<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as Permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to (S)240.14a-11(c) or
(S)240.14a-12
PALM, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
[PALM LOGO]
PALM, INC.
5470 GREAT AMERICA PARKWAY
SANTA CLARA, CALIFORNIA 95052
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 2, 2000
------------------------
To The Stockholders:
Our Annual Meeting will be held on Thursday, November 2, 2000, at 9:30 a.m.
at The Regency Building, 1270 Sutter Street, San Francisco, CA 94109 for the
following purposes:
1. To elect two (2) Class I directors to hold office for a three-year term.
2. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent public accountants for the fiscal year ending June 1, 2001.
3. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on September 11, 2000 are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof. For ten days prior to the meeting, a complete list of the stockholders
entitled to vote at the meeting will be available for examination by any
stockholder for any purpose germane to the meeting during ordinary business
hours at the offices of the Company at 5470 Great America Parkway, Santa Clara,
California 95052.
By Order of the Board of Directors,
Stephen Yu
Secretary
September 27, 2000
Santa Clara, California
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD
IN THE ACCOMPANYING POST-PAID ENVELOPE TO ASSURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY CHOOSE TO VOTE IN
PERSON EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY CARD.
<PAGE>
PALM, INC.
5470 GREAT AMERICA PARKWAY
SANTA CLARA, CALIFORNIA 95052
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of
Palm, Inc., a Delaware corporation (the "Company" or "Palm"), for use at the
Annual Meeting of Stockholders to be held on Thursday, November 2, 2000, at
9:30 a.m. local time or any adjournment thereof, for the purposes set forth in
the accompanying Notice of Annual Meeting. The meeting will be held at The
Regency Building, 1270 Sutter Street, San Francisco, CA 94109. The Company's
telephone number is (408) 326-9000. The date of this Proxy Statement is
September 27, 2000, the approximate date on which this Proxy Statement and the
accompanying form of proxy were first sent or given to stockholders.
GENERAL INFORMATION
CERTAIN FINANCIAL INFORMATION. Please take note that the Company's
financial statements and related information are included with its 2000 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
August 16, 2000, which is enclosed with this Proxy Statement.
VOTING SECURITIES. Only stockholders of record as of the close of business
on September 11, 2000 (the "Record Date") will be entitled to vote at the
meeting and any adjournment thereof. As of the Record Date, there were
565,344,617 shares of Common Stock of the Company issued and outstanding.
Stockholders may vote in person or by proxy. Each holder of shares of Common
Stock is entitled to one (1) vote on the proposals presented in this Proxy
Statement for each share of stock held. There is no cumulative voting in the
election of directors.
SOLICITATION OF PROXIES. The cost of soliciting proxies will be borne by
the Company. In addition to soliciting stockholders by mail and through its
regular employees, the Company will request banks and brokers, and other
custodians, nominees and fiduciaries to solicit their customers who have stock
of the Company registered in the names of such persons and will reimburse them
for their reasonable, out-of-pocket costs. The Company may use the services of
its officers, directors and others to solicit proxies, personally or by
telephone, facsimile or electronic mail, without additional compensation.
VOTING OF PROXIES. All valid proxies received prior to the meeting will be
voted. All shares represented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with the specification so made. If
no choice is indicated on the proxy, the shares will be voted FOR all nominees,
FOR all other proposals described herein and as the proxy holders may determine
in their discretion with respect to any other matters that properly come before
the meeting. See "Transaction of Other Business." A stockholder giving a proxy
has the power to revoke his or her proxy, at any time prior to the time it is
voted, by delivering to the Secretary of the Company a written instrument
revoking the proxy or a duly executed proxy with a later date, or by attending
the meeting and voting in person.
QUORUM. The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares of
Common Stock issued and outstanding on the Record Date. Shares that are voted
"FOR," "AGAINST" or "WITHHELD FROM" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
ABSTENTIONS. While there is no definitive statutory or case law authority
in Delaware as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the presence
or absence of a quorum for the transaction of business and (ii) the total number
of Votes Cast with respect to a proposal (other than the election of directors).
In
<PAGE>
the absence of controlling precedent to the contrary, the Company intends to
treat abstentions in this manner. Accordingly, abstentions will have the same
effect as a vote against the proposal.
BROKER NON-VOTES. Broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but will not be counted for purposes of determining the number of Votes Cast
with respect to the particular proposal on which the broker has expressly not
voted. Accordingly, broker non-votes will not affect the outcome of the voting
on a proposal that requires a majority of the Votes Cast (such as the approval
of a plan amendment).
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following
table sets forth certain information, as of July 28, 2000, with respect to the
beneficial ownership of the Company's Common Stock by (i) each director and
director-nominee of the Company; (ii) the Chief Executive Officer and each other
executive officer of the Company included in the Summary Compensation Table
(collectively, the "Named Officers"); and (iii) all current executive officers
and directors of the Company as a group.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE OF COMMON STOCK
NAME BENEFICIAL OWNERSHIP(1) OUTSTANDING(2)
---- ----------------------- --------------
<S> <C> <C>
Eric A. Benhamou........................................... 959,395 *
Carl J. Yankowski.......................................... 62,499(3) *
Alan J. Kessler............................................ 307,662(4) *
Barry Cottle............................................... 18,750(5) *
Judy Bruner................................................ 45,507(6) *
Stephen Yu................................................. 12,361(7) *
James L. Barksdale (10).................................... 10,000(8) *
Gordon A. Campbell......................................... 10,000 *
Jean-Jacques Damlamian (11)................................ -- *
Michael Homer.............................................. 10,000 *
David C. Nagel............................................. 10,000(9) *
Susan G. Swenson........................................... 10,000 *
All current directors and executive officers as a group (11
persons) (12)............................................ 1,446,174 *
</TABLE>
------------------------
*Less than 1%.
(1) To the Company's knowledge, except as indicated in the footnotes to this
table, the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws where applicable.
(2) Based on 564,992,928 shares of the Company's Common Stock issued and
outstanding as of July 28, 2000.
(3) Includes 62,499 shares issuable upon the exercise of options exercisable
within 60 days of July 28, 2000.
(4) Includes 307,662 shares issuable upon the exercise of options exercisable
within 60 days of July 28, 2000. This amount reflects 282,663 shares
issuable upon the exercise of 3Com options that were converted to Palm
options on July 28, 2000.
(5) Includes 18,750 shares issuable upon the exercise of options exercisable
within 60 days of July 28, 2000.
2
<PAGE>
(6) Includes 37,141 shares issuable upon the exercise of options exercisable
within 60 days of July 28, 2000. This amount reflects 22,516 shares
issuable upon the exercise of 3Com options that were converted to Palm
options on July 28, 2000.
(7) Includes 12,361 shares issuable upon the exercise of options exercisable
within 60 days of July 28, 2000. This amount reflects 8,175 shares issuable
upon the exercise of 3Com options that were converted to Palm options on
July 28, 2000.
(8) This amount includes 5,000 shares held by Barksdale Investments, LLC.
Mr. Barksdale and his spouse together own 10% of Barksdale Investments,
LLC, and they are the sole managers of Barksdale Investments, LLC. In
addition, this amount includes 5,000 shares held by Pickwick Group, L.P.
Mr. Barksdale and his spouse together own a 10% partnership interest in
Pickwick Group, L.P., and they are the sole general partners of Pickwick
Group, L.P.
(9) These shares are held by Mr. Nagel and his spouse as trustees of the
Nagel/Schreiner Revocable Trust.
(10) Mr. Barksdale resigned from the Board of Directors on September 12, 2000.
(11) Mr. Damlamian was elected to the Board of Directors effective as of
September 13, 2000.
(12) Includes 438,413 shares subject to options that are exercisable within
60 days of July 28, 2000.
As of July 28, 2000, there were no persons known to the Company to be the
beneficial owners of more than 5% of the outstanding Common Stock of the
Company.
ELECTION OF DIRECTORS
The number of directors authorized by the Company's Bylaws is currently
fixed at 7. The Company's Bylaws provide that the directors shall be divided
into three classes, with the classes of directors serving for staggered
three-year terms. Class I currently has two members. A stockholder may not cast
votes for more than two nominees. The two Class I directors to be elected at the
2000 Annual Meeting are to be elected to hold office until the year 2003 Annual
Meeting and until their successors have been elected and qualified.
The Company's nominees for election at the Annual Meeting of Stockholders to
Class I of the Board of Directors are Messrs. Yankowski and Homer. If a nominee
declines to serve or becomes unavailable for any reason, (although the Board of
Directors knows of no reason to anticipate that this will occur), the proxies
may be voted for such substitute nominee as the Board of Directors may
designate.
VOTE REQUIRED
If a quorum is present and voting at the Annual Meeting, the two nominees
for Class I directors receiving the highest number of affirmative votes will be
elected as Class I directors. Votes withheld from any director are counted for
purposes of determining the presence or absence of a quorum, but have no other
legal effect under Delaware law.
3
<PAGE>
NOMINEES AND OTHER DIRECTORS
The following table sets forth the name and age of each nominee and each
director of the Company whose term of office continues after the Annual Meeting,
the principal occupation of each during the past five years and the period
during which each has served as a director of the Company. Each nominee is
currently serving as a director of the Company.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS FOR A TERM EXPIRING IN 2003
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION DURING PAST FIVE YEARS AGE SINCE
--------------------- ------------------------------------------------------------ -------- --------
<S> <C> <C> <C>
Carl J. Yankowski Mr. Yankowski has been our Chief Executive Officer and one 52 1999
of our directors since December 1999. From September 1998 to
December 1999, Mr. Yankowski was Executive Vice President of
Reebok International Ltd. and President and Chief Executive
Officer of the Reebok Division. From November 1993 to
January 1998, Mr. Yankowski was President and Chief
Operating Officer of Sony Electronics Inc., a subsidiary of
the Sony Corporation. Mr. Yankowski holds a Bachelor of
Science degree in electrical engineering from the
Massachusetts Institute of Technology as well as a Bachelor
of Science degree in management which he earned concurrently
from MIT's Sloan School of Management. Mr. Yankowski also
serves as a director of Safeguard Scientifics, Avidyne, Inc.
and VITTS Networks, and he is a member of the board of
advisors of Boston College Business School.
Michael Homer Mr. Homer has served as one of our directors since February 42 2000
2000. Mr. Homer is Senior Vice President at America Online.
Prior to Netscape's acquisition by America Online,
Mr. Homer held various positions at Netscape beginning in
October 1994, including Executive Vice President, Sales and
Marketing and General Manager of Netscape Netcenter. From
April 1994 to October 1994, Mr. Homer was a consultant. From
August 1993 to April 1994, Mr. Homer served as Vice
President, Engineering at EO Corporation, a hand-held
computer manufacturer, and from July 1991 to July 1993,
Mr. Homer was Vice President, Marketing of Go Corporation, a
pen-based software company. He had previously been Director
of Product Marketing of Apple, where he held various
technical and marketing positions from 1982 through 1991.
Mr. Homer holds a B.S. from the University of California,
Berkeley. Mr. Homer is also a director of TiVo, Inc.,
Charitable Way, Oscar Technologies and Eazel.
</TABLE>
4
<PAGE>
INCUMBENT CLASS II DIRECTORS SERVING FOR A TERM EXPIRING IN 2001
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION DURING PAST FIVE YEARS AGE SINCE
--------------------- ---------------------------------------------------------- -------- --------
<S> <C> <C> <C>
Gordon A. Campbell Mr. Campbell has served as one of our directors since 56 1999
September 1999. Mr. Campbell is the founder and, since
1993, has been President and Chairman of the Board of
Techfarm, Inc., a company formed to launch
technology-based start-up companies. Mr. Campbell was the
founder of CHIPS and Technologies, Inc., a company that
designs and distributes very large scale integrated
circuit products, and served as its President and Chief
Executive Officer from December 1984 until November 1993,
and as its Chairman of the Board from December 1984 until
November 1995. Mr. Campbell also serves as a director of
Bell Microproducts, Inc., Chairman of the Board of 3D/Fx
Interactive Inc. and Chairman of the Board of Cobalt
Networks, Inc.
Susan G. Swenson Ms. Swenson has served as one of our directors since 52 1999
October 1999. Ms. Swenson has been President and Chief
Operating Officer of Leap Wireless International, Inc. and
Chief Executive Officer of Cricket Communications, Inc.
since July 1999. Ms. Swenson has also been a director of
Leap since July 1999. From March 1994 to July 1999,
Ms. Swenson served as President and Chief Executive
Officer for Cellular One, a joint venture between
AirTouch/Vodafone and AT&T Wireless. Ms. Swenson is also
a director of Wells Fargo Bank, General Magic and Working
Assets.
</TABLE>
INCUMBENT CLASS III DIRECTORS SERVING FOR A TERM EXPIRING IN 2002
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION DURING PAST FIVE YEARS AGE SINCE
----------------------- ------------------------------------------------------ -------- --------
<S> <C> <C> <C>
Eric A. Benhamou Mr. Benhamou has served as one of our directors since 45 1999
September 1999. Mr. Benhamou has been the Chief
Executive Officer of 3Com Corporation since September
1990 and also served as 3Com's President from April
1990 through August 1998. Mr. Benhamou has been 3Com's
Chairman of the Board of Directors since July 1994.
Mr. Benhamou served as 3Com's Chief Operating Officer
from April 1990 through September 1990. From October
1987 through April 1990, Mr. Benhamou held various
general management positions within 3Com.
Mr. Benhamou also serves as Chairman of the Board of
Cypress Semiconductor, Inc. and as a director of
Legato Systems, Inc. Mr. Benhamou is a member of
President Clinton's Information Technology Advisory
Council.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION DURING PAST FIVE YEARS AGE SINCE
----------------------- ------------------------------------------------------ -------- --------
<S> <C> <C> <C>
Jean-Jacques Damlamian Mr. Damlamian has served as one of our directors since 58 2000
September 2000. Mr. Damlamian has been Group Executive
Vice President in charge of the Development Branch of
France Telecom since January 1996. From April 1991
until January 1996, Mr. Damlamian was Senior Vice
President, Marketing and Sales for France Telecom. Mr.
Damlamian served as Group Vice President,
International and Industrial Affairs for France
Telecom from November 1989 until April 1991, and was
its Vice President, Mobile Services from May 1988
until November 1989. Prior to May 1988, Mr. Damlamian
worked in various divisions of France Telecom. Mr.
Damlamian graduated from the Ecole Polytechnique and
Ecole Nationale Superieure des Telecommunications, and
he is a member of the Institute of Electrical and
Electronics Engineers (IEEE). Mr. Damlamian is a
recipient of the French Legion d'Honneur and the Ordre
National du Merite. Mr. Damlamian also serves as a
director of Bull S.A.
David C. Nagel Dr. Nagel has served as one of our directors since 55 2000
February 2000. Dr. Nagel has been President of AT&T
Labs since April 1996 and AT&T Chief Technology
Officer since August 1997. Dr. Nagel has also served
as Chief Technology Officer of Concert, a joint
venture between AT&T and British Telecom, since June
1999. Prior to joining AT&T, Dr. Nagel was a Senior
Vice President of Apple Computer, where he led the
worldwide research and development group responsible
for Macintosh hardware, Mac OS software, imaging and
other peripheral products. Before joining Apple's
Advanced Technology Group in 1988, Dr. Nagel was a
research scientist and head of human factor research
at NASA's Ames Research Center. Dr. Nagel holds
undergraduate and graduate degrees in engineering and
a doctorate in experimental psychology, all from the
University of California, Los Angeles. Dr. Nagel also
serves as a director of Liberate Technologies, Respond
TV and ArcoSoft, Inc.
</TABLE>
BOARD AND COMMITTEE MEETINGS
During the fiscal year ending June 2, 2000 (the "Last Fiscal Year"), the
Board held ten (10) meetings. The Board has an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or a
committee performing the functions of a nominating committee.
6
<PAGE>
During the Last Fiscal Year, the Company's Audit Committee met one
(1) time. Its current members are Gordon A. Campbell, David C. Nagel and Susan
G. Swenson. The Audit Committee reviews the Company's auditing, accounting,
financial reporting and internal control functions and makes recommendations to
the Board for the selection of independent accountants. In addition, the Audit
Committee monitors the quality of the Company's accounting principles and
financial reporting, the Company's compliance with foreign trade regulations as
well as the independence of and the non-audit services provided by the Company's
independent accountants. In discharging its duties, the Audit Committee: reviews
and approves the scope of the annual audit and the independent accountant's
fees; obtains a formal written statement from the independent accountants
regarding any relationships between the independent accountants and the Company
that might bear on the accountants' independence and, if necessary, recommends
to the Board any actions necessary to satisfy the accountants' independence;
meets independently with the Company's internal auditing staff, the Company's
independent accountants and the Company's senior management; and reviews the
general scope of the Company's accounting, financial reporting, annual audit and
internal audit program, matters relating to internal control systems as well as
the results of the annual audit.
During the Last Fiscal Year, the Compensation Committee met three
(3) times. Its current members are Gordon A. Campbell and Susan G. Swenson. The
Compensation Committee determines, approves and reports to the Board on all
elements of compensation for the Company's executive officers including
salaries, bonuses, stock options, benefits and other compensation arrangements.
For additional information concerning the Compensation Committee, see "EXECUTIVE
COMPENSATION AND OTHER MATTERS--Compensation Committee Interlocks and Insider
Participation" and "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION."
During the Last Fiscal Year, Dr. Nagel attended fewer than seventy-five
percent (75%) of the aggregate of the total number of meetings of the Board held
during the period he served as a director and the total number of meetings held
by the Audit Committee during the period that he served on the Audit Committee.
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
(i) the Chief Executive Officer of the Company, (ii) the four other most highly
compensated executive officers of the Company
7
<PAGE>
(based on salary plus bonus for the Last Fiscal Year) who were serving as such
at the end of the Last Fiscal Year, and (iii) a former Chief Executive Officer:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION
COMPENSATION AWARDS
------------------- -----------------------------
SECURITIES ALL OTHER
FISCAL SALARY BONUS RESTRICTED STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (1) AWARD(S) ($)(2) OPTIONS(#) ($)(3)
--------------------------- -------- -------- -------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Eric A. Benhamou, Chairman of the
Board and former Chief Executive
Officer (4)......................... 2000 750,000 275,316 -- -- 10,267
1999 750,000 -- -- 273,425(5) 12,092
Carl J. Yankowski, Chief Executive
Officer and Director (6)............ 2000 281,819 430,010 664,063 2,000,000 130,246
Alan J. Kessler, Chief Operating
Officer, Platform and Products...... 2000 400,000 258,890 -- 813,157 954
1999 400,000 -- -- 83,500(5) 10,466
Barry Cottle, Chief Operating Officer,
Content and Access (7).............. 2000 99,167 86,771 332,031 600,000 156,626
Judy Bruner, Senior Vice President and
Chief Financial Officer............. 2000 247,917 151,522 -- 467,000 2,857
1999 204,967 16,504 -- 35,000(5) 5,480
Stephen Yu, Vice President, General
Counsel and Secretary............... 2000 162,695 67,316 -- 133,500 4,689
1999 130,242 7,946 -- 10,950(5) 3,564
</TABLE>
------------------------
(1) The amounts listed in this column include amounts earned and/or paid under
3Com's company-wide profit-sharing plan for fiscal year 1999 and the first
three quarters of fiscal year 2000. 3Com distributed amounts paid under
3Com's plan at six-month intervals to all employees worldwide, other than
those who are paid commissions, including executive officers, with the
individual payments pro rata based on salary level. In addition, the amounts
listed in this column include amounts earned and/or paid under Palm's
company-wide bonus plan for the last quarter of fiscal year 2000, except
with respect to Mr. Benhamou as noted in footnote (4) below.
(2) Amounts represent the dollar value of the 25,000 shares of restricted stock
granted to Mr. Yankowski and the dollar value of the 12,500 shares of
restricted stock granted to Mr. Cottle based upon the closing price of
$38.00 per share of Palm's Common Stock on the date of grant. The total
number of shares of restricted stock granted during the fiscal year was
592,375. The dollar value of these grants at the closing price per share on
June 2, 2000 of $26.5625 was $15,734,960.94. The grants of restricted stock
to Messrs. Yankowski and Cottle vest and become exercisable in equal annual
increments over a four year period.
(3) All other compensation generally includes group term life insurance
premiums, payments made to reimburse a spouse's travel costs to 3Com events,
401(k) matching payments and payment of relocation expenses. With respect to
Mr. Yankowski, all other compensation includes $123,923 in payments of
relocation expenses, $5,000 in 401(k) matching payments and $1,323 in group
term life insurance premiums. With respect to Mr. Cottle, all other
compensation includes $156,450 in relocation expenses and $176 in group term
life insurance premiums.
8
<PAGE>
(4) Mr. Benhamou ceased serving as Palm's Chief Executive Officer in
December 1999. All of Mr. Benhamou's compensation for fiscal year 2000
reflects the compensation he received from 3Com as Chief Executive Officer
of 3Com.
(5) This amount represents options to purchase shares of 3Com common stock.
(6) Mr. Yankowski became the Chief Executive Officer of Palm on December 12,
1999.
(7) Mr. Cottle became an employee of Palm on February 18, 2000.
GRANTS OF STOCK OPTIONS
The following table provides information concerning grants of options to
purchase the Company's Common Stock made during the Last Fiscal Year to the
Named Officers:
OPTION GRANTS IN FISCAL YEAR 2000
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------------ POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE PRICE OPTION TERM (4)
OPTIONS FISCAL YEAR PER SHARE EXPIRATION ---------------------------
NAME GRANTED(#)(1) 2000(2) ($/SH)(3) DATE 5%($) 10%($)
---- ------------- ------------ -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Eric A. Benhamou.............. -- * -- -- -- --
Carl J. Yankowski............. 1,500,000 11.5 38.00 03/01/10 35,846,994 90,843,320
500,000(5) 3.8 25.31 05/11/10 7,959,448 20,170,803
Alan J. Kessler............... 600,000 4.6 38.00 03/01/10 14,338,798 36,337,328
13,157 * 38.00 03/01/10 314,426 796,817
200,000(5) 1.5 25.31 05/11/10 3,183,779 8,068,321
Barry Cottle.................. 450,000 3.4 38.00 03/01/10 10,754,098 27,252,996
150,000(5) 1.2 25.31 05/11/10 2,387,834 6,051,241
Judy Bruner................... 350,000 2.7 38.00 03/01/10 8,364,299 21,196,775
117,000(5) * 25.31 05/11/10 1,862,511 4,719,968
Stephen Yu.................... 100,000 * 38.00 03/01/10 2,389,800 6,056,221
33,500(5) * 25.31 05/11/10 533,283 1,351,444
</TABLE>
------------------------
* Less than 1%
(1) All of the above options are subject to the terms of the Company's 1999
Stock Plan (the "1999 Plan") and are exercisable only as they vest. The
options granted to each executive officer vest and become exercisable in
equal annual increments over a four (4) year period provided the optionee
continues to be employed by the Company.
(2) Based on a total of options to purchase 13,074,561 shares granted to all
Palm employees in fiscal 2000.
(3) All options were granted at an exercise price equal to the fair market value
of Palm's Common Stock on the date of grant.
(4) Potential realizable values are net of exercise price, but before deduction
of taxes associated with exercise. These amounts represent certain assumed
rates of appreciation only, based on the Securities and Exchange Commission
rules, and do not represent the Company's estimate of future
9
<PAGE>
stock prices. No gain to an optionee is possible without an increase in
stock price, which will benefit all stockholders commensurately. A zero
percent gain in stock price will result in zero dollars for the optionee.
Actual realizable values, if any, on stock option exercises are dependent on
the future performance of the Common Stock, overall market conditions and
the option holders' continued employment through the vesting period.
(5) This grant represents half of a special stock option grant to such employee.
Such special stock option grants were granted in two installments: one half
of the option grant was made on May 11, 2000 at the closing price of
$25.3125 per share and the other half of the option grant was made on
July 11, 2000 at the closing price of $29.4375 per share. The grants of
options made pursuant to these special stock option grants will vest and be
exercisable in equal monthly increments over a four (4) year period.
EXERCISES OF STOCK OPTIONS
The following table provides the specified information concerning option
exercises during the Last Fiscal Year and the exercisable and unexercisable
options held as of June 2, 2000, by the Named Officers:
AGGREGATED OPTION EXERCISES IN FISCAL
YEAR 2000 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 6/2/00(#) AT 6/2/00(1)($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric A. Benhamou................. -- -- -- -- -- --
Carl J. Yankowski................ -- -- -- 2,000,000 -- 625,000
Alan J. Kessler(2)............... -- -- -- 813,157 -- 250,000
Barry Cottle..................... -- -- -- 600,000 -- 187,500
Judy Bruner(2)................... -- -- -- 467,000 -- 146,250
Stephen Yu(2).................... -- -- -- 133,500 -- 41,875
</TABLE>
------------------------
(1) Based on a fair market value of $26.5625 per share as of June 2, 2000, the
closing sale price of the Company's Common Stock on that date as reported by
the NASDAQ National Market System.
(2) Alan J. Kessler, Judy Bruner and Stephen Yu also received options to
purchase Palm's Common Stock upon the conversion of their 3Com options to
Palm options, which occurred on July 28, 2000. For additional information
concerning the Palm options that these individuals received upon the
conversion of their 3Com options, see the footnotes to the table in the
section entitled "GENERAL INFORMATION--Stock Ownership of Certain Beneficial
Owners and Management."
EMPLOYMENT, SEVERANCE AND CHANGE-OF-CONTROL ARRANGEMENTS
The Company's 1999 Stock Plan provides that in the event of the Company's
merger with or into another corporation or a sale of substantially all of the
Company's assets, the successor corporation will assume or substitute an
equivalent award for each option or stock purchase right. If following such an
assumption or substitution, the holder of an option or stock purchase right is
terminated without cause within 12 months following a change of control, then
the vesting and exercisability of 50% of the then unvested shares subject to his
or her option or stock purchase right shall accelerate. If the outstanding
options or stock purchase rights are not assumed or substituted for in
connection with a merger or sale of assets, the administrator will provide
notice to the optionee that he or she has the right to exercise the option or
stock purchase right as to all of the shares subject to the option or stock
purchase right, including shares which would not otherwise be exercisable, for a
period of 15 days from the date of the notice. The option or stock purchase
right will terminate upon the expiration of the 15-day period.
10
<PAGE>
Under the Company's 1999 Employee Stock Purchase Plan, in the event of the
Company's merger with or into another corporation or the sale of all or
substantially all of the Company's assets, a successor corporation may assume or
substitute for each outstanding option. If the successor corporation refuses to
assume or substitute for the outstanding options, the offering periods then in
progress will be shortened, and a new exercise date will be set prior to the
merger or sale of assets.
The Company's 1999 Director Option Plan, as amended (the "Director Plan"),
provides that in the event of the Company's merger with or into another
corporation in which the Company's stockholders before such transaction do not
continue to hold at least 50% of the successor or resulting entity, a sale of
substantially all of the Company's assets and other transactions set forth in
the Director Plan, the exercisability of each option granted under the Director
Plan shall accelerate as to all of the shares subject to the option. The option
will terminate following the change of control transaction.
COMPENSATION OF DIRECTORS
Members of the Board who are not employees of the Company received an annual
retainer (which has been paid quarterly since September 1999) during the Last
Fiscal Year as follows: members of the Board who are on the Audit and/or
Compensation Committee receive $25,000 each; members of the Board who are not on
either Committee receive $20,000 each; plus reimbursement of travel expenses for
travel by members of the Board who reside outside of the local area.
Outside directors receive options to purchase Common Stock pursuant to the
Director Plan. The Director Plan provides for the initial automatic grant of an
option to purchase 40,000 shares of the Company's Common Stock to each director
of the Company who is not an employee of the Company ("Outside Director"). In
addition, each Outside Director is automatically granted an option to purchase
15,000 shares of the Company's Common Stock on the date of each annual meeting
if such Outside Director is an Outside Director on the annual meeting date, is
expected to continue in service as an Outside Director after the annual meeting
date and has served as an Outside Director for at least six months preceding the
annual meeting date. All options have a term of ten years and an exercise price
equal to the fair market value of the Company's Common Stock on the date of
grant. Each option becomes exercisable as to 33% of the shares subject to the
option on each anniversary of the date of grant, provided in each case the
Outside Director remains a director on those dates. During the Last Fiscal Year,
options were granted under the Director Plan for the following number of shares
and at the exercise prices shown: James L. Barksdale: 40,000 shares at a per
share exercise price of $38.00; Gordon A. Campbell: 40,000 shares at a per share
exercise price of $38.00; Michael Homer: 40,000 shares at a per share exercise
price of $38.00; David C. Nagel: 40,000 shares at a per share exercise price of
$38.00; Susan G. Swenson: 40,000 shares at a per share exercise price of $38.00.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the Last Fiscal Year, James L. Barksdale, Gordon A. Campbell and
Susan G. Swenson served as members of the Compensation Committee of the
Company's Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers, directors and persons who
beneficially own more than 10% of the Company's Common Stock to file initial
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission ("SEC"). Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by such
persons.
Based solely on the Company's review of such forms furnished to the Company
and written representations from certain reporting persons, the Company believes
that all filing requirements
11
<PAGE>
applicable to the Company's executive officers, directors and more than 10%
Stockholders were complied with during the Last Fiscal Year.
RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH 3COM CORPORATION
Through February 25, 2000, the date of legal separation from 3Com, Palm's
costs and expenses included allocations from 3Com for centralized legal,
accounting, treasury, real estate, information technology, distribution,
customer service, sales, marketing, engineering, and other 3Com corporate
services and infrastructure costs. These allocations were determined on bases
that 3Com and Palm considered to be reasonable reflections of the utilization of
services provided or the benefit received by Palm. The allocation methods
include relative revenues, headcount or square footage. Allocated costs included
in the consolidated statements of operations were as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------
JUNE 2, MAY 28, MAY 31,
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Cost of revenues.......................................... $10,443 $ 9,238 $3,694
Sales and marketing....................................... 20,541 16,625 7,023
Research and development.................................. 6,125 3,437 845
General and administrative................................ 14,550 14,085 5,212
Other (income) expense, net............................... (632) 218 25
</TABLE>
Amounts paid to 3Com under transitional service agreements during the fourth
quarter of fiscal 2000 were recorded in the consolidated financial statements as
follows (in thousands):
<TABLE>
<S> <C>
Cost of revenues............................................ $2,435
Sales and marketing......................................... 3,093
Research and development.................................... 2,708
General and administrative.................................. 3,276
</TABLE>
Historically, Palm has outsourced all of its product manufacturing to 3Com
and other third parties. Products manufactured by 3Com for Palm have been
recorded in the consolidated financial statements at 3Com's actual manufacturing
cost.
For purposes of governing certain of the ongoing relationships between Palm
and 3Com at and after the separation date and to provide for an orderly
transition, Palm and 3Com have entered into various agreements. A brief
description of each of the agreements follows.
MASTER SEPARATION AND DISTRIBUTION AGREEMENT
The Master Separation and Distribution Agreement contains the key provisions
relating to the separation, initial public offering and the distribution. The
agreement lists the documents and items that the parties were required to be
delivered in order to have accomplished the transfer of assets and liabilities
from 3Com to Palm, effective on the separation date. The agreement also contains
conditions that were required to have occurred prior to the initial public
offering and must occur prior to the distribution. The parties also entered into
both short-term and long-term covenants, including covenants to enter into
transitional services agreements, exchange information, engage in certain
auditing practices and resolve disputes in particular ways.
12
<PAGE>
GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT
The General Assignment and Assumption Agreement identifies the assets that
3Com transferred to Palm and the liabilities that Palm assumed from 3Com in the
separation. In general, the assets that were transferred and the liabilities
that were assumed were included on the consolidated balance sheet as of May 28,
1999, after adjustments for certain assets and liabilities that were retained by
3Com, such as most of Palm's accounts receivable and accounts payable, and for
activity that occurred up to the separation date.
INTELLECTUAL PROPERTY AGREEMENTS
The Master Technology Ownership and License Agreement, the Master Patent
Ownership and License Agreement, the Master Trademark Ownership and License
Agreement and the Master Confidential Disclosure Agreement together are referred
to as the Intellectual Property Agreements. Under the Intellectual Property
Agreements, 3Com will confirm that Palm owns or will transfer to Palm its rights
in specified patents, patent applications, invention disclosures, specified
trademarks and other intellectual property related to Palm's current business
and research and development efforts. Neither 3Com nor Palm will sue the other
for claims of infringement related to existing patents. 3Com will grant a
license to Palm under certain patents owned by 3Com, which were jointly
developed with Palm. Palm has committed to license its operating system to 3Com
pursuant to a separate agreement that the two parties have negotiated with
pricing and other terms more favorable than it would agree to in customary
transactions with third parties. Both 3Com and Palm have agreed not to disclose
confidential information of the other party except in specific circumstances.
EMPLOYEE MATTERS AGREEMENT
The Employee Matters Agreement outlines how 3Com and Palm plan to allocate
assets, liabilities and responsibilities relating to current and former
employees of Palm and their participation in the benefits plans, including stock
plans, that 3Com currently sponsors and maintains. The agreement also contains
provisions describing some of Palm's employee benefit and employee stock plans.
All eligible Palm employees will continue to participate in the 3Com
benefits plans on comparable terms and conditions to those for 3Com employees
until the distribution date or until Palm establishes benefit plans for its
employees, or elects not to establish comparable plans if it is not legally or
financially practical. Palm intends to establish its own benefit program no
later than the time of the distribution.
Once Palm establishes its own benefits plans, it may modify or terminate
each plan in accordance with the terms of that plan and its policies. No Palm
benefit plan will provide benefits that overlap benefits under the corresponding
3Com benefit plan at the time of the distribution. Each Palm benefit plan will
provide that all service, compensation and other benefit determinations that, as
of the distribution, were recognized under the corresponding 3Com benefits plan
will be taken into account under that Palm benefit plan.
Following the date of 3Com's distribution of its Palm common stock to its
stockholders, Palm will be under no obligation to maintain these plans in the
form in which they were established or at all. The transfer to Palm of employees
at certain of 3Com's international operations, and of certain employee benefit
plans, may not take place until Palm receives consents or approvals or has
satisfied other applicable requirements.
TAX SHARING AGREEMENT
The Tax Sharing Agreement allocates 3Com's and Palm's responsibilities for
certain tax matters. The agreement requires Palm to pay 3Com for the incremental
tax costs of Palm's inclusion in
13
<PAGE>
consolidated, combined or unitary tax returns with affiliated corporations. In
determining these incremental costs, the agreement takes into account not only
the group's incremental tax payments to the Internal Revenue Service or other
taxing authorities, but also the incremental use of tax losses of affiliates to
offset Palm's taxable income and the incremental use of tax credits of
affiliates to offset the tax on Palm's income. The agreement also provides for
compensation or reimbursement as appropriate to reflect redeterminations of
Palm's tax liability for periods during which Palm joined in filing
consolidated, combined or unitary tax returns.
The Tax Sharing Agreement also requires Palm to indemnify 3Com for certain
taxes and similar obligations, including (a) sales taxes on the sale of products
purchased by 3Com from Palm before the distribution, (b) customs duties or
harbor maintenance fees on products exported or imported by 3Com on behalf of
Palm, (c) the additional taxes that would result if an acquisition of a
controlling interest in Palm's stock after the distribution causes the
distribution not to qualify for tax-free treatment to 3Com, and (d) any taxes
resulting from transactions undertaken in preparation for the distribution.
Palm's indemnity obligations include any interest and penalties on taxes,
duties or fees for which Palm must indemnify 3Com.
Each member of a consolidated group for U.S. federal income tax purposes is
jointly and severally liable for the group's federal income tax liability.
Accordingly, Palm could be required to pay a deficiency in the group's federal
income tax liability for a period during which Palm was a member of the group
even if the Tax Sharing Agreement allocates that liability to 3Com or another
member.
The agreement also assigns responsibilities for certain administrative
matters such as the filing of returns, payment of taxes due, retention of
records, and the conduct of audits, examinations or similar proceedings. 3Com is
responsible for filing all tax returns for all periods before the distribution
and paying any taxes shown as due on those returns. Palm must provide 3Com with
sufficient information about its activities to enable 3Com to file these
returns. Palm also must pay its share of the tax liability to 3Com within
30 days after 3Com files the return. Palm and 3Com must retain tax returns and
related materials for periods beginning before the distribution and make these
materials available to each other upon request. In general, 3Com will be
entitled to control the contest of any claim by a taxing authority arising from
the audit of a return for any period before the distribution, unless the return
covers only Palm's activities.
MASTER TRANSITIONAL SERVICES AGREEMENT
The Master Transitional Services Agreement governs the provision of
information technology services by 3Com and Palm to each other, on an interim
basis, for one year from the date of separation, unless extended for specific
services or otherwise indicated in the agreement. The services include data
processing and telecommunications services, such as voice telecommunications and
data transmission, and information technology support services, for functions
including accounting, financial management, tax, payroll, stockholder and public
relations, legal, procurement and other administrative functions. Specified
charges for such services are generally intended to allow the providing company
to recover the direct and indirect costs of providing the services, plus 5% for
one year, and plus 10% for an extension of the agreements beyond one year. The
Master Transitional Services Agreement also will cover the provision of certain
additional transitional services identified from time to time after the
separation date that were inadvertently or unintentionally omitted from the
specified services, or that are essential to effectuate an orderly transition
under the separation agreement, so long as the provision of such services would
not significantly disrupt 3Com's operations or significantly increase the scope
of its responsibility under the agreement.
In addition, the Master Transitional Services Agreement will provide for the
replication of some computer systems, including hardware, software, data storage
or maintenance and support components. Generally, the party needing the
replicated system will bear the costs and expenses of replication.
14
<PAGE>
Generally, the party purchasing new hardware or licensing new software will bear
the costs and expenses of purchasing the new hardware or obtaining the new
software licenses.
REAL ESTATE MATTERS AGREEMENT
The Real Estate Matters Agreement addresses real estate matters relating to
the 3Com leased and owned properties that 3Com will transfer to or share with
Palm. The agreement describes the manner in which 3Com will transfer to or share
with Palm various leased and owned properties. The Real Estate Matters Agreement
provides that Palm will be required to accept the transfer of all sites
allocated to Palm, even if a casualty has damaged a site before the separation
date. The Real Estate Matters Agreement also provides that all reasonable costs
required to effect the transfers, including landlord consent fees and landlord
attorneys' fees will be paid by 3Com. No casualty, as contemplated in the Real
Estate Matters Agreement, took place at any site allocated to Palm prior to or
as of the separation date.
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
Effective as of the separation date, subject to specified expectations, Palm
and 3Com each released the other from any liabilities arising from events
occurring on or before the separation date, including events occurring in
connection with the activities to implement the separation, the initial public
offering and the distribution. The agreement also contains provisions governing
indemnification. In general, Palm and 3Com have indemnified the other from all
liabilities arising from their respective businesses or contracts, as well as
liabilities arising from a breach of the separation agreement or any ancillary
agreement. In addition, 3Com and Palm have indemnified the other against
liability for specified environmental conditions. Palm will reimburse 3Com for
the cost of any insurance coverage from the separation date to the distribution
date.
LOANS TO RELATED PARTIES
Palm currently plans to enter into a loan agreement with Mr. Cottle in the
amount of $300,000. Pursuant to the terms of the loan agreement, as presently
contemplated, twenty-five percent (25%) of the principal amount of the loan will
be forgiven each year over a four year period, which shall begin on the date of
the loan agreement. If Mr. Cottle terminates his employment with Palm prior to
the fourth anniversary of the date of the loan agreement, the remaining balance
of the loan at the time of his termination will become due and payable to Palm
within sixty (60) days of his termination date.
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The goals of the Company's compensation program are to: (i) enable the
Company to attract, retain and motivate the most qualified talent who contribute
to the long-term success of the Company; (ii) align compensation with business
objectives and performance; and (iii) align incentives for executive officers
with the interests of stockholders in maximizing stockholder value. The Company
emphasizes performance-based compensation that is competitive with the
marketplace, and the importance of clearly communicating performance objectives.
Prior to the separation of the Company from 3Com, the Company followed the
compensation practices established by 3Com for all 3Com employees. The Company
intends to annually review its compensation practices by comparing them to
surveys of relevant competitors and set objective compensation parameters based
on this review. Compensation policies also reflect the competition for executive
talent and the unique challenges and opportunities facing the Company in the
handheld computing and Internet content and access markets.
The Company's compensation program for all employees includes both cash- and
equity-based elements. Because it is directly linked to the interests of our
stockholders, equity-based compensation is emphasized in the design of the
Company's compensation programs. Consistent with competitive practices, the
Company also utilizes a cash bonus plan based on achievement of financial
performance objectives. In the Last Fiscal Year, the Company exceeded its annual
performance objectives and its quarterly targets.
CASH COMPENSATION
SALARY. The Company sets a base salary range for each executive officer,
including the Chief Executive Officer, by reviewing the base salary for
comparable positions of a broad peer group, including companies similar in size
and business that compete with the Company in the recruitment and retention of
senior personnel. Base pay is targeted at 50% of market on the basis of external
salary data from independent surveys. Individual salaries for each executive
officer are set relative to this target based on sustained individual
performance and contribution to the Company's results.
CASH BONUS. All employees of the Company are eligible to participate in the
Company's cash bonus plan, with executive employee bonuses determined by the
Compensation Committee of the Board of Directors. This plan provides cash awards
for meeting quarterly revenue and earnings per share goals, based on a matrix in
which 100% of target may be achieved only if the Company's results meet targets.
Targets for quarterly cash bonus awards for executive employees range from
thirty-five to one hundred percent of eligible base salary. Awards may range
from zero to 200% of target and can be earned quarterly, based on achievement of
stated performance objectives. An additional 50% of target can be earned at year
end based on achievement of stated annual performance objectives related to
consistency of financial results.
EQUITY-BASED COMPENSATION
Initial or "new-hire" options are granted to executive officers when they
first join the Company. In addition, restricted stock may be granted to certain
executive officers when they first join the Company. Thereafter, options and
restricted stock may be granted to each executive officer annually and from time
to time based on performance. To enhance retention, options and restricted stock
granted to executive officers are subject to vesting restrictions that generally
lapse over four years. The amount of actual options granted depends on the
individual's level of responsibility and a review of stock option grants of
positions at a broad peer group. Options granted by the Company at the
then-current fair market value become valuable and exercisable only if the
executive officer continues to serve the Company and the price of the Company's
stock subsequently increases.
16
<PAGE>
In designing executive compensation for fiscal year 2001, the Company
retained outside consultants to perform a comprehensive assessment of
compensation for its Chief Executive Officer and other executive officers. The
services rendered by the consultant to the Compensation Committee included
surveying competitors' practices, assessing the mix of pay relative to
competitive practices, evaluating the linkage between pay and performance, and
recommending compensation strategies.
The Committee has considered the potential impact of Section 162(m) (the
"Section") of the Internal Revenue Code adopted under the Federal Revenue
Reconciliation Act of 1993. The Section disallows a tax deduction for any
publicly-held corporation for individual compensation exceeding $1 million in
any taxable year for any of the named executive officers, other than
compensation that is performance-based. Since the targeted cash compensation of
the majority of the Named Officers is below the $1 million threshold and the
Company believes that any options granted under the 1999 Stock Plan will meet
the requirement of being performance-based under the transition provisions
provided in the regulations under the Section, the Committee concluded that the
Section should not materially reduce the tax deductions available to the Company
and that no changes to the Company's compensation program were needed in this
regard. However, the Committee may from time to time approve compensation that
is not deductible under the Section.
CEO COMPENSATION
The Chief Executive Officer's salary and stock option grants follow the
policies set forth above. Mr. Yankowski's base annual salary for fiscal year
2000 of $600,000 reflects his position, duties and responsibilities. In
addition, Mr. Yankowski received a cash bonus of $430,010 during fiscal year
2000 pursuant to the bonus plan in effect for all employees as a result of the
Company's achievement of certain revenue and earnings goals. Mr. Yankowski's
stock option and restricted stock award grants for fiscal 2000 reflect his
position, duties and responsibilities.
THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Gordon A. Campbell
Susan G. Swenson
17
<PAGE>
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the cumulative total return on
Palm's Common Stock with the cumulative total return of the S&P 500 Index and
the Chase H&Q Technology Index for the period commencing on March 2, 2000, the
date of the initial public offering of Palm's Common Stock, and ending on
June 2, 2000, Palm's fiscal year end.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
<S> <C> <C>
March 2, 2000(1) June 2, 2000
PALM INC 100.00 69.90
S & P 500 100.00 104.29(2)
CHASE H & Q TECHNOLOGY 100.00 82.82
</TABLE>
DATA POINTS FOR PERFORMANCE GRAPH
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------
MARCH 2, 2000(1) JUNE 2, 2000
---------------- ------------
<S> <C> <C>
Palm........................................................ 100.00 69.90
S&P 500 Index............................................... 100.00 104.29(2)
Chase H&Q Technology Index.................................. 100.00 82.82
</TABLE>
------------------------
(1) The initial measurement point for the performance graph assumes a $100.00
investment in Palm's Common Stock and in the Chase H&Q Technology Index on
March 2, 2000 and in the S&P 500 Index on February 29, 2000. In addition,
the cumulative total returns assume reinvestment of any dividends.
(2) The cumulative total return information for the S&P 500 Index is only
available at the end of each month, and, therefore, no data point is
available for June 2, 2000. Accordingly, the data point on the graph for the
S&P 500 Index on June 2, 2000 reflects the cumulative total return as of
May 31, 2000.
18
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Deloitte & Touche LLP as the independent public
accountants of the Company for the fiscal year ending June 1, 2001. Deloitte &
Touche LLP has acted in such capacity since its appointment for fiscal year
2000. A representative of Deloitte & Touche LLP will be present at the Annual
Meeting, will be given the opportunity to make a statement, if he or she so
desires, and will be available to respond to appropriate questions.
In the event ratification by the stockholders of the appointment of
Deloitte & Touche LLP as the Company's independent public accountants is not
obtained, the Board will reconsider such appointment.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast is required for
approval of this proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 1, 2001.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders that are intended for inclusion in the Company's
proxy statement relating to the 2001 Annual Meeting of the Stockholders of the
Company must be received by the Company at its offices at 5470 Great America
Parkway, Santa Clara, California 95052, not later than May 30, 2001 and must
satisfy the conditions established by the Securities and Exchange Commission for
stockholder proposals in order to be included in the Company's proxy statement
for that meeting. Stockholder proposals that are not intended to be included in
the Company's proxy materials for such meeting but that are intended to be
presented by the stockholder from the floor are subject to the advance notice
procedures described below under "TRANSACTION OF OTHER BUSINESS."
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business that the Board of
Directors intends to present or knows that others will present at the meeting is
as set forth above. If any other matter or matters are properly brought before
the meeting, or any adjournment thereof, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on such matters in
accordance with their best judgment.
Any stockholder may present a matter from the floor for consideration at a
meeting so long as certain procedures are followed. Under the Company's Bylaws,
in order for a matter to be deemed properly presented by a stockholder, timely
notice must be delivered to, or mailed and received by, the Company not later
than 90 days prior to the next Annual Meeting (under the assumption that the
next Annual Meeting will occur on the same calendar day as the day of the most
recent Annual Meeting). The stockholder's notice must set forth, as to each
proposed matter, the following: (a) a brief description of the business desired
to be brought before the meeting and reasons for conducting such business at the
meeting; (b) the name and address, as they appear on the Company's books, of the
stockholder proposing such business; (c) the class and number of shares of the
Company
19
<PAGE>
that are beneficially owned by the stockholder; and (d) any material interest of
the stockholder in such business. The presiding officer of the meeting may
refuse to acknowledge any matter not made in compliance with the foregoing
procedure.
By Order of the Board of Directors,
Stephen Yu
SECRETARY
September 27, 2000
20
<PAGE>
(1991-PS-00)
<PAGE>
PALM, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Carl J. Yankowski, Judy Bruner and
Stephen Yu, and each of them, as proxyholders and attorneys-in-fact of the
undersigned, with full power of substitution, to vote all shares of stock that
the undersigned is entitled to vote at the Annual Meeting of Stockholders of
Palm, Inc., to be held at The Regency Building, 1270 Sutter Street, San
Francisco, CA 94109 on Thursday, November 2, 2000 at 9:30 a.m., local time, and
at any continuation or adjournment thereof, with all the powers that the
undersigned would have if personally present at the meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement, dated September 27, 2000, a copy of the
Company's 2000 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on August 16, 2000 and a copy of the Company's 2000
Annual Report to Stockholders. The undersigned hereby expressly revokes any
and all proxies heretofore given or executed by the undersigned with respect
to the shares of stock represented by this Proxy and, by filing this Proxy
with the Secretary of the Company, gives notice of such revocation.
WHERE NO CONTRARY CHOICE IS INDICATED BY THE STOCKHOLDER, THIS PROXY,
WHEN RETURNED, WILL BE VOTED FOR EACH NOMINEE SET FORTH BELOW, FOR THE
RATIFICATION OF ACCOUNTANTS AND WITH DISCRETIONARY AUTHORITY UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THIS PROXY MAY BE REVOKED AT
ANY TIME PRIOR TO THE TIME IT IS VOTED.
<PAGE>
/X/ Please mark votes
as in this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
1. Election of two Class I Directors to serve a three-year term expiring in
2003.
Nominees:
Carl J. Yankowski
Michael Homer
FOR WITHHELD
all nominees from all
nominees
/ / / / / /
------------------------
For all nominees except those written on
the line above
2. To ratify the appointment of
Deloitte & Touche LLP as
independent public accountants
for the fiscal year ending June
1, 2001.
FOR AGAINST ABSTAIN
/ / / / / /
3. With discretionary authority, upon such
other matters as may properly come
before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
Please date and sign exactly as your name or
names appear herein. Corporate or partnership
proxies should be signed in full corporate or
partnership name by an authorized person.
Persons signing in a fiduciary capacity should
indicate their full title in such capacity.
PLEASE COMPLETE, DATE AND
SIGN THIS PROXY AND RETURN
PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature:___________________________ Date:_______
Signature:___________________________ Date:_______
