SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
SCHEDULE 13D/A
(Amendment No. 1)*
Under the Securities Exchange Act of 1934
Liberate Technologies
(Name of Issuer)
Common Stock, $0.01 par value
(Title of Class of Securities)
530129105
(CUSIP Number)
David Lockwood
Liberate Technologies
2 Circle Star Way
San Carlos, California 94020-6200
(650) 751-4545
(Name, address and telephone number of person
authorized to receive notices and communications)
March 14, 2003
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g),
check the following box [ ]
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7 for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 ("Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
(Page 1 of 23 Pages)
CUSIP No. 530129105 13D/A Page 2 of 23 pages
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(1) NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
David Lockwood
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS **
PF, SC
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States Citizen
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NUMBER OF (7) SOLE VOTING POWER
3,861,367.67
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
8,225,700
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
3,861,367.67
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
8,225,700
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
12,087,067.67
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(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
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(13) PERCENT OF CLASS REPRESENTED BY
AMOUNT IN ROW (11)
11.2%
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(14) TYPE OF REPORTING PERSON **
IN
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** SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 530129105 13D/A Page 3 of 23 Pages
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(1) NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
Lockwood Fund LLC
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
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(3) SEC USE ONLY
-----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
OO
-----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF (7) SOLE VOTING POWER
0
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
8,225,700
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
0
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
8,225,700
-----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
8,225,700
-----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
-----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
7.6%
-----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
OO
-----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 530129105 13D/A Page 4 of 23 Pages
-----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
Lockwood Capital Advisors LLC
-----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
-----------------------------------------------------------------------------
(3) SEC USE ONLY
-----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
OO
-----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
-----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
-----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
0
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
8,225,700
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
0
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
8,225,700
-----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
8,225,700
-----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
-----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.6%
-----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
OO
-----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 530129105 13D/A Page 5 of 23 Pages
Item 1. Security and Issuer.
This Amendment No. 1 amends the statement on Schedule 13D initially
filed on February 19, 2003 (the "Schedule 13D") relating to the shares of common
stock, par value $0.01 (the "Shares") of Liberate Technologies (the "Issuer"), a
Delaware corporation whose principal executive offices are located at 2 Circle
Star Way, San Carlos, California 94070-6200. Except as specifically provided
herein, this amendment does not modify any of the information previously
reported on Schedule 13D.
Item 2. Identity and Background.
Subsections (b) and (c) of Item 2 are amended and restated in
its entirety as set forth below.
(b) The address of the principal office of Lockwood Funds and
Lockwood Capital Advisors is c/o Schulte Roth & Zabel LLP, 919 Third Avenue, New
York, NY 10022, Attention: Stuart D. Freedman, Esq. The business address of Mr.
Lockwood is Liberate Technologies, 2 Circle Star Way, San Carlos, California
94070-6200.
(c) The principal business of Lockwood Fund is serving as a private
investment fund. The principal business of Lockwood Capital Advisors is serving
as the Managing Member of Lockwood Fund. Mr. Lockwood is a professional
investor in technology companies, the Managing Member of Lockwood Capital
Advisors, and as of March 14, 2003, Mr. Lockwood has become a Strategic
Consultant with the Issuer. He had also recently acted as Chief Executive
Officer and President of InterTrust Technologies Corporation, which was recently
sold to a joint venture between Phillips Electronics and Sony Corporation.
Item 3. Source and Amount of Funds and Other Consideration.
Item 3 is amended and restated in its entirety as set forth below.
The Shares owned directly by Mr. Lockwood were purchased with
personal funds and the options to purchase Shares owned directly by Mr. Lockwood
were granted by the Issuer without payment. The Shares owned directly or
indirectly by the other Reporting Persons were purchased with investable funds
of Lockwood Fund.
Item 4. Purpose of the Transaction.
Item 4 is amended and restated in its entirety as set forth below.
The Issuer granted to Mr. Lockwood, on March 14, 2003, options to
purchase 1,300,000 Shares of the Issuer. The Issuer and Mr. Lockwood have
agreed that Mr. Lockwood will act as a Strategic Consultant for the Issuer, with
the understanding that Mr. Lockwood will become the Chairman of the Board of
Directors and Chief Executive Officer of the Issuer following the Issuer's
submission of its delinquent public filings.
CUSIP No. 530129105 13D/A Page 6 of 23 Pages
The Reporting Persons acquired the previously-acquired Shares for
investment purposes based upon a determination that the shares presented an
opportunity to realize significant capital appreciation. Each of the Reporting
Persons may make further purchases of Shares from time to time and/or may
dispose of any or all of the Shares held by him or it at any time. Except as
noted above, none of the Reporting Persons has any plans or proposals which
relate to, or could result in, any of the matters referred to in paragraphs (a)
through (j), inclusive, of the instructions to Item 4 of the Schedule 13D.
However, each of the Reporting Persons intends to continuously review his or its
investment in the Issuer, and may, at any time and from time to time, review or
reconsider his or its position and formulate plans or proposals that relate to,
might result in, or have the purpose or effect of changing or influencing
control of the Issuer, or that relate to or would result in any of the other
events enumerated in the instructions to Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
Subsections (a) and (a)(i), (b)(i) and (c) of Item 5 are
amended as set forth below.
(a) Mr. Lockwood may be deemed to beneficially own (as that term is
defined in Rule 13d-3 under the Exchange Act), in the aggregate, 12,087,067.67
Shares representing approximately 11.2% of the Shares outstanding. Lockwood
Fund and Lockwood Capital Advisors each may be deemed to beneficially own, in
the aggregate, 8,225,700 Shares, representing 7.6% of the Shares outstanding.
The percentages used herein are calculated based upon 107,618,302 Shares
outstanding as of June 30, 2002, as reported in the Issuer's Form 10-K for the
period ending May 31, 2002, which is the most recently available annual or
quarterly filing with the Commission containing information about the number of
outstanding Shares of the Issuer. Pursuant to Rule 13d-3(d)(1)(i)(D), for the
sole purpose of calculating Mr. Lockwood's percentage of beneficial ownership of
the Shares, 54,166.67 Shares, that may be beneficially owned by Mr. Lockwood by
virtue of the fact that Mr. Lockwood will obtain the right to acquire beneficial
ownership of such Shares through the vesting of options within the next sixty
days, have been added to the total number of 107,618,302 outstanding Shares as
of June 30, 2002, as reported on the Form 10-K for the period ending May 31,
2002.
(i) Mr. Lockwood directly owns 3,807,201 Shares in an
Individual Retirement Account. Mr. Lockwood also may be deemed to beneficially
own 54,166.67 Shares by means of a grant of options to purchase 1,300,000 Shares
of the Issuer. Mr. Lockwood will obtain the right to acquire beneficial
ownership of 54,166.67 of the Shares through the vesting of such options within
the next sixty days. Mr. Lockwood additionally may be deemed to beneficially
own 8,225,700 Shares in his capacity as the Managing Member of Lockwood Capital
Advisors, which itself is the Managing Member of Lockwood Fund. Accordingly,
Mr. Lockwood may be deemed to own beneficially the Shares held by all of the
Reporting Persons.
(b) (i) Mr. Lockwood has sole voting and dispositive power over
3,861,367.67 Shares and shared voting and dispositive power over 8,225,700
Shares.
CUSIP No. 530129105 13D/A Page 7 of 23 Pages
(c) The trading dates, number of Shares purchased and the price per
Share for all transactions related to Shares by the Reporting Persons since the
filing of the Schedule 13D on February 19, 2003 are set forth in Schedule I
hereto and are incorporated herein by reference. All options were granted by
the Issuer without payment.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
Item 6 is amended and restated in its entirety as set forth below.
Pursuant to Rule 13d-1(k), the Reporting Persons have entered into
an agreement with respect to the joint filing of this statement and any
amendment or amendments hereto, which is attached hereto as Exhibit 1 and is
incorporated herein by reference.
Mr. Lockwood has entered into an agreement with the Issuer whereby
he has been granted, without payment, options to purchase 1,300,000 Shares. An
equal portion of the options will vest monthly over a 48 month period, subject
to accelerated vesting in certain circumstances.
Except as described herein, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the persons named in
Item 2 hereof and between such persons and any person with respect to any
securities of the Issuer, including but not limited to transfer or voting of any
other securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, divisions of profits or loss, or the
giving or withholding of proxies.
Item 7. Materials to be Filed as Exhibits.
There is filed herewith as Exhibit 1 a written agreement dated
February 19, 2003 relating to joint filing as required by Rule 13d-1(k).
There is filed herewith as Exhibit 2 a letter from the Chief
Executive Officer of the Issuer to Mr. Lockwood, dated March 14, 2003, relating
to the employment of Mr. Lockwood as a Strategic Consultant, with the
understanding that Mr. Lockwood will become the Chairman of the Board of
Directors and Chief Executive Officer of the Issuer following the Issuer's
submission of its delinquent public filings.
There is filed herewith as Exhibit 3 an Employee Retention
Agreement, dated March 14, 2003, between the Issuer and Mr.
Lockwood.
There is filed herewith as Exhibit 4 a Notice of Stock Option Grant,
dated March 14, 2003, relating to the options to purchase 1,300,000 Shares
granted by the Issuer to Mr. Lockwood.
There is filed herewith as Exhibit 5 Purchaser Representations
Regarding Acquisition of Options and Purchase of Shares, dated March 14, 2003,
relating to the options to purchase 1,300,000 Shares granted by the Issuer to
Mr. Lockwood.
CUSIP No. 530129105 13D/A Page 8 of 23 Pages
SIGNATURES
After reasonable inquiry and to the best of knowledge and belief of
the undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
DATED: March 14, 2003
/s/ David Lockwood
------------------------------
David Lockwood
LOCKWOOD FUND LLC
By: LOCKWOOD CAPITAL ADVISORS LLC, its
Managing Member
By: /s/ David Lockwood
--------------------------
David Lockwood, as
Managing Member
LOCKWOOD CAPITAL ADVISORS LLC
By: /s/ David Lockwood
-------------------------
David Lockwood, as
Managing Member
CUSIP No. 530129105 13D/A Page 9 of 23 Pages
EXHIBIT 1
JOINT FILING AGREEMENT
PURSUANT TO RULE 13D-1(k)
David Lockwood, Lockwood Fund LLC and Lockwood Capital Advisors LLC hereby agree
that this Schedule 13D filed herewith and any amendments thereto relating to the
holding of shares of Common Stock, $0.01 par value of Liberate Technologies is
filed jointly on behalf of such persons.
DATED: February 19, 2003
/s/ David Lockwood
------------------------------
David Lockwood
LOCKWOOD FUND LLC
By: LOCKWOOD CAPITAL ADVISORS LLC, its
Managing Member
By: /s/ David Lockwood
--------------------------
David Lockwood, as
Managing Member
LOCKWOOD CAPITAL ADVISORS LLC
By: /s/ David Lockwood
--------------------------
David Lockwood, as
Managing Member
CUSIP No. 530129105 13D/A Page 10 of 23 Pages
EXHIBIT 2
David Lockwood
2798 Broadway
San Francisco, CA 94115
Dear David:
We are pleased to offer you employment as Strategic Consultant for Liberate
Technologies, becoming Chief Executive Officer and Chairman of the Board of
Directors upon Liberate's submission of its delinquent public filings. Your
annual salary will be $250,000, less applicable withholding. Your bonus will be
determined by the Compensation Committee of Liberate's Board of Directors, with
timing and criteria to be mutually agreed. Your starting date will be March 14,
2003.
As an employee of Liberate Technologies, you will be eligible to participate in
a number of company-sponsored benefits, including health and medical benefits.
Subject to the approval of Liberate's Board of Directors or its Compensation
Committee, Liberate will grant you an option to purchase 1.3 million shares of
Liberate common stock at today's closing fair market value per share. As a
condition of your receipt of the option grant, you will confirm your investment
experience, your status as an "accredited investor", your receipt of all
information you consider necessary and appropriate to make an investment
decision, and any other representations appropriate under the securities laws.
The option will vest monthly in equal increments upon the completion of each of
the next 48 months of service. The option is granted outside of Liberate's 1999
Equity Incentive Plan (the "Plan") and its related agreements, but will be
governed by the terms of the Plan, except that the Board and the Compensation
Committee commit not to invoke Article 18.1(b) of the Plan, so that Article 18
will apply only if Liberate's independent auditors (and if they are not able to
perform this evaluation, another nationally recognized accounting firm selected
by Liberate) determines that you would receive a greater after-tax benefit if it
reduced any payment or option vesting acceleration. Liberate will file an S-8
registration statement covering the exercise of the option as soon as reasonably
practical following its filing of its delinquent public filings.
The option will vest fully in the event of a Change in Control (as defined in
the Employee Retention Agreement entered into concurrently herewith between you
and Liberate) of Liberate in which the acquiring or surviving entity fails
within ten days prior to the closing thereof to make a written offer to you of
continued employment for a period of at least one year that is located within 20
miles of your present location and has equal or greater: (i) responsibilities,
title, and reporting relationship in the surviving entity and parent; (ii) total
compensation (including salary, bonus and equity incentives); and (iii) office
and support arrangements, and staff. As a condition of any such accelerated
vesting, you and Liberate will sign a mutual waiver of claims (as set forth in
the Employee Retention Agreement between the parties) at the time of the
acceleration. In addition, in the event of a Change in Control that is followed
within one year by your Actual or Constructive Termination (as defined in the
Employee Retention Agreement), Liberate will pay you an amount equal to twice
the sum of your total taxable
CUSIP No. 530129105 13D/A Page 11 of 23 Pages
compensation received in the prior fiscal year, with a minimum of $500,000 and
up to a maximum of $750,000.
Your employment with Liberate is not for a specific term and can be terminated
by you or by Liberate at any time for any reason, with or without cause. (We do
ask employees, to the extent possible, to give us notice if they intend to
resign.) Additionally, Liberate may take any other employment action at any
time for any reason. This offer is contingent upon your executing Liberate's
Proprietary Information Agreement, and providing legally required proof of your
identity and eligibility to work in the United States.
We make every effort to maintain a great and rewarding work environment. If,
however, a dispute arises, you and we agree to waive trial before a judge or
jury and to arbitrate with the JAMS arbitration service any dispute relating to
this agreement or to your recruitment, employment, or termination, except for
claims relating to worker's compensation benefits, unemployment insurance, or
intellectual property rights. The arbitrator's decision will include written
findings of fact and law and will be final and binding except to the extent that
judicial review is required by law. The American Arbitration Association's
National Rules for the Resolution of Employment Disputes will govern the
arbitration, except that the arbitrator will allow discovery authorized by the
California Arbitration Act and any additional discovery necessary to vindicate a
claim or defense. The arbitrator may award any remedy that would be available
from a court of law. You may choose to hold the arbitration either in San Mateo
County, California or the county where you worked when the arbitrable dispute
first arose. You and we will share the arbitration costs equally (except that
we will pay the arbitrator's fee and any other cost unique to arbitration) and
each party will pay its own attorney's fees except as required by law. If
either of us files any legal action or proceeding about a non-arbitrable matter,
it will be instituted in a state or federal court located in Santa Clara or San
Mateo County, California, and we and you submit to the personal jurisdiction of,
and agree that venue is proper in, these courts.
To confirm your acceptance of this employment agreement, please sign and date
this letter in the space provided below and return it to Temre Jenkins. A
duplicate original is enclosed for your records. This letter and the
Proprietary Information Agreement set forth the terms of your employment with
Liberate. This agreement supersedes any prior representations or agreements
between us, and it may be modified only by a document signed by you and by
Liberate's Board of Directors. This offer, if not accepted, will expire on
March 21, 2003.
Sincerely,
/s/ Mitchell Kertzman
Liberate Technologies
By: Mitchell Kertzman
Chief Executive Officer
I agree to and accept employment with Liberate Technologies on the terms set
forth in this agreement.
/s/ David Lockwood March 14, 2003
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David Lockwood Date
CUSIP No. 530129105 13D/A Page 12 of 23 Pages
EXHIBIT 3
EMPLOYEE RETENTION AGREEMENT
This Employee Retention Agreement (the "Agreement") is entered into between
Liberate Technologies, 2 Circle Star Way, San Carlos, California ("Liberate")
and David Lockwood ("you") as of March 14, 2003 (the "Effective Date").
PAYMENT UPON A TERMINATION EVENT. In order to secure your continued services,
Liberate and you hereby agree as follows:
Upon a Termination Event, consisting of both:
(a) A Change in Control (as defined in EXHIBIT A to this Agreement, which
is hereby incorporated into this Agreement) that is followed within
one year by
(b) Your Actual or Constructive Termination, which will consist of
Liberate's termination of your employment (other than for Cause, as
defined below) or your resignation of your Liberate employment due to
any of the following changes made without your written consent: (i) a
reduction in the scope, level, or nature of your responsibilities;
(ii) a reduction in your title or the level of your reporting
relationship or authority in the surviving entity and parent; (iii) a
reduction in the overall economic value of your compensation, equity
incentives or benefits (including the failure to offer you in
connection with such Change in Control at least as favorable economic
value following such Change in Control as you had prior to such Change
in Control), with the economic value of options in each case measured
based on their intrinsic value; (iv) a material change in or failure
to maintain your office or office equipment and services; (v) a
material reduction in the number or level of your staff (other than
your pro rata share of company-wide reductions); or (vi) the
relocation of your principal place of employment beyond 30 miles from
its current location ((a) and (b) together constituting a Termination
Event),
Liberate will, within thirty days of the Termination Event, pay you twice your
total taxable compensation for the prior fiscal year, with a minimum payment of
$500,000 and a maximum payment of $750,000.
For these purposes, "Cause" consists of: (i) reckless or willful misconduct in
the performance of your duties to Liberate; (ii) repeated unexplained or
unjustified absence from Liberate; (iii) commission of any act of fraud,
embezzlement, or dishonesty with respect to Liberate; (iv) intentional
unauthorized use or disclosure of confidential information or trade secrets of
Liberate (or any parent or subsidiary of Liberate); or (v) any other intentional
misconduct that materially harms the business affairs of Liberate (or any parent
or subsidiary). These provisions do not constitute all of the acts or omissions
that may be grounds for dismissal for purposes other than this Agreement.
You will be solely responsible for any taxes that may be incurred as a result of
such payments and Liberate will withhold applicable taxes from them.
CUSIP No. 530129105 13D/A Page 13 of 23 Pages
"GOLDEN PARACHUTE" LIMITATIONS ON ACCELERATED PAYMENTS. If Liberate's
independent auditors (and if they are not able to perform this evaluation,
another nationally recognized accounting firm selected by Liberate) determines
that you would receive a greater after-tax benefit if it reduced any amount
payable under this Agreement (for example, due to application of Section 4999 of
the Internal Revenue Code relating to "excess parachute payments"), Liberate
will pay you the reduced amount calculated to provide you with the maximum
after-tax value. If the independent auditors subsequently determine that the
correct amount differs from the amount paid to you, any under- or over-payment
will be repayable within three months from the notice of the revised
determination and bearing interest at the applicable federal rate (provided in
section 7872(f)(2) of the Internal Revenue Code of 1986, as amended) from the
date of the under- or over-payment.
ARBITRATION. The parties waive trial before a judge or jury and agree to
arbitrate with the JAMS arbitration service any dispute relating to this
agreement or your recruitment, employment, or termination, except for claims
relating to worker's compensation benefits, unemployment insurance, or
intellectual property rights. The arbitrator's decision will include written
findings of fact and law and will be final and binding except to the extent that
judicial review of arbitration awards is required by law. JAMS procedural rules
will govern the arbitration, except that the arbitrator will allow discovery
authorized by the California Arbitration Act and any additional discovery
necessary to vindicate a claim or defense. The arbitrator may award any remedy
that would be available from a court of law. You may choose to hold the
arbitration either in San Mateo County, California or the county where you
worked when the arbitrable dispute first arose. The parties will share the
arbitration costs equally (except that Liberate will pay the arbitrator's fee
and any other cost unique to arbitration) and will pay their own attorney's fees
except as required by law or separate agreement. This Agreement is governed by
the laws of the State of California without regard to its conflict-of-law rules.
MUTUAL RELEASE OF CLAIMS. As a condition of receiving the payments under this
Agreement and upon such receipt thereof, each party releases the other from any
claims against the other or against any affiliated persons or entities. This
release includes, but is not limited to, any claims related to your employment
with Liberate, and any claims under past or present laws or regulations,
including original and amended versions of Title VII of the Civil Rights Act of
1964; the California Fair Employment and Housing Act; the Worker Adjustment and
Retraining Notification Act; the California Constitution; the California
Worker's Compensation Act; the Age Discrimination in Employment Act, the Older
Workers' Benefit Protection Act; the Employee Retirement Income Security Act of
1974; the Family Medical Leave Act; the Americans with Disabilities Act; and the
National Labor Relations Act. You confirm in connection with the above release
that you are not aware of any such claims.
The parties understand and acknowledge that they may not currently know of
losses or claims or may have underestimated the severity of losses. Part of the
consideration provided by this Agreement was given in exchange for the release
of such claims. The parties hereby waive any rights or benefits under
California Civil Code Section 1542, which provides that:
CUSIP No. 530129105 13D/A Page 14 of 23 Pages
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with debtor.
MISCELLANEOUS. Should you die before receiving any payments otherwise earned
under this Agreement, Liberate will make such payments to your estate. Other
than specifically set forth above, nothing in this Agreement modifies your
existing at-will employment relationship with Liberate or otherwise changes the
terms of your employment agreement.
LIBERATE TECHNOLOGIES: YOU:
/s/ Mitchell Kertzman /s/ David Lockwood
------------------------- ----------------------
Mitchell Kertzman
Chief Executive Officer
Liberate Technologies
CUSIP No. 530129105 13D/A Page 15 of 23 Pages
EXHIBIT 4
NOTICE OF STOCK OPTION GRANT
You have been granted the following option to purchase Common Stock of Liberate
Technologies ("Liberate"):
Name of Optionee: David Lockwood
Total Number of Shares
Covered by This Option 1,300,000
Exercise Price Per Share: $1.75
Date of Grant: March 14, 2003
Vesting Commencement Date: March 14, 2003
Expiration Date: March 14, 2013
Vesting Schedule: This option shall vest in equal
monthly installments over 48 months
commencing with the Vesting
Commencement Date.
This option will fully vest upon a Termination Event, consisting of a Change in
Control (as defined in the Employee Retention Agreement between you and
Liberate) in which the acquiring or surviving entity fails within ten days prior
to the closing thereof to make a written offer to you of continued employment
for a period of at least one year that is located within 20 miles of your
present location and has equal or greater: (i) responsibilities, title, and
reporting relationship in the surviving entity and parent; (ii) total
compensation (including salary, bonus and equity incentives); and (iii) office
and support arrangements and staff. As a condition of any such acceleration,
you and Liberate will sign a mutual waiver of claims (as set forth in the
Employee Retention Agreement between the parties) at the time of the
acceleration.
As a condition of such accelerated vesting, you agree to sign a mutual release
of claims against Liberate (as set forth in the Employee Retention Agreement
between the parties) as to any claims that may have arisen prior to the date of
the acceleration.
By your signature and the signature of Liberate's representative below, you and
Liberate agree that this option is granted outside of but subject to the terms
and conditions of the 1999 Equity Incentive Plan (the "Plan") and the Stock
Option Agreement, both of which are attached to and made a part of this
document. You further agree that Liberate may deliver by email all documents
relating to the Plan or this option (including, without limitation, prospectuses
required by the Securities and Exchange Commission) and all other documents that
Liberate is required to deliver to its security holders (including, without
limitation, annual reports and proxy statements). You also agree that Liberate
CUSIP No. 530129105 13D/A Page 16 of 23 Pages
may deliver these documents by posting them on a web site maintained by Liberate
or by a third party under contract with Liberate. If Liberate posts these
documents on a web site, it will notify you by email. You also agree that this
option constitutes consideration for your agreement to comply with the policies
set forth on Liberate's intranet site, and by signing below, you agree to comply
with those policies.
OPTIONEE: LIBERATE TECHNOLOGIES
/s/ David Lockwood By: /s/ Mitchell Kertzman
--------------------- ------------------------
Title: Chief Executive Officer
Liberate Technologies
-------------------------
CUSIP No. 530129105 13D/A Page 17 of 23 Pages
STOCK OPTION AGREEMENT TERMS
TAX TREATMENT This option is intended to be a nonstatutory
stock option. It does not qualify as an incentive
stock option under section 422 of the Internal Revenue
Code.
VESTING This option becomes exercisable in installments, as
shown in the Notice of Stock Option Grant. No
additional shares become exercisable after your
service as an employee, consultant or director of
Liberate or a subsidiary of Liberate has terminated
for any reason.
TERM This option expires in any event at the close of
business at Company headquarters on the day before
the 10th anniversary of the Date of Grant, as shown
in the Notice of Stock Option Grant. (It will
expire earlier if your service terminates, as
described below.)
REGULAR If your service as an employee, consultant or director
TERMINATION of Liberate or a subsidiary of Liberate terminates for any
reason except death or total and permanent disability, then
this option will expire at the close of business at Company
headquarters on the date three months after your
termination date. Liberate determines when your
service terminates for this purpose.
DEATH If you die as an employee, consultant or director
of Liberate or a subsidiary of Liberate, then this
option will expire at the close of business at
Company headquarters on the date six months after
the date of death. During that six-month period,
your beneficiary, heir or estate may exercise this
option (to the extent that it was exercisable at
the time of your death).
DISABILITY If your service as an employee, consultant or
director of Liberate or a subsidiary of Liberate
terminates because of your total and permanent
disability, then this option will expire at the
close of business at Company headquarters on the
date 12 months after your termination date.
For all purposes under this Agreement, "total and
permanent disability" means that you are unable to
engage in any substantial gainful activity by
reason of any medically determinable physical or
mental impairment which can be expected to result
in death or which has lasted, or can be expected to
last, for a continuous period of not less than one
year.
CUSIP No. 530129105 13D/A Page 18 of 23 Pages
LEAVES OF For purposes of this option, your service does not
ABSENCE terminate when you go on a military leave, a sick leave or
another BONA FIDE leave of absence, if the leave was
approved by Liberate in writing and if continued crediting
of service is required by the terms of the leave or by
applicable law. But your service terminates when
the approved leave ends, unless you immediately
return to active work.
RESTRICTIONS ON Liberate will not permit you to exercise this option if the
EXERCISE issuance of shares at that time would violate any law or
regulation.
NOTICE OF When you wish to exercise this option, you must notify
EXERCISE Liberate by filing the proper "Notice of Exercise" form at
the address given on the form. Your notice must specify
how many shares you wish to purchase. Your notice must
also specify how your shares should be registered (in your
name only or in your and your spouse's names as community
property or as joint tenants with right of survivorship).
The notice will be effective when it is received by
Liberate.
If someone else wants to exercise this option after your
death, that person must prove to Liberate's satisfaction
that he or she is entitled to do so.
FORM OF PAYMENT When you submit your notice of exercise, you must include
payment of the option exercise price for the shares you
are purchasing. Payment may be made in one (or a
(or a combination of two or more) of the following forms:
o Your personal check, a cashier's check or a money
order.
o Certificates for shares of Company stock that you own,
along with any forms needed to effect a transfer of
those shares to Liberate. The value of the shares,
determined as of the effective date of the option
exercise, will be applied to the option exercise
price. Instead of surrendering shares of Company
stock, you may attest to the ownership of those shares
on a form provided by Liberate and have the same
number of shares subtracted from the option shares
issued to you. However, you may not surrender, or
attest to the ownership of, shares of Company stock in
payment of the exercise price if your action would
cause Liberate to recognize compensation expense (or
additional compensation expense) with respect to this
option for financial reporting purposes.
CUSIP No. 530129105 13D/A Page 19 of 23 Pages
o Irrevocable directions to a securities broker approved
by Liberate to sell all or part of your option shares
and to deliver to Liberate from the sale proceeds an
amount sufficient to pay the option exercise price and
any withholding taxes. (The balance of the sale
proceeds, if any, will be delivered to you.) The
directions must be given by signing a special "Notice
of Exercise" form provided by Liberate.
o Irrevocable directions to a securities broker or
lender approved by Liberate to pledge option shares
as security for a loan and to deliver to Liberate from
the loan proceeds an amount sufficient to pay the
option exercise price and any withholding taxes. The
directions must be given by signing a special
"Notice of Exercise" form provided by Liberate.
WITHHOLDING You will not be allowed to exercise this option unless
TAXES AND STOCK you make arrangements acceptable to Liberate to pay any
WITHHOLDING withholding taxes that may be due as a result of the
option exercise. These arrangements may include
withholding shares of Company stock that otherwise would
be issued to you when you exercise this option. The
value of these shares, determined as of the effective date
of the option exercise, will be applied to the withholding
taxes.
RESTRICTIONS ON By signing this Agreement, you agree not to sell any
RESALE option shares at a time when applicable laws, Company
policies or an agreement between Liberate and its
underwriters prohibit a sale. This restriction will apply
as long as you are an employee, consultant or director of
Liberate or a subsidiary of Liberate.
TRANSFER OF Prior to your death, only you may exercise this option.
OPTION You cannot transfer or assign this option. For instance,
you may not sell this option or use it as security for a
loan. If you attempt to do any of these things, this
option will immediately become invalid. You may, however,
dispose of this option in your will or a beneficiary
designation.
Regardless of any marital property settlement agreement,
Liberate is not obligated to honor a notice of exercise
from your former spouse, nor is Liberate obligated to
recognize your former spouse's interest in your option in
any other way.
RETENTION RIGHTS Neither your option nor this Agreement gives you the right
to be retained by Liberate or a subsidiary of Liberate in
any capacity. Liberate and its subsidiaries reserve the
right to terminate your service at any time, with or
without cause.
CUSIP No. 530129105 13D/A Page 20 of 23 Pages
STOCKHOLDER RIGHTS You, or your estate or heirs, have no rights as a
stockholder of Liberate until you have exercised this
option by giving the required notice to Liberate and
paying the exercise price. No adjustments are made for
dividends or other rights if the applicable record date
occurs before you exercise this option, except as described
in the Plan.
ADJUSTMENTS In the event of a stock split, a stock dividend or a
similar change in Company stock, the number of shares
covered by this option and the exercise price per share may
be adjusted pursuant to the Plan.
APPLICABLE LAW This Agreement will be interpreted and enforced under the
laws of the State of Delaware (without regard to its
choice-of-law provisions).
THE PLAN AND OTHER While the Option is not issued under Liberate's 1999 Equity
AGREEMENTS Incentive Plan (the "Plan"), it is governed by the terms of
that Plan, which is incorporated in this Agreement by
reference. The Board and the Compensation Committee will
not to invoke Article 18.1(b) of the Plan, so that Article
18 will apply only if Liberate's independent auditors (and
if they are not able to perform this evaluation, another
nationally recognized accounting firm selected by Liberate)
determines that you would receive a greater after-tax
benefit if it reduced any payment or option vesting
acceleration.
This Agreement and the Plan constitute the entire
understanding between you and Liberate regarding this
option. Any prior agreements, commitments or negotiations
concerning this option are superseded. This Agreement may
be amended only by another written agreement, signed by
both parties.
BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND
CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
CUSIP No. 530129105 13D/A Page 21 of 23 Pages
EXHIBIT 5
REPRESENTATIONS REGARDING ACQUISITION OF OPTION AND PURCHASE OF SHARES
In connection with the issuance and acquisition of option shares in connection
with Liberate's offer of employment to the Purchaser, the Purchaser hereby
represents and warrants to Liberate as follows:
(a) The Purchaser is acquiring and will hold the Purchased Shares for
investment for his or her account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Exchange Act of 1934 ("Securities Act").
(b) The Purchaser understands that the Purchased Shares have not been
registered under the Securities Act by reason of a specific exemption therefrom
and that the Purchased Shares must be held indefinitely, unless they are
subsequently registered under the Securities Act or the Purchaser obtains an
opinion of counsel, in form and substance satisfactory to Liberate and its
counsel, that such registration is not required. The Purchaser further
acknowledges and understands that Liberate is under no obligation to register
the Purchased Shares.
(c) The Purchaser is aware of the adoption of Rule 144 by the Securities
and Exchange Commission under the Securities Act, which permits limited public
resales of securities acquired in a non-public offering, subject to the
satisfaction of certain conditions, including (without limitation) the
availability of certain current public information about the issuer, the resale
occurring only after the holding period required by Rule 144 has been satisfied,
the sale occurring through an unsolicited "broker's transaction," and the amount
of securities being sold during any three-month period not exceeding specified
limitations. The Purchaser acknowledges and understands that the conditions for
resale set forth in Rule 144 have not been satisfied and that Liberate has no
plans to satisfy these conditions in the foreseeable future.
(d) The Purchaser will not sell, transfer or otherwise dispose of the
Purchase Shares in violation of the Securities Act, the Securities Exchange Act
of 1934, or the rules promulgated thereunder, including Rule 144 under the
Securities Act. The Purchaser agrees that he or she will not dispose of the
Purchased Shares unless and until he or she has complied with all requirements
of this Agreement applicable to the disposition of Purchased Shares and he or
she has provided Liberate with written assurances, in substance and form
satisfactory to Liberate, that (A) the proposed disposition does not require
registration of the Purchased Shares under the Securities Act or all appropriate
action necessary for compliance with the registration requirements of the
Securities Act or with any exemption from registration available under the
Securities Act (including Rule 144) has been taken and (B) the proposed
disposition will not result in the contravention of any transfer restrictions
applicable to the Purchased Shares under state securities law.
CUSIP No. 530129105 13D/A Page 22 of 23 Pages
(e) The Purchaser has been furnished with, and has had access to, all
information that he considers necessary or appropriate for deciding whether to
invest in the Purchased Shares, and the Purchaser has had an opportunity to ask
questions and receive answers from Liberate regarding Liberate's business,
financial condition and results of operations as well as the terms and
conditions of the issuance of the Purchased Shares.
(f) The Purchaser is aware that his or her investment in Liberate is a
speculative investment that has limited liquidity and is subject to the risk of
complete loss. The Purchaser is able, without impairing his or her financial
condition, to hold the Purchased Shares for an indefinite period and to suffer a
complete loss of his or her investment in the Purchased Shares.
(g) Purchaser is an "accredited investor" within the meaning of Securities
and Exchange Commission Rule 501 of Regulation D, as presently in effect.
Purchaser:
Name: David Lockwood
-------------------
Signature: /s/ David Lockwood
---------------------
Date: March 14, 2003
--------------------
CUSIP No. 530129105 13D/A Page 23 of 23 Pages
Schedule I
Date of Amount of Securities Exercise Price
Reporting Person Transaction Involved per Share
David Lockwood March 14, 2003 54,166.67(1) $1.75(2)
(1) Mr. Lockwood, as of March 14, 2003, may be deemed to have beneficial
ownership of 54,166.67 Shares pursuant to the grant of 1,300,000 options by the
Issuer on March 14, 2003, vesting in equal portions over 48 months.
(2) The options were granted by the Issuer without payment. The exercise
price of the options is $1.75 per Share.