Exhibit 10
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT dated as of March 6, 2001 (the "Agreement")
is entered into by and between Extended Systems Incorporated, a Delaware
corporation (the "Company"), and Palm, Inc., a Delaware corporation
("Parent"). Capitalized terms used in this Agreement but not defined herein
shall have the meanings ascribed thereto in the Merger Agreement (as defined
below).
Recitals
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A. Concurrently with the execution and delivery of this Agreement, the
Company and Parent are entering into an Agreement and Plan of Reorganization
(the "Merger Agreement"), which provides that, among other things, upon the
terms and subject to the conditions thereof, the Company and Parent will enter
into a business combination transaction (the "Merger").
B. As a condition to Parent's willingness to enter into the Merger
Agreement, Parent has requested that the Company agree, and the Company has so
agreed, to grant to Parent an option to acquire shares of the Company's Common
Stock, $0.001 par value (the "Company Shares"), upon the terms and subject to
the conditions set forth herein.
Agreement
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option.
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The Company hereby grants to Parent an irrevocable option (the "Option")
to acquire up to a number of Company Shares equal to 19.9% of the issued and
outstanding shares of common stock of the Company as of the first date, if
any, upon which an Exercise Event (as defined in Section 2(a) below) shall
occur (the "Option Shares"), in the manner set forth below by paying cash at a
price of $22.00 per share (the "Exercise Price").
2. Exercise of Option; Maximum Proceeds.
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(a) For all purposes of this Agreement, an "Exercise Event" shall
mean the occurrence of either: (i) a Company Triggering Event (as such term is
defined in the Merger Agreement) or (ii) the time immediately prior to the
consummation of a tender or exchange offer for 25% or more of any class of the
Company's capital stock.
(b) Parent may deliver to the Company a written notice (an
"Exercise Notice") specifying that it wishes to exercise and close a purchase
of Option Shares at any time following the occurrence of an Exercise Event and
specifying the total number of Option Shares it wishes to acquire. Provided
that the conditions set forth in Section 3 to the Company's obligation to
issue the
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Option Shares to Parent hereunder have been satisfied or waived, and unless
such Exercise Notice is withdrawn by Parent, the closing of a purchase of
Option Shares (a "Closing") specified in such Exercise Notice shall take place
at the principal offices of the Company upon such date prior to the
termination of the Option as may be designated by Parent in writing.
Notwithstanding the foregoing, upon the commencement of a tender or exchange
offer for 25% or more of any class of the Company's capital stock (and/or
during any time which such a tender or exchange offer remains open), Parent
may deliver to the Company an Exercise Notice (a "Conditional Exercise
Notice") specifying that it wishes to exercise and close a purchase of Option
Shares immediately prior to the consummation of such tender or exchange offer.
Unless the Conditional Exercise Notice is withdrawn by Parent, the Closing of
the purchase of Options Shares specified in a Conditional Exercise Notice
shall take place immediately prior to the consummation of such tender or
exchange offer. In the event that such tender or exchange offer is not
consummated prior to termination of the Option, such Conditional Exercise
Notice shall be void and of no further force and effect.
(c) The Option shall terminate upon the earliest to occur of (i)
the Effective Time (as such term is defined in the Merger Agreement), (ii)
termination of the Merger Agreement pursuant to any of Section 7.1(a), 7.1(c),
7.1(f) or 7.1(g) thereof, (iii) termination of the Merger Agreement pursuant
to either of Section 7.1(b) or 7.1(d) thereof if prior thereto no Exercise
Event shall have occurred, or (ii) 12 months following the termination of the
Merger Agreement under any other circumstances; provided, however, that if the
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Option is exercisable but cannot be exercised by reason of any applicable
government order or because the waiting period related to the issuance of the
Option Shares under the HSR Act (as such term is defined in the Merger
Agreement) shall not have expired or been terminated, or because any other
condition to closing has not been satisfied, then the Option shall not
terminate until the tenth business day after such impediment to exercise shall
have been removed or shall have become final and not subject to appeal.
(d) If Parent receives proceeds in connection with any sales or
other dispositions of Option Shares or this Option (including by selling
Option Shares to the Company pursuant to Sections 7(a), 7(f) or 8(c) hereof),
which when aggregated with the amount of any dividends (or equivalent
distributions under Section 9(a) hereof) received by Parent declared on Option
Shares and the aggregate fees paid to Parent pursuant to Section 7.3 of the
Merger Agreement, exceed the sum of (x) $11,000,000 plus (y) the Exercise
Price multiplied by the number of Company Shares purchased by Parent pursuant
to the Option, then all proceeds to Parent in excess of such sum shall be
promptly remitted by Parent to the Company.
3. Conditions to Closing.
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The obligation of the Company to issue Option Shares to Parent hereunder
is subject to the conditions that (a) any waiting period under the HSR Act
applicable to the issuance of the Option Shares hereunder shall have expired
or been terminated; (b) all material consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any
Federal, state or local administrative agency or commission or other Federal
state or local governmental authority or instrumentality, if any, required in
connection with the issuance of the Option Shares hereunder shall have been
obtained or made, as the case may be; and (c) no preliminary or permanent
injunction or other order by any court of competent jurisdiction prohibiting
or otherwise restraining such issuance shall be in effect. It is understood
and agreed that at any time during which Parent shall be entitled
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to deliver to the Company an Exercise Notice, the parties will use their
respective reasonable efforts to satisfy all conditions to Closing, so that a
Closing may take place as promptly as practicable, subject to Section 2(b).
4. Closing.
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At any Closing, (a) the Company shall deliver to Parent a single
certificate in definitive form representing the number of Company Shares
designated by Parent in its Exercise Notice consistent with this Agreement,
such certificate to be registered in the name of Parent and to bear the legend
set forth in Section 10 hereof, against delivery of (b) payment by Parent to
the Company of the aggregate purchase price for the Company Shares so
designated and being purchased by wire transfer of immediately available funds
to the account or accounts designated in writing by the Company.
5. Representations and Warranties of the Company.
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The Company represents and warrants to Parent that (a) the Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder; (b) the
execution and delivery of this Agreement by the Company and consummation by
the Company of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or any of the transactions contemplated hereby; (c) this
Agreement has been duly executed and delivered by the Company and constitutes
a legal, valid and binding obligation of the Company and, assuming this
Agreement constitutes a legal, valid and binding obligation of Parent, is
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by principles of public policy, bankruptcy,
insolvency, reorganization, or other similar laws affecting the enforcement of
creditors' rights generally, and by rules of law governing specific
performance, injunctive relief and other equitable remedies; (d) except for
any filings, authorizations, approvals or orders required under the HSR Act
and any other applicable laws, the Company has taken all necessary corporate
and other action to authorize and reserve for issuance and to permit it to
issue upon exercise of the Option, and at all times from the date hereof until
the termination of the Option will have reserved for issuance, a sufficient
number of unissued Company Shares for Parent to exercise the Option in full
and will take all necessary corporate or other action to authorize and reserve
for issuance all additional Company Shares or other securities which may be
issuable pursuant to Section 9(a) hereof upon exercise of the Option, all of
which, upon their issuance and delivery in accordance with the terms of this
Agreement and payment therefor by Parent, will be validly issued, fully paid
and nonassessable; (e) upon delivery of the Company Shares and any other
securities to Parent upon exercise of the Option, Parent will acquire such
Company Shares or other securities free and clear of all material claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever, excluding those imposed by Parent and restrictions under
applicable securities laws; (f) the execution and delivery of this Agreement
by the Company do not, and the performance of this Agreement by the Company
will not, (i) violate the Certificate of Incorporation or Bylaws of the
Company, (ii) conflict with or violate any order applicable to the Company or
any of its subsidiaries or by which they or any of their material property is
bound or affected or (iii) result in any breach of
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or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a
material lien or encumbrance on any material property or assets of the Company
or any of its subsidiaries pursuant to, any material contract or agreement to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any of their material property is bound
or affected; and (g) the execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company will
not, require any consent, approval, authorization or permit of, or filing
with, or notification to, any Governmental Entity (as such term is defined in
the Merger Agreement) except pursuant to the HSR Act.
6. Representations and Warranties of Parent. Parent represents and
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warrants to the Company that:
(a) Parent is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all corporate
power and authority required to enter into this Agreement and to carry out its
obligations hereunder;
(b) the execution and delivery of this Agreement by Parent and
the consummation by Parent of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent, and
no other corporate proceedings on the part of Parent and no action of its
stockholders are necessary to authorize this Agreement or any of the
transactions contemplated hereby; this Agreement has been duly and validly
executed and delivered by Parent and, assuming the due authorization,
execution and delivery hereof by the Company and the receipt of all required
governmental approvals, constitutes the valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization, or other
similar laws affecting the enforcement of creditors' rights generally, and
except that the availability of equitable remedies, including specific
performance, may be subject to the discretion of any court before which any
proceeding may be brought;
(c) the execution and delivery of this Agreement by Parent does
not, and (except for the expiration or early termination of the waiting period
under the HSR Act) the performance of this Agreement by Parent and the
consummation of the transactions contemplated hereby will not, require any
consent, approval, order, authorization or permit of, filing with, or
notification to any governmental or regulatory authority; and
(d) Parent is an "accredited investor" as defined in Rule 501
under the Securities Act. Any Company Shares acquired by Parent upon exercise
of the Option will be acquired for Parent's own account, for investment
purposes only and will not be, and the Option is not being, acquired by Parent
with a view to the public distribution thereof, in violation of any applicable
provision of the Securities Act.
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7. Registration Rights.
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(a) Following the termination of the Merger Agreement, Parent
(sometimes referred to herein as the "Holder") may by written notice
(sometimes referred to herein as the "Registration Notice") to the Company
(the "Registrant") request the Registrant to register under the Securities Act
all or any part of the shares acquired by the Holder pursuant to this
Agreement (such shares requested to be registered the "Registrable
Securities") in order to permit the sale or other disposition of such shares
pursuant to a bona fide firm commitment underwritten public offering in which
the Holder and the underwriters shall effect as wide a distribution of such
Registrable Securities as is reasonably practicable and shall use reasonable
efforts to prevent any person or group from purchasing through such offering
shares representing more than 1% of the outstanding shares of Common Stock of
the Registrant on a fully diluted basis (a "Permitted Offering"); provided,
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however, that any such Registration Notice must relate to a number of shares
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equal to at least 5% of the outstanding shares of Common Stock of the
Registrant on a fully diluted basis and that any rights to require
registration hereunder shall terminate with respect to any shares that may be
sold pursuant to Rule 144(k) under the Securities Act or at such time as all
of the Registrable Securities may be sold in any three month period pursuant
to Rule 144 under the Securities Act. The Registration Notice shall include a
certificate executed by the Holder and its proposed managing underwriter,
which underwriter shall be an investment banking firm of internationally
recognized standing reasonably acceptable to the Company (the "Manager"),
stating that (i) the Holder and the Manager have a good faith intention to
commence a Permitted Offering and (ii) the Manager in good faith believes
that, based on the then prevailing market conditions, it will be able to sell
the Registrable Securities at a per share price equal to at least 80% of the
per share average of the closing sale prices of the Registrant's Common Stock
on the Nasdaq National Market for the twenty trading days immediately
preceding the date of the Registration Notice. The Registrant shall thereupon
have the option exercisable by written notice delivered to the Holder within
ten business days after the receipt of the Registration Notice, irrevocably to
agree to purchase all (but not less than all) of the Registrable Securities
for cash at a price (the "Option Price") equal to the product of (i) the
number of Registrable Securities so purchased and (ii) the per share average
of the closing sale prices of the Registrant's Common Stock on the Nasdaq
National Market for the twenty trading days immediately preceding the date of
the Registration Notice. Any such purchase of Registrable Securities by the
Registrant hereunder shall take place at a closing to be held at the principal
executive offices of the Registrant or its counsel at any reasonable date and
time designated by the Registrant in such notice within 10 business days after
delivery of such notice. The payment for the shares to be purchased shall be
made by delivery at the time of such closing of the Option Price in
immediately available funds.
(b) If the Registrant does not elect to exercise its option to
purchase pursuant to Section 7(a) with respect to all Registrable Securities,
the Registrant shall use all reasonable efforts to effect, as promptly as
practicable, the registration under the Securities Act of the Registrable
Securities requested to be registered in the Registration Notice; provided,
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however, that (i) the Holder shall not be entitled to more than an aggregate
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of two effective registration statements hereunder, provided however, that if
the Registrant withdraws a filed registration statement at the request of the
Holder (other than as the result of a material change in the Registrant's
business or the Holder's learning of new material information concerning the
Registrant), then such filing shall be deemed to have been an effective
registration for purposes of this clause (i), (ii) the Registrant will
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not be required to file any such registration statement during any period of
time (not to exceed 45 days after a Registration Notice in the case of clause
(A) below or 90 days after a Registration Notice in the case of clauses (B)
and (C) below) when (A) the Registrant is in possession of material non-public
information which it reasonably believes would be detrimental to be disclosed
at such time and such information would have to be disclosed if a registration
statement were filed at that time; (B) the Registrant is required under the
Securities Act to include audited financial statements for any period in such
registration statement and such financial statements are not yet available for
inclusion in such registration statement; or (C) the Registrant determines, in
its reasonable judgment, that such registration would interfere with any
financing, acquisition or other material transaction involving the Registrant
and (iii) the Registrant will not be required to maintain the effectiveness of
any such registration statement for a period greater than 60 days. If
consummation of the sale of any Registrable Securities pursuant to a
registration hereunder does not occur within 180 days after the filing with
the SEC of the initial registration statement therefor, the provisions of this
Section 7 shall again be applicable to any proposed registration. The
Registrant shall use all reasonable efforts to cause any Registrable
Securities registered pursuant to this Section 7 to be qualified for sale
under the securities or blue sky laws of such jurisdictions as the Holder may
reasonably request and shall continue such registration or qualification in
effect in such jurisdictions until the Holder has sold or otherwise disposed
of all of the securities subject to the registration statement, but not for a
period greater than 60 days; provided, however, that the Registrant shall not
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be required to qualify to do business in, or consent to general service of
process in, any jurisdiction by reason of this provision.
(c) The registration rights set forth in this Section 7 are
subject to the condition that the Holder shall provide the Registrant with
such information with respect to the Holder's Registrable Securities, the plan
for distribution thereof, and such other information with respect to the
Holder as, in the reasonable judgment of counsel for the Registrant, is
necessary to enable the Registrant to include in a registration statement all
material facts required to be disclosed with respect to a registration
thereunder, including the identity of the Holder and the Holder's plan of
distribution.
(d) A registration effected under this Section 7 shall be
effected at the Registrant's expense, except for underwriting discounts and
commissions and the fees and expenses of counsel to the Holder, and the
Registrant shall use all reasonable efforts to provide to the underwriters
such documentation (including certificates, opinions of counsel and "comfort"
letters from auditors) as are customary in connection with underwritten public
offerings and as such underwriters may reasonably require. In connection with
any registration, the Holder and the Registrant agree to enter into an
underwriting agreement reasonably acceptable to each such party, in form and
substance customary for transactions of this type with the underwriters
participating in such offering.
(e) Indemnification.
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(i) The Registrant will indemnify the Holder, each of its
directors and officers and each person who controls the Holder within the
meaning of Section 15 of the Securities Act, and each underwriter of the
Registrant's securities, with respect to any registration, qualification or
compliance which has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred
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in settlement of any litigation, commenced or threatened, arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Registrant of any rule or regulation promulgated under the Securities Act
applicable to the Registrant in connection with any such registration,
qualification or compliance, and the Registrant will reimburse the Holder and,
each of its directors and officers and each person who controls the Holder
within the meaning of Section 15 of the Securities Act, and each underwriter
for any legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability
or action, provided that the Registrant will not be liable in any such case to
the extent that any such claim, loss, damage, liability or expense arises out
of or is based on any untrue statement or omission or alleged untrue statement
or omission, made in reliance upon and in conformity with written information
furnished to the Registrant by the Holder or director or officer or
controlling person or underwriter seeking indemnification, provided, however,
that the indemnity agreement contained in this subsection 7(e)(i) 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
Registrant, which consent shall not be unreasonably withheld.
(ii) The Holder will indemnify the Registrant, each of its
directors and officers and each underwriter of the Registrant's securities
covered by such registration statement and each person who controls the
Registrant within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or
any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Holder of any rule or regulation
promulgated under the Securities Act applicable to the Holder in connection
with any such registration, qualification or compliance, and will reimburse
the Registrant, such directors, officers or control persons or underwriters
for any legal or any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability
or action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Registrant by the Holder expressly for use
therein, provided that in no event shall any indemnity under this Section 7(e)
exceed the gross proceeds of the offering received by the Holder and provided
further that the indemnity agreement contained in this subsection 7(e)(ii)
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.
(iii) Each party entitled to indemnification under this
Section 7(e) (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as
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to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the
defense of such claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's expense; provided,
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however, that the Indemnifying Party shall pay such expense if representation
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of the Indemnified Party by counsel retained by the Indemnifying Party would
be inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding, and provided further that the failure of any Indemnified Party to
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give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 7(e) unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such
action. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnifying Party shall be required to indemnify any
Indemnified Party with respect to any settlement entered into without such
Indemnifying Party's prior consent (which shall not be unreasonably withheld).
(f) Repurchase at the Election of the Company.
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(i) Except to the extent that Parent shall have previously
exercised its rights under Section 7(a), at the request of the Company during
the six-month period beginning one year following the Parent's exercise of the
Option, the Company may repurchase from Parent, and Parent shall sell to the
Company, all (but not less than all) the Company Shares acquired by Parent
pursuant hereto and with respect to which Parent has beneficial ownership at
the time of such repurchase, at a price equal to the sum of the greater of (I)
one hundred ten percent (110%) of the Current Market Price (as defined in
Section 7(f)(iii)) or (II) the sum of (X) the Exercise Price in respect of the
shares so acquired plus (Y) Parent's Pre-Tax Carrying Cost (as defined in
Section 7(f)(iii)), multiplied in either case by the number of shares so
acquired (the "Section 7(f) Repurchase Consideration"); provided, that the
Company's rights under this Section 7(f) shall be suspended (with any such
rights being extended accordingly) during any period when the exercise of such
rights would subject Parent to liability or disgorgement of profits pursuant
to Section 16(b) of the Exchange Act.
(ii) If the Company exercises its rights under this Section
7(f), the Company shall, within ten (10) business days pay the Section 7(f)
Repurchase Consideration in immediately available funds and Parent shall
surrender to the Company certificates evidencing the Company Shares purchased
hereunder with respect to which Parent then has beneficial ownership, and
Parent shall warrant that it has sole beneficial ownership of such shares and
that all such shares are then free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever.
(iii) As used in Section 7(f)(i), (A) "Current Market Price"
shall mean the average of the last sale prices per share of the Company Shares
on The Nasdaq National Market for the ten (10) trading days immediately
preceding the date of the Company's request for repurchase pursuant to this
Section 7(f), and (B) "Pre-Tax Carrying Cost" shall mean an amount equal to
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interest on the aggregate purchase price paid by Parent for the Company Shares
purchased pursuant to the Option from the date of purchase to the date of
repurchase at the rate of interest announced by Citibank, N.A. as its prime or
base lending or reference rate during such period, less any dividends received
on the shares so purchased, divided by the number of shares so purchased.
8. Restrictions on Transfer.
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(a) Restrictions on Transfer. Prior to the Expiration Date (as
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defined in Section 2(c)), Parent shall not, directly or indirectly, by
operation of law or otherwise, sell, assign, pledge, or otherwise dispose of
or transfer any shares of capital stock of the Company acquired pursuant to
this Agreement ("Restricted Shares") beneficially owned by Parent, other than
(i) pursuant to Section 7, or (ii) in accordance with Sections 8(b) and 8(c).
(b) Permitted Sales. Following the termination of the Merger
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Agreement, Parent shall be permitted to sell any Restricted Shares
beneficially owned by it if such sale is made pursuant to a tender or exchange
offer that has been approved or recommended, or otherwise determined to be
fair to and in the best interests of the holders of common stock of the
Company, by a majority of the members of the Board of Directors of the
Company.
(c) Right of First Refusal. At any time after the first
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occurrence of a Trigger Event and prior to the expiration of twenty-four (24)
months immediately following the first purchase of Option Shares pursuant to
this Agreement ("Expiration Date"), if Parent shall desire to sell, assign,
transfer or otherwise dispose of all or any of the Company Shares or other
securities acquired by it pursuant to this Agreement, it shall give the
Company written notice of the proposed transaction (a "Parent Offer Notice"),
identifying the proposed transferee, accompanied by a copy of an offer to
purchase such shares or other securities signed by such transferee (if Parent
shall have received such a written offer) and setting forth the terms of the
proposed transaction. A Parent Offer Notice shall be deemed an offer by Parent
to the Company, which may be accepted within five (5) business days of the
receipt of such Parent Offer Notice, on the same terms and conditions and at
the same price at which Parent is proposing to transfer such shares or other
securities to such transferee. The purchase of any such shares or other
securities by the Company shall be settled within five (5) business days of
the date of the acceptance of the offer and the purchase price shall be paid
to Parent in immediately available funds. In the event of the failure or
refusal of the Company to purchase all the shares or other securities covered
by a Parent Offer Notice, Parent may sell all, but not less than all, of such
shares or other securities to the proposed transferee at no less than the
price specified and on terms no more favorable to the transferee than those
set forth in the Parent Offer Notice; provided that the provisions of this
sentence shall not limit the rights Parent may otherwise have in the event the
Company has accepted the offer contained in the Parent Offer Notice and
wrongfully refuses to purchase the shares or other securities subject thereto.
The requirements of this Section 8(c) shall not apply to (i) any disposition
as a result of which the proposed transferee would own beneficially not more
than four percent (4%) of the outstanding voting power of the Company, (ii)
any disposition of the Company Shares or other securities by a person to whom
Parent has assigned its rights under the Option with the consent of the
Company, (iii) any sale by means of a public offering registered under the
Securities Act, or (iv) any transfer to a wholly-owned subsidiary of Parent
which agrees in writing to be bound by the terms hereof.
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9. Adjustment Upon Changes in Capitalization; Rights Plans.
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(a) In the event of any change in the Company Shares by reason of
stock dividends, stock splits, reverse stock splits, mergers (other than the
Merger), recapitalizations, combinations, exchanges of shares and the like,
the type and number of shares or securities subject to the Option and the
Exercise Price shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction so that Parent shall
receive, upon exercise of the Option, the number and class of shares or other
securities or property that Parent would have received in respect of the
Company Shares if the Option had been exercised immediately prior to such
event or the record date therefor, as applicable.
(b) Prior to such time as the Option is terminated, and at any
time after the Option is exercised (in whole or in part, if at all), the
Company shall not adopt (nor permit the adoption of) a stockholders rights
plan unless such rights plan exempts from the distribution or exercise of
rights thereunder this acquisition by Parent or any affiliate or transferee of
the beneficial owner of shares of the Company by virtue of the Option being
exercisable or having been exercised (or the Parent beneficially owning shares
issuable in respect of any Option Shares).
10. Restrictive Legends.
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Each certificate representing Option Shares issued to Parent hereunder
shall include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR
SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF MARCH 6,
2001, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER.
11. Listing and HSR Filing.
----------------------
The Company, upon the request of Parent, shall promptly file an
application to list the Company Shares to be acquired upon exercise of the
Option for quotation on the Nasdaq National Market and shall use its
reasonable efforts to obtain approval of such listing as soon as practicable.
Promptly after the date hereof, each of the parties hereto shall promptly file
with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice all required premerger notification and report
forms and other documents and exhibits required to be filed under the HSR Act
to permit the acquisition of the Company Shares subject to the Option at the
earliest possible date.
12. Binding Effect.
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Nothing
contained in this Agreement, express or
10
implied, is intended to confer upon any person other than the parties hereto
and their respective successors and permitted assigns any rights or remedies
of any nature whatsoever by reason of this Agreement. Certificates
representing shares sold in a registered public offering pursuant to Section 7
hereof shall not be required to bear the legend set forth in Section 10
hereof.
13. Specific Performance.
--------------------
The parties recognize and agree that if for any reason any of the
provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, immediate and irreparable harm or
injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that
any action shall be brought in equity to enforce the provisions of the
Agreement, neither party will allege, and each party hereby waives the
defense, that there is an adequate remedy at law.
14. Entire Agreement.
----------------
This Agreement and the Merger Agreement (including the appendices and
exhibits thereto) constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
15. Further Assurances.
------------------
Each party will execute and deliver all such further documents and
instruments and take all such further action as may be necessary in order to
consummate the transactions contemplated hereby.
16. Validity.
--------
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of the other provisions of
this Agreement, which shall remain in full force and effect. In the event any
Governmental Entity of competent jurisdiction holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith and shall execute and deliver an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision.
17. Notices.
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or sent via telecopy (receipt confirmed) to the parties at the following
addresses or telecopy numbers (or at such other address or telecopy numbers for
a party as shall be specified by like notice):
(a) if to the Company, to:
11
Extended Systems Incorporated
0000 X. Xxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (208) 322-7575 ext. 6056
Facsimile: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Rock
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to Parent, to:
Palm, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Ph.D.
Tel.: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Palm, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx Xxxxx, XX 00000
Attention: General Counsel
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxxxxx X. Xxxxxx
X. Xxxxxx
Xxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
12
18. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to agreements made and to be performed
entirely within such State.
19. Counterparts.
------------
This Agreement may be executed in two counterparts, each of which shall be
deemed to be an original, but both of which, taken together, shall constitute
one and the same instrument.
20. Expenses.
--------
Except as otherwise expressly provided herein or in the Merger Agreement,
all costs and expenses incurred in connection with the transactions contemplated
by this Agreement shall be paid by the party incurring such expenses.
21. Amendments; Waiver.
------------------
This Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a waiver, by an
instrument signed on behalf of the party waiving compliance.
22. Assignment.
----------
The Company may not sell, transfer, assign or otherwise dispose of any of
its rights or obligations under this Agreement or the Option created hereunder
to any other person, without the express written consent of Parent. The rights
and obligations hereunder shall inure to the benefit of and be binding upon
any successor of a party hereto.
13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
EXTENDED SYSTEMS INCORPORATED
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
PALM, INC.
By: /s/ Xxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxxxx
--------------------------------------
Title: Chief Executive Officer
-------------------------------------
***STOCK OPTION AGREEMENT***
