March 29, 2002



Ms. Gabriele Schindler



Dear Gabi:


It is my pleasure to offer you the position of Senior Vice President of Worldwide Marketing of PalmSource, a wholly owned subsidiary of Palm, Inc., reporting to me.


Your starting salary will be $275,000.00 per year, payable semi-monthly, to be paid by PalmSource. You will also be eligible to participate in PalmSource’s discretionary bonus plan beginning in FY03. For purposes of this offer, the PalmSource discretionary bonus plan shall be assumed equitable with the current Palm bonus plan. As a point of reference, for fiscal 2002, the Palm bonus plan offered the opportunity to earn a bonus with a target amount of 50% of base salary; actual payments being based on various factors, including company and individual performance, and paid semi-annually. Your individual performance targets will be set by mutual agreement between you and me by the beginning of FY03. For the remainder of FY02, the bonus plan has been suspended for all employees. In lieu of this plan, a discretionary profit sharing plan has been approved by the Palm Board of Directors, through the end of this fiscal year. You will be eligible to participate in any payout (pro-rated) that may result from this discretionary plan.


You will receive a sign-on/retention bonus totaling $100,000, less applicable taxes, payable as follows, and contingent upon your continued employment with PalmSource. You will receive $50,000 within 30 days of your employment commencement date. The remainder of the bonus will be paid by June 30, 2002, contingent upon your continued satisfactory performance. By signing this letter below, you agree to repay the full amount of the sign-on/retention bonus you have received if you voluntarily leave PalmSource without Good Reason (as defined in the Severance Agreement referenced below) within one year of your employment commencement date.


A stock option plan for PalmSource has been established. Upon receipt of the required approval by PalmSource’s Board of Directors, you will receive an option for a number of shares equal to one percent (1%) of the shares of PalmSource (which is currently equal to 900,000 shares of PalmSource, calculated on a fully diluted basis, assuming convertibility of all other forms of security into common stock, including but not limited to the shares owned or controlled by Palm and the amount set aside in the initial option pool for employees, directors, and consultants). The stock option plan provides for four year vesting. The option’s per share

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exercise price is $5.33, which is based on the fair market value of PalmSource, as most recently determined by the Board. Such grant shall be made within 45 days of your employment commencement date. By mutual consent, Palm and/or PalmSource will have the right to repurchase the option (and any shares acquired upon exercise of the options), by paying you the fair market value (at the time of repurchase) of the stock covered by the option, minus the exercise price otherwise paid or payable. If necessary or appropriate to preserve favorable tax treatment for the spin-off o£ PalmSource, changes may be made in the option terms described above (but without materially diminishing the potential value of the option). These terms are subject to approval by the PalmSource Board.


In addition, you will be eligible to receive a stock option grant of 75,000 Palm shares priced at the closing stock price on the Friday following your start date, or if the stock market is closed on this date, the closing stock price on the last trading day prior to Friday. This grant is subject to approval by the Palm Board of Directors. The plan provides four year vesting, 25% after the first year and a monthly vesting thereafter. Vesting will begin effective, with your start date.


PalmSource shall offer you the same benefits it provides to its other senior executives. If PalmSource does not have its own separate benefit programs, you will participate in the Palm benefit plans on the same terms as Palm’s senior executives (but excluding incentive and equity compensation programs.) You also shall receive 28 days of combined time off and holidays, and other benefits as established by PalmSource (including any sabbatical program). Your benefits will depend upon the terms of the benefit plans and programs, as they may exist from time to time. Until PalmSource establishes comparable benefits, you shall be covered by Palm’s benefit plan, including medical coverage.


This offer of employment and your continued employment with Palm are is expressly contingent upon PalmSource receiving the following:


  Acceptable results from a background investigation. Any falsification of employment history or educational background may result in withdrawal of the offer and and/or termination of employment.


  Signed copies of the Palm (i) Employee Agreement, (ii) Confidentiality Guidelines, and (iii) Palm’s Code of Conduct, stating, among other things, that you will keep confidential company information throughout and beyond your employment with PalmSource.


  Satisfactory proof of identification and work authorization as required by the Immigration Reform and Control Act of 1990.


If your position requires exposure or access to export controlled or classified data, this offer is also contingent upon successful acquisition of any necessary licenses or security

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clearances. If a license is granted, then you must agree to abide by all conditions of any restrictions or riders to the license approval.


The terms and conditions of your proposed employment with PalmSource in this letter supersede any contrary verbal representations concerning conditions of employment. While we are confident that we will have a mutually beneficial employment relationship, employment with PalmSource is voluntary and at-will. This means that you are free to resign at any time. Similarly, PalmSource is free to terminate your employment relationship, with or without Cause or notice, at any time. Exceptions to this employment-at-will policy may be made only by a written agreement signed by PalmSource’s Board of Directors.


You will also be eligible for benefits provided in Palm’s standard Management Retention Agreement (Change in Control) and Executive Severance Agreement. Both are attached hereto and incorporated by reference.


As and additional benefit, PalmSource shall pay your reasonable attorney’s fees and expenses, not to exceed $3500, in connection with the negotiation of this agreement.

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This offer of employment is open for a period of 5 working days from the date of this letter. Within this time period, I would appreciate your confirming your acceptance by singing on the space provided and returning this letter to me, indicating your proposed start date.


Let me close by reaffirming our belief that the skill and background you bring to Palm and PalmSource, Inc. will be instrumental to the future success of the Company. I look forward to working with you very soon.



/s/    DAVID NAGEL        

David Nagel

President and CEO

PalmSource, Inc.




I accept the offer of employment at PalmSource, Inc. based on the terms described in this offer letter. I propose a start date of                         .




     April 1, 2002

Signature     Date

Source: OneCLE Business Contracts.