the 1933 Act (other than a registration
statement relating solely to the issuance of common stock pursuant to a business
combination or an employee incentive or benefit plan).
(h) ENCUMBRANCES ON VESTED SHARES. Purchaser may grant a lien
or security interest in, or pledge, hypothecate or encumber Vested Shares only
if each party to whom such lien or security interest is granted, or to whom such
pledge, hypothecation or other encumbrance is made, agrees in a writing
satisfactory to the Company that: (i) such lien, security interest, pledge,
hypothecation or encumbrance will not apply to such Vested Shares after they are
acquired by the Company and/or its assignees) under this Section; and (ii) the
provisions of this Section will continue to apply to such Vested Shares in the
hands of such party and any transferee of such party. Purchaser may not grant a
lien or security interest in, or pledge, hypothecate or encumber, any Unvested
Shares.
7. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of this
Agreement, Purchaser will have all of the rights of a shareholder of the Company
with respect to the Shares from and after the date that Purchaser delivers
payment of the Purchase Price until such time as Purchaser disposes of the
Shares or the Company and/or its assignee(s) exercise(s) the Repurchase Option
or Right of First Refusal. Upon an exercise of the Repurchase Option or the
Right of First Refusal, Purchaser will have no further rights as a holder of the
Shares so purchased upon such exercise, except the right to receive payment for
the Shares so purchased in accordance with the provisions of this Agreement, and
Purchaser will promptly surrender the stock certificate(s) evidencing the Shares
so purchased to the Company for transfer or cancellation.
<PAGE> 7
8. ESCROW. As security for Purchaser's faithful performance of this
Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company ("ESCROW HOLDER"), who is hereby appointed to
hold such certificate(s) and Stock Powers in escrow and to take all such actions
and to effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. Escrow Holder will act solely for
the Company as its agent and not as a fiduciary. Purchaser and the Company agree
that Escrow Holder will not be liable to any party to this Agreement (or to any
other party) for any actions or omissions unless Escrow Holder is grossly
negligent or intentionally fraudulent in carrying out the duties of Escrow
Holder under this Section. Escrow Holder may rely upon any letter, notice or
other document executed by any signature purported to be genuine and may rely on
the advice of counsel and obey any order of any court with respect to the
transactions contemplated by this Agreement. The Shares will be released from
escrow upon termination of both the Repurchase Option and the Right of First
Refusal.
9. TAX CONSEQUENCES. Purchaser hereby acknowledges that Purchaser has
been informed that, unless an election is filed by the Purchaser with the
Internal Revenue Service (and, if necessary, the proper state taxing
authorities), within 30 days of the purchase of the Shares, electing pursuant to
Section 83(b) of the Internal Revenue Code (and similar state tax provisions, if
applicable) to be taxed currently on any difference between the Purchase Price
of the Shares and their fair market value on the date of purchase, there will be
a recognition of taxable income to the Purchaser, measured by the excess, if
any, of the fair market value of the Vested Shares, at the time they cease to be
Unvested Shares, over the purchase price for such Shares. Purchaser represents
that Purchaser has consulted any tax consultant(s) Purchaser deems advisable in
connection with Purchaser's purchase of the Shares and the filing of the
election under Section 83(b) and similar tax provisions. A form of Election
under Section 83(b) is attached hereto as Exhibit 3 for reference. PURCHASER
HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING SUCH ELECTION AND PAYING ANY TAXES
RESULTING FROM SUCH ELECTION OR FOR FAILING TO FILE THE ELECTION AND PAYING
TAXES RESULTING FROM THE LAPSE OF THE REPURCHASE RESTRICTIONS ON THE UNVESTED
SHARES.
10. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Purchaser understands and agrees that the Company
will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that may
be required by state or federal securities laws, the Company's Articles of
Incorporation or Bylaws, any other agreement between Purchaser and the Company
or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR
<PAGE> 8
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD
BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON PUBLIC RESALE,
TRANSFER, RIGHT OF REPURCHASE AND RIGHT OF FIRST
REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A FOUNDER'S RESTRICTED
STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS AND THE
RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL ARE
BINDING ON TRANSFEREES OF THESE SHARES.
(b) STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, in
order to ensure compliance with the restrictions imposed by this Agreement, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company will not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares, or to accord the right to vote or pay dividends, to any
purchaser or other transferee to whom such Shares have been so transferred.
<PAGE> 9
11. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
registration of the Company's securities under the 1933 Act that, upon the
request of the Company or the underwriters managing any registered public
offering of the Company's securities, Purchaser will not sell or otherwise
dispose of any Shares without the prior written consent of the Company or such
managing underwriters, as the case may be, for a period of time (not to exceed
180 days) after the effective date of such registration requested by such
managing underwriters and subject to all restrictions as the Company or the
managing underwriters may specify for employee-shareholders generally.
12. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
the Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and federal laws and regulations and with
all applicable requirements of any stock exchange or automated quotation system
on which the Company's common stock may be listed or quoted at the time of such
issuance or transfer.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement, including its rights to repurchase Shares under the
Repurchase Option and the Right of First Refusal. This Agreement will be binding
upon and inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement will be
binding upon Purchaser and Purchaser's heirs, executors, administrators,
successors and assigns.
14. GOVERNING LAW; SEVERABILITY. This Agreement will be governed by and
construed in accordance with the internal laws of the State of California
excluding that body of laws pertaining to conflict of laws. If any provision of
this Agreement is determined by a court of law to be illegal or unenforceable,
then such provision will be enforced to the maximum extent possible and the
other provisions will remain fully effective and enforceable.
15. NOTICES. Any notice required or permitted hereunder will be given in
writing and will be deemed effectively given upon personal delivery, three (3)
days after deposit in the United States mail by certified or registered mail
(return receipt requested), one (1) business day after its deposit with any
return receipt express courier (prepaid), or one (1) business day after
transmission by telecopier, addressed to the other party at its address (or
facsimile number, in the case of transmission by telecopier) as shown below its
signature to this Agreement, or to such other address as such party may
designate in writing from time to time to the other party.
16. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
17. HEADINGS. The captions and headings of this Agreement are included
for ease of reference only and will be disregarded in interpreting or construing
this Agreement. All references herein to Sections will refer to Sections of this
Agreement.
18. ENTIRE AGREEMENT. This Agreement, together with all its Exhibits,
constitutes the entire agreement and understanding of the parties with respect
to the subject
<PAGE> 10
matter of this Agreement, and supersedes all prior understandings and
agreements, whether oral or written, between the parties hereto with respect to
the specific subject matter hereof.
19. TITLE TO SHARES. The exact spelling of the name(s) under which
Purchaser will take title to the Shares is:
------------------------------------------------------------
------------------------------------------------------------
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[x] Alone or with spouse as trustee(s) of the following trust
(including date):
--------------------------------------------------
Strauss - Hawkins Trust April 17, 1991
-------------------------------------------------------------------
-------------------------------------------------------------------
[ ] Other; please specify:
---------------------------------------------
-------------------------------------------------------------------
Purchaser's social security number is:
----------------------------------------
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in duplicate by its duly authorized representative and Purchaser has executed
this Agreement in duplicate, as of the Effective Date.
<TABLE>
<CAPTION>
COMPANY PURCHASER
<S> <C>
By: /s/ DONNA DUBINSKY /s/ JEFF HAWKINS
--------------------------------------------- -------------------------------------------
Name: Donna Dubinsky
-------------------------------------------
Title: President and Chief Financial Officer Name: Jeff Hawkins
------------------------------------------ --------------------------------------
Address: 420 Florence Avenue, Suite 100 Address:
---------------------------------------- -----------------------------------
Palo Alto, CA 94301
- ------------------------------------------------ -------------------------------------------
Fax: ( ) Fax: ( )
---- ------------------------------------ ---- -------------------------------
</TABLE>
[Signature Page to JD Technology, Inc. Founders' Restricted Stock Purchase
Agreement]
<PAGE> 11
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spousal Consent
Exhibit 3: Election Under Section 83(b) of the Internal Revenue Code
<PAGE> 12
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Founder's Restricted
Stock Purchase Agreement dated as of __________, 199 , (the "Agreement"), the
undersigned hereby sells, assigns and transfers unto _____________________,
__________ shares of the common stock of ________________, a California
corporation (the "Company"), standing in the undersigned's name on the books of
the Company represented by Certificate No(s). ____ delivered herewith, and does
hereby irrevocably constitute and appoint the Secretary of the Company as the
undersigned's attorney-in-fact, with full power of substitution, to transfer
said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.
Dated:
---------------------------
/s/ JEFFREY C. HAWKINS
-------------------------------------------
(Signature)
Jeffrey C. Hawkins, as an individual and as
-------------------------------------------
Trustee for The Strauss-Hawkins Trust, dated
-------------------------------------------
April 17, 1991, Jeffrey C. Hawkins and Janet
-------------------------------------------
L. Strauss, Trustors and/or Trustees
-------------------------------------------
(Please Print Name)
/s/ JANET L. STRAUSS
-------------------------------------------
(Spouse's Signature, if any)
Janet L. Strauss, as an individual and as
-------------------------------------------
Trustee for The Strauss-Hawkins Trust, dated
-------------------------------------------
April 17, 1991, Jeffrey C. Hawkins and Janet
-------------------------------------------
L. Strauss, Trustors and/or Trustees
-------------------------------------------
(Please Print Spouse's Name)
INSTRUCTION: Please do not fill in any blanks other than the signature line. The
purpose of this Stock Power and Assignment is to enable the Company and/or its
assignee(s) to acquire the shares upon exercise of the "Repurchase Option"
and/or "Right of First Refusal" set forth in the Agreement without requiring
additional signatures on the part of the Undersigned or Undersigned's Spouse (if
any).
<PAGE> 13
EXHIBIT 2
CONSENT OF SPOUSE
I, the undersigned, am the spouse of Jeff Hawkins ("Purchaser"). I have
read and hereby consent to and approve all the terms and conditions of: the
Founder's Restricted Stock Purchase Agreement (the "Agreement") dated
August 20, 1998 between Purchaser and JD Technology, Inc., a California
corporation (the "Company"), pursuant to which Purchaser has purchased 4,550,000
shares of the Company's common stock (the "Shares").
In consideration of the Company granting my spouse the right to
purchase the Shares under the Agreement, I hereby agree to be irrevocably bound
by all the terms and conditions of the Agreement (including but not limited to
the Company's Repurchase Option, the Right of First Refusal and the market
standoff agreements contained therein) and further agree that any community
property interest I may have in the Shares will be similarly bound by the
Agreement.
I hereby appoint Purchaser as my attorney-in-fact, to act in my name,
place and stead with respect to any amendment of the Agreement and with respect
to the making and filing of an election under Internal Revenue Code Section
83(b) in connection with the purchase of the Shares.
Dated: August 20, 1998
/s/ JEFFREY C. HAWKINS
-------------------------------------------
Signature of Spouse [Sign Here]
/s/ JANET L. STRAUSS
-------------------------------------------
Name of Spouse [Please Print]
[ ] Check this box if you do not have a spouse.
<PAGE> 1
EXHIBIT 10.12
[HANDSPRING LOGO]
Bernard Whitney
May 31, 1999
Dear Bern:
Handspring, Inc. (the "Company") is pleased to offer you a
position as Chief Financial Officer reporting me, on the terms
set forth in this letter agreement. The effective date is your
start date, which is anticipated to be June 21, 1999.
COMPENSATION. Your initial salary will be $180,000 annually,
payable in accordance with the Company's customary payroll
practice as in effect from time to time. You also will receive
the Company's standard employee benefits package, and will be
subject to the Company's vacation policy, as such package and
policy are in effect from time to time.
STOCK OPTION. Effective at the next Company's Board of
Directors meeting, I will recommend that the Board grant you
an incentive stock option, effective upon the date of your
commencement of employment, to purchase 300,000 shares of
Company Common Stock pursuant to the Company's Stock Option
Plan. The exercise price for this option will be the
then-current fair market value of the Company Common Stock at
the date of the grant. The option will become exercisable
according to the Company's standard four year exercise
schedule, which calls for an initial vesting of 25% of the
total after the first year of continuous service, and
thereafter an additional 1/36 per month will become
exercisable, at the close of each month during which you
remain employed with the Company, over the remainder of the
exercise term.
<PAGE> 2
[HANDSPRING LOGO]
If the Company raises money through an additional outside,
private equity financing of Preferred B stock, you will be
issued additional options at that time so as to not dilute
your then current ownership position in the Company
represented by the 300,000 options. This anti-dilution option
does not apply to subsequent private equity financings after
the Preferred B, a public offering of the Company's stock, a
reasonable expansion of the employee stock option pool, or
convertible debt. These additional options will be priced at
the current market value as of the date of issue, and will
vest 25% on the anniversary of that grant, with an additional
1/36 per month at the close of each month thereafter.
If the Company experiences a change of control event such that
more than 50% of the Company is sold to another corporation,
your unvested stock options will immediately vest. If any such
vesting would result in any taxes under Section 280G of the
Internal Revenue Code, you may either decline such vesting or
retain such vesting at your election so as to maximize your
benefits from the Company. An initial public offering of the
Company's stock is not considered a change of control event.
The sale of the shares which are the subject of this letter
has not been qualified with the Commissioner of Corporations
of the State of California, and the issuance of shares or the
payment or receipt of any part of the consideration for the
shares prior to such qualification is unlawful, unless the
offer and sale are exempt from the qualification provisions.
The rights of all parties to this letter are expressly
conditioned upon such qualification being obtained or an
exemption being available.
CONFIDENTIAL INFORMATION. As an employee of the Company, you
will have access to certain Company confidential information
and you may, during the course of your employment, develop
certain information or inventions which will be the property
of the Company. To protect the interest of the Company, you
will need to sign the Company's standard "Employee Inventions
and Confidentiality Agreement" as a condition of your
employment. We wish to impress upon you that we do not wish
you to bring with you any confidential or proprietary material
of any former employer or to violate any other obligation to
your former employers.
<PAGE> 3
[HANDSPRING LOGO]
AT-WILL EMPLOYMENT. You will be an at-will employee of the
Company, which means the employment relationship can be
terminated by either of us for any reason at any time. Any
statements or representations to the contrary should be
regarded by you as ineffective. Further, your participation in
any stock option or benefit program is not to be regarded as
assuring you of continuing employment for any particular
period of time.
AUTHORIZATION TO WORK. Because of Federal regulations adopted
in the Immigration Reform and Control Act of 1986, you will
need to present documentation demonstrating that you have
authorization to work in the United States. This requirement
applies to U.S. and non-U.S. citizens alike.
ACCEPTANCE OF OFFER. If you decide to accept our offer, please
sign the enclosed copy of this letter and return it to me.
Upon your signature below, this will become our binding
agreement with respect to the subject matter of this letter,
superseding all other or prior agreements by you with the
Company as to the specific subjects of this letter, will be
binding upon and inure to the benefit of our respective
successors and assigns and your heirs, administrators and
executors, will be governed by California law, and may only be
amended in writing signed by both you and the Company.
This offer will expire on June 1, 1999. We're all excited to
have you join the company!
Best regards,
Donna Dubinsky
President & CEO
Agreed by:
/s/ Bern Whitney
-----------------------------------
<PAGE> 1
EXHIBIT 10.13
HANDSPRING, INC.
(FORMERLY JD TECHNOLOGY, INC.)
1998 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "AGREEMENT") is made and entered into as
of the date of grant set forth below (the "DATE OF GRANT") by and between
Handspring, Inc. (formerly JD Technology, Inc.), a California corporation (the
"COMPANY"), and the participant named below (the "PARTICIPANT"). Capitalized
terms not defined herein shall have the meaning ascribed to them in the
Company's 1998 Equity Incentive Plan (the "PLAN").
PARTICIPANT: Edward Colligan
------------------------------------
SOCIAL SECURITY NUMBER: ------------------------------------
ADDRESS:
------------------------------------
------------------------------------
TOTAL OPTION SHARES: 1,346,154
------------------------------------
EXERCISE PRICE PER SHARE: $0.23
------------------------------------
DATE OF GRANT: October 12, 1998
------------------------------------
FIRST VESTING DATE: October 8, 1999
------------------------------------
EXPIRATION DATE: October 11, 2008
------------------------------------
(unless earlier terminated under
Section 5.6 of the Plan)
TYPE OF STOCK OPTION
(CHECK ONE): [X] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an option
(this "OPTION") to purchase the total number of shares of Common Stock of the
Company set forth above as Total Option Shares (the "SHARES") at the Exercise
Price Per Share set forth above (the "EXERCISE PRICE"), subject to all of the
terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an "incentive
stock option" (the "ISO") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "CODE").
2. EXERCISE PERIOD.
2.1 Exercise Period of Option. This Option is immediately
exercisable although the Shares issued upon exercise of the Option will be
subject to the restrictions on transfer and Repurchase Options set forth in
Sections 7, 8 and 9 below. Provided Participant continues to provide services to
the Company or to any Parent or Subsidiary of the Company, the Shares issuable
upon exercise of this Option will become vested with respect to twenty-five
percent (25%) of the Shares on October 8, 1999 (the "FIRST VESTING DATE") and
<PAGE> 2
thereafter at the end of each full succeeding month after the First Vesting Date
an additional 2.08333% of the Shares will become vested until the Shares are
vested with respect to one hundred percent (100%) of the Shares. If application
of the vesting percentage causes a fractional share, such share shall be rounded
down to the nearest whole share for each month except for the last month in such
vesting period, at the end of which last month this Option shall become
exercisable for the full remainder of the Shares. Unvested Shares (as defined in
Section 2.2 of this Agreement) may not be sold or otherwise transferred by
Participant without the Company's prior written consent. Notwithstanding any
provision in the Plan or this Agreement to the contrary, Options for Unvested
Shares will not be exercisable on or after Participant's Termination Date.
In the event of an Acquisition Event (as defined herein), then immediately prior
to such event, twenty-five percent (25%) of the shares issued or issuable upon
exercise of the incentive stock options granted herein to Edward Colligan
immediately become vested and will no longer be subject to the Company's
Repurchase Option for Unvested Shares set forth in Section 8 of this Agreement.
Any Unvested Shares will continue to vest on the original vesting schedule. The
term "ACQUISITION EVENT" means the (i) any consolidation or merger of the
Company with or into any other corporation or corporations 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 of such
consolidation or merger or stock representing a majority of the voting power of
a corporation that wholly owns, directly or indirectly, the surviving
corporation of such consolidation or merger; (ii) the sale, transfer or
assignment of securities of the Company representing a majority of the voting
power of all the Company's outstanding voting securities by the holders thereof
to an acquiring party in a single transaction or series of related transactions;
(iii) any other sale, transfer or assignment of securities of the Company
representing over two-thirds (2/3) of the voting power of the Company's then
outstanding voting securities by the holders thereof to an acquiring party; or
(iv) the sale of all or substantially all the Company's assets.
2.2 Vesting of Options. Shares that are vested pursuant to the
schedule set forth in Section 2.1 are "VESTED SHARES." Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "UNVESTED SHARES."
2.3 Expiration. The Option shall expire on the Expiration Date
set forth above or earlier as provided in Section 3 below or pursuant to Section
5.6 of the Plan.
3. TERMINATION.
3.1 Termination for Any Reason Except Death, Disability or
Cause. If Participant is Terminated for any reason, except death, Disability or
for Cause, the Option, to the extent (and only to the extent) that it would have
been exercisable by Participant on the Termination Date, may be exercised by
Participant no later than three (3) months after the Termination Date, but in
any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If Participant
is Terminated because of death or Disability of Participant (or Participant dies
within three (3) months of Termination when Termination is for any reason other
than Participant's Disability or
2
<PAGE> 3
for Cause), the Option, to the extent that it is exercisable by Participant on
the Termination Date, may be exercised by Participant (or Participant's legal
representative) no later than twelve (12) months after the Termination Date, but
in any event no later than the Expiration Date. 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, is deemed to be an NQSO.
3.3 Termination for Cause. If Participant is Terminated for
Cause, then the Option will expire on Participant's Termination Date, or at such
later time and on such conditions as are determined by the Committee.
3.4 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
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.
4. MANNER OF EXERCISE.
4.1 Stock Option Exercise Agreement. To exercise this Option,
Participant (or in the case of exercise after Participant's death or incapacity,
Participant's executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Committee from time to time (the "EXERCISE AGREEMENT"), which shall set forth,
inter alia, (i) Participant's election to exercise the Option, (ii) the number
of Shares being purchased, (iii) any restrictions imposed on the Shares and (iv)
any representations, warranties and agreements regarding Participant's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws. If someone other than Participant
exercises the Option, then such person must submit documentation reasonably
acceptable to the Company verifying that such person has the legal right to
exercise the Option.
4.2 Limitations on Exercise. The Option may not be exercised
unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. The Option may
not be exercised as to fewer than one hundred (100) Shares unless it is
exercised as to all Shares as to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the shares being purchased in cash (by
check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock 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
3
<PAGE> 4
has been fully paid with respect to such shares); or (B) were
obtained by Participant in the open public market; and (ii)
are clear of all liens, claims, encumbrances or security
interests;
(c) by waiver of compensation due or accrued to Participant for
services rendered;
(d) provided that a public market for the Company's stock exists:
(i) through a "same day sale" commitment from Participant and
a broker-dealer that is a member of the National Association
of Securities Dealers (an "NASD DEALER") whereby Participant
irrevocably elects to exercise the Option and to sell a
portion of the Shares so purchased sufficient to pay for 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 Participant and an NASD Dealer
whereby 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 such Shares to
forward the total Exercise Price directly to the Company; or
(e) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares upon
exercise of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement
and payment are in form and substance satisfactory to counsel for the Company,
the Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option is
an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (i) the date two (2)
years after the Date of Grant, and (ii) the date one (1) year after transfer of
such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.
4
<PAGE> 5
6. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan and this Agreement
are intended to comply with Section 25102(o) of the California Corporations Code
and any regulations relating thereto. Any provision of this Agreement which is
inconsistent with Section 25102(o) or any regulations relating thereto shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o) and any regulations relating
thereto. The exercise of the Option and the issuance and transfer of Shares
shall be subject to compliance by the Company and Participant with all
applicable requirements of federal and state securities laws and with all
applicable requirements of any stock exchange on which the Company's Common
Stock may be listed at the time of such issuance or transfer. Participant
understands that the Company is under no obligation to register or qualify the
Shares with the SEC, any state securities commission or any stock exchange to
effect such compliance.
7. NONTRANSFERABILITY OF OPTION. The Option may not be transferred in
any manner other than by will or by the laws of descent and distribution and may
be exercised during the lifetime of Participant only by Participant or in the
event of Participant's incapacity, by Participant's legal representative. The
terms of the Option shall be binding upon the executors, administrators,
successors and assigns of Participant.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company, or its
assignee, shall have the option to repurchase Participant's Unvested Shares (as
defined in Section 2.2 of this Agreement) on the terms and conditions set forth
in the Exercise Agreement (the "REPURCHASE OPTION") if Participant is Terminated
(as defined in the Plan) for any reason, or no reason, including without
limitation Participant's death, Disability (as defined in the Plan), voluntary
resignation or termination by the Company with or without Cause. Notwithstanding
the foregoing, the Company shall retain the Repurchase Option for Unvested
Shares only as to that number of Unvested Shares (whether or not exercised) that
exceeds the number of shares which remain unexercised.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or
otherwise transferred by Participant without the Company's prior written
consent. Before any Vested Shares held by Participant or any transferee of such
Vested Shares may be sold or otherwise transferred (including without limitation
a transfer by gift or operation of law), the Company and/or its assignee(s)
shall have an assignable right of first refusal to purchase the Vested Shares to
be sold or transferred on the terms and conditions set forth in the Exercise
Agreement (the "RIGHT OF FIRST REFUSAL"). The Company's Right of First Refusal
will terminate when the Company's securities become publicly traded.
10. TAX CONSEQUENCES. Set forth below is a brief summary as of the
Effective Date of the Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.
10.1 Exercise of ISO. If the Option qualifies as an ISO, there
will be no regular federal or California income tax liability upon the exercise
of the Option, although the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise
5
<PAGE> 6
Price will be treated as a tax preference item for federal alternative minimum
tax purposes and may subject the Participant to the alternative minimum tax in
the year of exercise.
10.2 Exercise of Nonqualified Stock Option. If the Option does
not qualify as an ISO, there may be a regular federal and California income tax
liability upon the exercise of the Option. Participant will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Participant is a current or former employee of the
Company, the Company may be required to withhold from Participant's compensation
or collect from Participant and pay to the applicable taxing authorities an
amount equal to a percentage of this compensation income at the time of
exercise.
10.3 Disposition of Shares. The following tax consequences may
apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are held
for more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two (2) years
after the Date of Grant, any gain realized on disposition of the Shares will be
treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are
held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an NQSO, any gain realized on disposition of
the Shares will be treated as long term capital gain.
(c) Withholding. The Company may be required to
withhold from the Participant's compensation or collect from the Participant and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income.
10.4. Section 83(b) Election for Unvested Shares. With respect
to Unvested Shares, which are subject to the Repurchase Option, unless an
election is filed by the Participant with the Internal Revenue Service (and, if
necessary, the proper state taxing authorities), within 30 days of the purchase
of the Unvested Shares, electing pursuant to Section 83(b) of the Code (and
similar state tax provisions, if applicable) to be taxed currently on any
difference between the Exercise Price of the Unvested Shares and their Fair
Market Value on the date of purchase, there may be a recognition of taxable
income (including, where applicable, alternative minimum taxable income) to the
Participant, measured by the excess, if any, of the Fair Market Value of the
Unvested Shares at the time they cease to be Unvested Shares, over the Exercise
Price of the Unvested Shares.
11. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of
the rights of a shareholder with respect to any Shares until the Shares are
issued to Participant.
6
<PAGE> 7
12. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
13. ENTIRE AGREEMENT. The Plan is incorporated herein by reference.
This Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
14. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (i) personal
delivery; (ii) three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any return receipt express courier (prepaid); or (iv) one
(1) business day after transmission by facsimile, rapifax or telecopier.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement including its rights to purchase Shares under the
Repurchase Option and the Right of First Refusal. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Participant and Participant's heirs, executors,
administrators, legal representatives, successors and assigns.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.
17. ACCEPTANCE. Participant hereby acknowledges receipt of a copy of
the Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in triplicate by its duly authorized representative and Participant has
executed this Agreement in triplicate, effective as of the Date of Grant.
HANDSPRING, INC.
(FORMERLY JD TECHNOLOGY, INC.) PARTICIPANT
By: /s/ Donna Dubinsky /s/ Edward Colligan
------------------------------ -------------------------------------
(Signature)
Donna Dubinsky Edward Colligan
- --------------------------------- ------------------------------------
(Please print name) (Please print name)
President
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[SIGNATURE PAGE TO HANDSPRING, INC. STOCK OPTION AGREEMENT]
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EXHIBIT A
FORM OF STOCK OPTION EXERCISE AGREEMENT
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HANDSPRING, INC.
(FORMERLY JD TECHNOLOGY, INC.)
1998 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Stock Option Exercise Agreement (the "EXERCISE AGREEMENT") is made
and entered into as of May 11, 1999 (the "EFFECTIVE DATE") by and between
Handspring, Inc. (formerly JD Technology, Inc.), a California corporation (the
"COMPANY"), and the purchaser named below (the "PURCHASER"). Capitalized terms
not defined herein shall have the meanings ascribed to them in the Company's
1998 Equity Incentive Plan (the "PLAN").
PURCHASER: Edward Colligan
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SOCIAL SECURITY NUMBER:
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ADDRESS:
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TOTAL OPTION SHARES: 200,000
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EXERCISE PRICE PER SHARE: $0.23
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DATE OF GRANT: October 12, 1998
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FIRST VESTING DATE: October 8, 1999
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EXPIRATION DATE: October 11, 2008
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(Unless earlier terminated under
Section 5.6 of the Plan)
TYPE OF STOCK OPTION
(CHECK ONE): [X] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. EXERCISE OF OPTION.
1.1 Exercise. Pursuant to exercise of that certain option (the
"OPTION") granted to Purchaser under the Plan and subject to the terms and
conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the Total Number of Shares
set forth above (the "SHARES") of the Company's Common Stock at the Exercise
Price Per Share set forth above (the "EXERCISE PRICE"). As used in this Exercise
Agreement, the term "SHARES" refers to the Shares purchased under this Exercise
Agreement and includes all securities received (i) in replacement of the Shares,
(ii) as a result of stock dividends or stock splits with respect to the Shares,
and (iii) all securities received in
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replacement of the Shares in a merger, recapitalization, reorganization or
similar corporate transaction.
1.2 Title to Shares. The exact spelling of the name(s) under
which Purchaser will take title to the Shares is:
Edward T. Colligan
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Lisa A. Colligan
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Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[X ] Joint Tenants
[ ] Other; please specify:
To assign the Shares to a trust, a stock transfer agreement in
the form attached hereto as Exhibit 5 (the "STOCK TRANSFER AGREEMENT") must be
completed and executed.
1.3 Payment. Purchaser hereby delivers payment of the Exercise
Price in the manner permitted in the Stock Option Agreement as follows (check
and complete as appropriate):
[X] in cash (by check) in the amount of $46,000.00,
receipt of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company
owed to Purchaser in the amount of $__________;
[ ] by delivery of _________ fully-paid,
nonassessable and vested shares of the Common
Stock of the Company owned by Purchaser for at
least six (6) months prior to the date hereof
which have been paid for within the meaning of
SEC Rule 144, (if purchased by use of a
promissory note, such note has been fully paid
with respect to such vested shares), or obtained
by Purchaser in the open public market, and owned
free and clear of all liens, claims, encumbrances
or security interests, valued at the current Fair
Market Value of $___________ per share;
[ ] by the waiver hereby of compensation due or
accrued for services rendered in the amount
of $_________.
2. DELIVERY.
2.1 Deliveries by Purchaser. Purchaser hereby delivers to the
Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock Power
and Assignment Separate from Stock Certificate in the form of Exhibit 1 attached
hereto (the "STOCK POWERS"), both executed by Purchaser (and Purchaser's spouse,
if any), (iii) if Purchaser is married, a Consent of Spouse in the form of
Exhibit 2 attached hereto (the "SPOUSE CONSENT") executed by Purchaser's
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spouse, (iv) the Exercise Price and payment or other provision for any
applicable tax obligations in the form of a check, a copy of which is attached
hereto as Exhibit 3 and (v) if shares are being transferred to a trust, the
fully executed Stock Transfer Agreement in the form attached hereto as Exhibit
5.
2.2 Deliveries by the Company. Upon its receipt of the
Exercise Price, payment or other provision for any applicable tax obligations
and all the documents to be executed and delivered by Purchaser to the Company
under Section 2.1, the Company will issue a duly executed stock certificate
evidencing the Shares in the name of Purchaser to be placed in escrow as
provided in Section 11 to secure payment of Purchaser's obligation to the
Company under the promissory note and until expiration or termination of the
Company's Repurchase Option and Right of First Refusal described in Sections 8,
9 and 10.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to the Company that:
3.1 Agrees to Terms of the Plan. Purchaser has received a copy
of the Plan and the Stock Option Agreement, has read and understands the terms
of the Plan, the Stock Option Agreement and this Exercise Agreement, and agrees
to be bound by their terms and conditions. Purchaser acknowledges that there may
be adverse tax consequences upon exercise of the Option or disposition of the
Shares, and that Purchaser should consult a tax adviser prior to such exercise
or disposition.
3.2 Purchase for Own Account for Investment. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act. Purchaser has no present
intention of selling or otherwise disposing of all or any portion of the Shares
and no one other than Purchaser has any beneficial ownership of any of the
Shares.
3.3 Access to Information. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
3.4 Understanding of Risks. Purchaser is fully aware of: (i)
the highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on transferability of the Shares (e.g., that Purchaser may not be
able to sell or dispose of the Shares or use them as collateral for loans); (iv)
the qualifications and backgrounds of the management of the Company; and (v) the
tax consequences of investment in the Shares. Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.
3.5 No General Solicitation. At no time was Purchaser
presented with or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general advertising or solicitation in
connection with the offer, sale and purchase of the Shares.
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4. COMPLIANCE WITH SECURITIES LAWS.
4.1 Compliance with U.S. Federal Securities Laws. Purchaser
understands and acknowledges that the Shares have not been registered with the
SEC under the Securities Act and that, notwithstanding any other provision of
the Stock Option Agreement to the contrary, the exercise of any rights to
purchase any Shares is expressly conditioned upon compliance with the Securities
Act and all applicable state securities laws. Purchaser agrees to cooperate with
the Company to ensure compliance with such laws. The Shares are being issued
under the Securities Act pursuant to the exemption provided by SEC Rule 701.
4.2 Compliance with California Securities Laws. The Plan, The
stock option agreement, and this Exercise Agreement are intended to comply with
Section 25102(o) of the California Corporations Code and any rules (INCLUDING
COMMISSIONER RULES, IF APPLICABLE) or regulations promulgated thereunder BY THE
CALIFORNIA DEPARTMENT OF CORPORATIONS (the "REGULATIONS"). Any provision of this
Exercise Agreement 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). THE SALE OF THE SECURITIES THAT ARE THE
SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE CALIFORNIA
COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION, IS SUBJECT
TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL
UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.
5. RESTRICTED SECURITIES.
5.1 No Transfer Unless Registered or Exempt. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company, exemptions
from such registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC
and that the Company is under no obligation to do so with respect to the Shares.
Purchaser has also been advised that exemptions from registration and
qualification may not be available or may not permit Purchaser to transfer all
or any of the Shares in the amounts or at the times proposed by Purchaser.
5.2 SEC Rule 144. In addition, Purchaser has been advised that
SEC Rule 144 promulgated under the Securities Act, which permits certain limited
sales of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of one
(1) year, and in certain cases two (2) years, after they have been purchased and
paid for (within the meaning of Rule 144). Purchaser understands that Rule 144
may indefinitely restrict transfer of the Shares so long as Purchaser remains an
"affiliate" of the Company or if "current public information" about the Company
(as defined in Rule 144) is not publicly available.
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5.3 SEC Rule 701. The Shares are issued pursuant to SEC Rule
701 promulgated under the Securities Act and may become freely tradeable by
non-affiliates (under limited conditions regarding the method of sale) ninety
(90) days after the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the SEC, subject to the lengthier market standoff agreement contained in Section
7 of this Exercise Agreement or any other agreement entered into by Purchaser.
Affiliates must comply with the provisions (other than the holding period
requirements) of Rule 144.
6. RESTRICTIONS ON TRANSFERS.
6.1 Disposition of Shares. Purchaser hereby agrees that
Purchaser shall make no disposition of the Shares (other than as permitted by
this Exercise Agreement) unless and until:
(a) Purchaser shall have notified the Company of the
proposed disposition and provided a written summary of the terms and conditions
of the proposed disposition;
(b) Purchaser shall have complied with all
requirements of this Exercise Agreement applicable to the disposition of the
Shares;
(c) Purchaser shall have provided the Company with
written assurances, in form and substance satisfactory to counsel for the
Company, that (i) the proposed disposition does not require registration of the
Shares under the Securities Act or (ii) all appropriate actions necessary for
compliance with the registration requirements of the Securities Act or of any
exemption from registration available under the Securities Act (including Rule
144) have been taken; and
(d) Purchaser shall have provided the Company with
written assurances, in form and substance satisfactory to the Company, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Shares pursuant to the provisions of the
Regulations referred to in Section 4.2 hereof.
6.2 Restriction on Transfer. Purchaser shall not transfer,
assign, grant a lien or security interest in, pledge, hypothecate, encumber or
otherwise dispose of any of the Shares which are subject to the Company's
Repurchase Option or the Company's Right of First Refusal described below,
except as permitted by this Exercise Agreement.
6.3 Transferee Obligations. Each person (other than the
Company) to whom the Shares are transferred by means of one of the permitted
transfers specified in this Exercise Agreement must, as a condition precedent to
the validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Exercise Agreement and that the
transferred Shares are subject to: (i) both the Company's Repurchase Option and
the Company's Right of First Refusal granted hereunder and (ii) the market
stand-off provisions of Section 7 hereof, to the same extent such Shares would
be so subject if retained by the Purchaser.
7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the Company
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or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Shares without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180) days) after the
effective date of such registration requested by such managing underwriters and
subject to all restrictions as the Company or the underwriters may specify.
Purchaser further agrees to enter into any agreement reasonably required by the
underwriters to implement the foregoing.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company, or its
assignee, shall have the option to repurchase Purchaser's Unvested Shares (as
defined in Section 2.2 of the Stock Option Agreement) on the terms and
conditions set forth in this Section 8 (the "REPURCHASE OPTION") if Purchaser is
Terminated (as defined in the Plan) for any reason, or no reason, including
without limitation Purchaser's death, Disability (as defined in the Plan),
voluntary resignation or termination by the Company with or without Cause.
Notwithstanding the foregoing, the Company shall retain the Repurchase Option
for Unvested Shares only as to that number of Unvested Shares (whether or not
exercised) that exceeds the number of shares which remain unexercised.
8.1 Termination and Termination Date. In case of any dispute
as to whether Purchaser is Terminated, the Committee shall have discretion to
determine whether Purchaser has been Terminated and the effective date of such
Termination (the "TERMINATION DATE").
8.2 Exercise of Repurchase Option. At any time within ninety
(90) days after the Purchaser's Termination Date (or, in the case of securities
issued upon exercise of an Option after the Purchaser's Termination Date, within
ninety (90) days after the date of such exercise), the Company, or its assignee,
may elect to repurchase the Purchaser's Unvested Shares by giving Purchaser
written notice of exercise of the Repurchase Option.
8.3 Calculation of Repurchase Price for Unvested Shares. The
Company or its assignee shall have the option to repurchase from Purchaser (or
from Purchaser's personal representative as the case may be) the Unvested Shares
at the Purchaser's Exercise Price, proportionately adjusted for any stock split
or similar change in the capital structure of the Company as set forth in
Section 2.2 of the Plan (the "REPURCHASE PRICE").
8.4 Payment of Repurchase Price. The Repurchase Price shall be
payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness owed by
Purchaser to the Company or such assignee, or by any combination thereof. The
Repurchase Price shall be paid without interest within sixty (60) days after
exercise of the Repurchase Option.
8.5 Right of Termination Unaffected. Nothing in this Exercise
Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company (or any Parent or Subsidiary of the
Company) to terminate Purchaser's employment or other relationship with Company
(or the Parent or Subsidiary of the Company) at any time, for any reason or no
reason, with or without Cause.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or
otherwise transferred by Purchaser without the Company's prior written consent.
Before any Vested Shares held by Purchaser or any transferee of such Vested
Shares (either being sometimes
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referred to herein as the "HOLDER") may be sold or otherwise transferred by gift
(including without limitation any transfer by (i) an assignment of any Shares
for the benefit of creditors of the Holder, (ii) a transfer by operation of law,
(iii) an execution of judgment against the Shares or the acquisition of record
or beneficial ownership of Shares by a lender or creditor, (iv) a transfer by
will or under the laws of descent and distribution, (v) a transfer pursuant to
any decree of divorce, dissolution or separate maintenance, any property
settlement, any separation agreement or any other agreement with a spouse
(except for bona fide estate planning purposes) under which any Shares are
transferred or awarded to the spouse of the Holder or are required to be sold,
or (vi) a transfer resulting from the filing by the Holder of a petition for
relief or the filing of an involuntary petition against Holder, under the
bankruptcy laws of the United States or of any other nation (each instance
referred to hereafter as the "INVOLUNTARY TRANSFER")), the Company and/or its
assignee(s) shall have an assignable right of first refusal to purchase the
Vested Shares to be sold or transferred (THE "OFFERED SHARES") on the terms and
conditions set forth in this Section (the "RIGHT OF FIRST REFUSAL").
9.1 Notice of Proposed Transfer. In the event the Holder
proposes to transfer any Vested Shares, other than by an Involuntary Transfer,
the Holder of the Offered Shares shall deliver to the Company a written notice
(the "VOLUNTARY TRANSFER NOTICE") stating: (i) the Holder's bona fide intention
to sell or otherwise transfer the Offered Shares; (ii) the name of each proposed
bona fide purchaser or other transferee (the "PROPOSED TRANSFEREE"); (iii) the
number of Offered Shares to be transferred to each Proposed Transferee; (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Offered Shares (the "OFFERED PRICE"); and (v) that the Holder
acknowledges this Notice is an offer to sell the Offered Shares to the Company
and/or its assignee(s) pursuant to the Company's Right of First Refusal at the
Offered Price as provided for in this Exercise Agreement. In the event of any
Involuntary Transfer of any Vested Shares, the Holder shall deliver to the
Company a written notice (the "INVOLUNTARY TRANSFER NOTICE") stating: (i) the
number of Shares subject to the Involuntary Transfer, (ii) the manner,
circumstances and date of the Involuntary Transfer, and (iii) the name and
address of the Holder and transferee. If the Company subsequently requests
additional information concerning the Involuntary Transfer or transferee, Holder
agrees to promptly provide the requested information to the Company.
9.2 Exercise of Right of First Refusal. At any time within
thirty (30) days after the date of the Voluntary Transfer Notice or the
Involuntary Transfer Notice (either being sometimes referred to herein as the
"NOTICE"), the Company and/or its assignee(s) may, by giving written notice to
the Holder, elect to purchase all (or, with the consent of the Holder, less than
all) the Offered Shares proposed to be transferred to any one or more of the
Proposed Transferees named in the Notice, at the purchase price, determined as
specified below.
9.3 Purchase Price. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If no price or other
legal consideration is to be paid for the Shares, the transfer will be referred
to as a "DONATIVE TRANSFER". If the Offered Price includes consideration other
than cash, then the cash equivalent value of the non-cash consideration shall
conclusively be deemed to be the present Fair Market Value of such non-cash
consideration as conclusively determined in good faith by the Board of Directors
of the Company. In the case of a Donative Transfer or an Involuntary Transfer,
the Offered Price to be paid to the Holder by the Company or its assignee will
be the Fair Market Value on the proposed
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transfer date, as conclusively determined in good faith by the Board of
Directors of the Company.
9.4 Payment. Payment of the Offered Price will be payable, at
the option of the Company and/or its assignee(s) (as applicable), by check or by
cancellation of all or a portion of any outstanding indebtedness owed by the
Holder to the Company (or to such assignee, in the case of a purchase of Offered
Shares by such assignee) or by any combination thereof. The Offered Price will
be paid without interest within sixty (60) days after the Company's receipt of
the Notice, or, at the option of the Company and/or its assignee(s), in the
manner and at the time(s) set forth in the Notice.
9.5 Holder's Right to Transfer. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided (i) that
such sale or other transfer is consummated within one hundred twenty (120) days
after the date of the Notice, (ii) any such sale or other transfer is effected
in compliance with all applicable securities laws, and (iii) the Proposed
Transferee agrees in writing that the provisions of this Section will continue
to apply to the Offered Shares in the hands of such Proposed Transferee. If the
Offered Shares described in the Notice are not transferred to the Proposed
Transferee within such one hundred twenty (120) day period, then a new Notice
must be given to the Company pursuant to which the Company will again be offered
the Right of First Refusal before any Shares held by the Holder may be sold or
otherwise transferred.
9.6 Exempt Transfers. Notwithstanding anything to the contrary
in this Section, the following transfers of Vested Shares will be exempt from
the Right of First Refusal: (i) the transfer of any or all of the Vested Shares
during Purchaser's lifetime by gift or on Purchaser's death by will or intestacy
to Purchaser's "Immediate Family" (as defined below) or to a trust for the
benefit of Purchaser or Purchaser's Immediate Family, provided that each
transferee or other recipient agrees in a writing satisfactory to the Company
that the provisions of this Section will continue to apply to the transferred
Vested Shares in the hands of such transferee or other recipient; (ii) any
transfer of Vested Shares made pursuant to a statutory merger or statutory
consolidation of the Company with or into another corporation or corporations
(except that the Right of First Refusal and Repurchase Option will continue to
apply thereafter to such Vested Shares, in which case the surviving corporation
of such merger or consolidation shall succeed to the rights of the Company under
this Section unless the agreement of merger or consolidation expressly otherwise
provides); or (iii) any transfer of Vested Shares pursuant to the winding up and
dissolution of the Company. As used herein, the term "IMMEDIATE FAMILY" will
mean Purchaser's spouse, the lineal descendant or antecedent, father, mother,
brother or sister, child, adopted child, grandchild or adopted grandchild of the
Purchaser or the Purchaser's spouse, or the spouse of any child, adopted child,
grandchild or adopted grandchild of Purchaser or the Purchaser's spouse. or
Spousal Equivalent, as defined herein. As used herein, a person is deemed to be
a "Spousal Equivalent" provided the following circumstances are true: (i)
irrespective of whether or not the Participant and the Spousal Equivalent are
the same sex, they are the sole spousal equivalent of the other for the last
twelve (12) months, (ii) they intend to remain so indefinitely, (iii) neither
are married to anyone else, (iv) both are at least 18 years of age and mentally
competent to consent to contract, (v) they are not related by blood to a degree
of closeness that which would prohibit legal marriage in the state
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in which they legally reside, (vi) they are jointly responsible for each other's
common welfare and financial obligations, and (vii) they reside together in the
same residence for the last twelve (12) months and intend to do so indefinitely.
9.7 Termination of Right of First Refusal. The
Company's Right of First Refusal will terminate when the Company's securities
become publicly traded.
10. RIGHTS AS A SHAREHOLDER. Subject to the terms and conditions of this
Exercise Agreement, Purchaser will have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that Shares are
issued to Purchaser until such time as Purchaser disposes of the Shares or the
Company and/or its assignee(s) exercise(s) the Repurchase Option or Right of
First Refusal. Upon an exercise of the Repurchase Option or the Right of First
Refusal, Purchaser will have no further rights as a holder of the Shares so
purchased upon such exercise, other than the right to receive payment for the
Shares so purchased in accordance with the provisions of this Exercise
Agreement, and Purchaser will promptly surrender the stock certificate(s)
evidencing the Shares so purchased to the Company for transfer or cancellation.
11. ESCROW. As security for Purchaser's faithful performance of this
Exercise Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company (the "ESCROW HOLDER"), who is hereby appointed
to hold such certificate(s) and Stock Powers in escrow and to take all such
actions and to effectuate all such transfers and/or releases of such Shares as
are in accordance with the terms of this Exercise Agreement. Purchaser and the
Company agree that Escrow Holder will not be liable to any party to this
Exercise Agreement (or to any other party) for any actions or omissions unless
Escrow Holder is grossly negligent or intentionally fraudulent in carrying out
the duties of Escrow Holder under this Exercise Agreement. Escrow Holder may
rely upon any letter, notice or other document executed with any signature
purported to be genuine and may rely on the advice of counsel and obey any order
of any court with respect to the transactions contemplated by this Exercise
Agreement. The Shares will be released from escrow upon termination of both the
Repurchase Option and the Right of First Refusal.
12. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
12.1 Legends. Purchaser understands and agrees that the
Company will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that may
be required by state or U.S. Federal securities laws, the Company's Articles of
Incorporation or Bylaws, any other agreement between Purchaser and the Company
or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS
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SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON PUBLIC RESALE AND
TRANSFER, INCLUDING THE RIGHT OF REPURCHASE AND RIGHT
OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER AND/OR
ITS ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION
EXERCISE AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS INCLUDING
THE RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL
ARE BINDING ON TRANSFEREES OF THESE SHARES.
12.2 Stop-Transfer Instructions. Purchaser agrees that, to
ensure compliance with the restrictions imposed by this Exercise Agreement, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
12.3 Refusal to Transfer. The Company will not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Exercise Agreement or (ii) to
treat as owner of such Shares, or to accord the right to vote or pay dividends
to any purchaser or other transferee to whom such Shares have been so
transferred.
13. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION OF
THE SHARES. PURCHASER REPRESENTS: (i) THAT PURCHASER HAS CONSULTED WITH ANY TAX
ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND (ii) THAT PURCHASER IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF UNVESTED SHARES ARE SUBJECT TO REPURCHASE
BY THE COMPANY, PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH
PURCHASER'S OWN TAX ADVISER CONCERNING THE ADVISABILITY OF FILING AN 83(b)
ELECTION WITH THE INTERNAL REVENUE SERVICE WHICH MUST BE FILED WITHIN THIRTY
(30) DAYS OF THE PURCHASE OF SHARES TO BE EFFECTIVE. SET FORTH BELOW IS A BRIEF
SUMMARY AS OF THE DATE THE PLAN WAS ADOPTED BY THE BOARD OF SOME OF THE U.S.
FEDERAL AND CALIFORNIA TAX CONSEQUENCES OF EXERCISE OF THE OPTION AND
DISPOSITION OF THE SHARES. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER
10
<PAGE> 20
SHOULD CONSULT HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
13.1 Exercise of Incentive Stock Option. If the Option
qualifies as an ISO, there will be no regular U.S. Federal income tax liability
or California income tax liability upon
the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as a tax preference item for U.S. Federal alternative minimum tax
purposes and may subject Purchaser to the alternative minimum tax in the year of
exercise.
13.2 Exercise of Nonqualified Stock Option. If the Option does
not qualify as an ISO, there may be a regular U.S. Federal income tax liability
and a California income tax liability upon the exercise of the Option. Purchaser
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price. If Purchaser is or was
an employee of the Company, the Company may be required to withhold from
Purchaser's compensation or collect from Purchaser and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
13.3 Disposition of Shares. The following tax consequences may
apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are held
for more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two (2) years
after the Date of Grant, any gain realized on disposition of the Shares will be
treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are
held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an NQSO, any gain realized on disposition of
the Shares will be treated as long term capital gain.
(c) Withholding. The Company may be required to
withhold from the Purchaser's compensation or collect from the Purchaser and pay
to the applicable taxing authorities an amount equal to a percentage of this
compensation income.
13.4 Section 83(b) Election for Unvested Shares. With respect
to Unvested Shares, which are subject to the Repurchase Option, unless an
election is filed by the Purchaser with the Internal Revenue Service (and, if
necessary, the proper state taxing authorities), WITHIN 30 DAYS OF THE PURCHASE
of the Unvested Shares, electing pursuant to Section 83(b) of the Code (and
similar state tax provisions, if applicable) to be taxed currently on any
difference between the Exercise Price of the Unvested Shares and their Fair
Market Value on the date of purchase, there may be a recognition of taxable
income (including, where applicable, alternative minimum taxable income) to the
Purchaser, measured by the excess, if any, of the Fair Market Value of the
Unvested Shares at the time they cease to be Unvested Shares, over the Exercise
Price of the
11
<PAGE> 21
any stock exchange or automated quotation system on which the Company's Common
Stock may be listed or quoted at the time of such issuance or transfer.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Exercise Agreement, including its rights to purchase Shares under the
Repurchase Option and the Right of First Refusal. This Exercise Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this Exercise
Agreement will be binding upon Purchaser and Purchaser's heirs, executors,
administrators, legal representatives, successors and assigns.
16. GOVERNING LAW; SEVERABILITY. This Exercise Agreement shall be
governed by and construed in accordance with the internal laws of the State of
California as such laws are applied to agreements between California residents
entered into and to be performed entirely within California. If any provision of
this Exercise Agreement is determined by a court of law to be illegal or
unenforceable, then such provision will be enforced to the maximum extent
possible and the other provisions will remain fully effective and enforceable.
17. NOTICES. Any notice required to be given or delivered to the Company
shall be in writing and addressed to the Corporate Secretary of the Company at
its principal corporate offices. Any notice required to be given or delivered to
Purchaser shall be in writing and addressed to Purchaser at the address
indicated above or to such other address as Purchaser may designate in writing
from time to time to the Company. All notices shall be deemed effectively given
upon personal delivery, (i) three (3) days after deposit in the United States
mail by certified or registered mail (return receipt requested), (ii) one (1)
business day after its deposit with any return receipt express courier
(prepaid), or (iii) one (1) business day after transmission by rapifax or
telecopier.
18. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Agreement.
19. HEADINGS. The captions and headings of this Exercise Agreement are
included for ease of reference only and will be disregarded in interpreting or
construing this Exercise Agreement. All references herein to Sections will refer
to Sections of this Exercise Agreement.
20. ENTIRE AGREEMENT. The Plan, the Stock Option Agreement and this
Exercise Agreement, together with all Exhibits thereto, constitute the entire
agreement and understanding of the parties with respect to the subject matter of
this Exercise Agreement, and supersede all prior understandings and agreements,
whether oral or written, between the parties hereto with respect to the specific
subject matter hereof.
12
<PAGE> 22
Unvested Shares. A form of Election under Section 83(b) is attached
hereto as Exhibit 4 for reference.
14. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
the Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and U.S. Federal laws and regulations and
with all applicable requirements of
IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be
executed in triplicate by its duly authorized representative and Purchaser has
executed this Exercise Agreement in triplicate as of the Effective Date,
indicated above.
HANDSPRING, INC. PURCHASER
(FORMERLY JD TECHNOLOGY, INC.)
By: /s/ DONNA DUBINSKY /s/ EDWARD T. COLLIGAN
------------------------------ ---------------------------------
(Signature)
Donna Dubinsky Edward T. Colligan
- --------------------------------- --------------------------------
(Please print name) (Please print name)
President
- ---------------------------------
(Please print title)
[SIGNATURE PAGE TO HANDSPRING, INC. STOCK OPTION EXERCISE AGREEMENT]
13
<PAGE> 23
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: Copy of Purchaser's Check
Exhibit 4: Section 83(b) Election
Exhibit 5: Stock Transfer Agreement
<PAGE> 24
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
<PAGE> 25
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise
Agreement No. ________ dated as of _______________, _____, (the "AGREEMENT"),
the undersigned hereby sells, assigns and transfers unto
_______________________________, __________ shares of the Common Stock of
Handspring, Inc. (formerly JD Technology, Inc.), a California corporation (the
"COMPANY"), standing in the undersigned's name on the books of the Company
represented by Certificate No(s). ______ delivered herewith, and does hereby
irrevocably constitute and appoint the Secretary of the Company as the
undersigned's attorney-in-fact, with full power of substitution, to transfer
said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO.
Dated: ,
------------- ---------
PURCHASER
/s/ EDWARD T. COLLIGAN
------------------------------------
(Signature)
Edward T. Colligan
------------------------------------
(Please Print Name)
/s/ LISA A. COLLIGAN
------------------------------------
(Spouse's Signature, if any)
Lisa A. Colligan
------------------------------------
(Please Print Spouse's Name)
INSTRUCTIONS TO PURCHASER: Please do not fill in any blanks other than the
signature line. The purpose of this Stock Power and Assignment is to enable the
Company to acquire the shares pursuant to its "Repurchase Option" and/or "Right
of First Refusal" set forth in the Exercise Agreement without requiring
additional signatures on the part of the Purchaser or Purchaser's Spouse.
<PAGE> 26
EXHIBIT 2
SPOUSE CONSENT
<PAGE> 27
SPOUSE CONSENT
The undersigned spouse of Edward T. Colligan (the "PURCHASER") has
read, understands, and hereby approves the Stock Option Exercise Agreement
between Purchaser and the Company (the "AGREEMENT"). In consideration of the
Company's granting my spouse the right to purchase the Shares as set forth in
the Agreement, the undersigned hereby agrees to be irrevocably bound by the
Agreement and further agrees that any community property interest I may have in
the Shares shall similarly be bound by the Agreement. The undersigned hereby
appoints Purchaser as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
Date: May 11, 1999
-------------------------------------
Lisa A. Colligan
-----------------------------------
Print Name of Purchaser's Spouse
/s/ LISA A. COLLIGAN
-----------------------------------
Signature of Purchaser's Spouse
Address:
-----------------------------------
-----------------------------------
-----------------------------------
[ ] Please check this box if you do not have a spouse.
<PAGE> 28
EXHIBIT 3
COPY OF PURCHASER'S CHECK
[Check in the Amount of $46,000.00 Payable to Handspring, Inc.]
<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%
</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 March 27, 2000 relating to the financial statements and financial
statement schedules 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
-------------------------------
PricewaterhouseCoopers LLP
San Jose, California
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> OTHER 6-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-2000
<PERIOD-START> JUL-29-1998 JUL-01-1999
<PERIOD-END> JUN-30-1999 JAN-01-2000
<CASH> 7,533 18,799
<SECURITIES> 6,234 2,983
<RECEIVABLES> 0 2,485
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 48 24,746
<PP&E> 1,104 4,747
<DEPRECIATION> 70 667
<TOTAL-ASSETS> 15,063 29,570
<CURRENT-LIABILITIES> 1,289 14,608
<BONDS> 0 0
17,792 27,962
0 0
<COMMON> 519 1,150
<OTHER-SE> (4,717) (14,246)
<TOTAL-LIABILITY-AND-EQUITY> 15,063 29,570
<SALES> 0 15,790
<TOTAL-REVENUES> 0 15,790
<CGS> 0 10,822
<TOTAL-COSTS> 0 10,822
<OTHER-EXPENSES> 8,835 25,946
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (8,357) (20,487)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (8,357) (20,487)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (8,357) (20,487)
<EPS-BASIC> (1.06) (1.10)
<EPS-DILUTED> (1.06) (1.10)
</TABLE>
