<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[ x ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended SEPTEMBER 30, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________to __________.
Commission file number 0-23926
GEOWORKS
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2920371
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
960 ATLANTIC AVENUE, ALAMEDA, CALIFORNIA 94501
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
510-814-1660
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ] Yes [ ] No
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. [ ] Yes [ ] No
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
COMMON STOCK, NO PAR VALUE: 14,049,617 SHARES AS OF SEPTEMBER 30, 1996
<PAGE> 2
GEOWORKS
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets: September 30, 1996 and March 31, 1996 2
Condensed consolidated statements of operations: Three and six months ended
September 30, 1996 and September 30, 1995 3
Condensed consolidated statements of cash flows: Six months ended
September 30, 1996 and September 30, 1995 4
Notes to condensed consolidated financial statements 5
Item 2. Management's discussion and analysis of financial condition and results
of operations 6-10
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
</TABLE>
<PAGE> 3
PART 1 FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
GEOWORKS
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Sept. 30, March 31,
1996 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 5,004 $10,765
Marketable securities 37,936 39,625
Prepaid expenses and other current assets 666 216
------- -------
Total current assets 43,606 50,606
Furniture and equipment, net 3,117 2,132
Other assets 160 160
------- -------
$46,883 $52,898
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 1,396 $ 1,240
Deferred revenue 3,411 5,529
Other current liabilities 899 707
------- -------
Total current liabilities 5,706 7,476
Other liabilities 772 965
------- -------
Total liabilities 6,478 8,441
Shareholders' equity 40,405 44,457
------- -------
$46,883 $52,898
======= =======
</TABLE>
See accompanying notes
2
<PAGE> 4
GEOWORKS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ -----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues:
License revenue and product sales $ 1,186 $ 875 $ 3,427 $ 1,160
Research and development fees 745 75 933 175
Service revenue 100 - 100 -
------- ------- ------- -------
Total net revenues 2,031 950 4,460 1,335
Operating expenses:
Cost of license revenue and product sales 27 24 99 40
Sales and marketing 1,679 928 3,050 1,892
Research and development 2,883 1,917 5,632 3,719
General and administrative 958 560 1,656 1,078
------- ------- ------- -------
Total operating expenses 5,547 3,429 10,437 6,729
------- ------- ------- -------
Operating loss (3,516) (2,479) (5,977) (5,394)
Other income (expense):
Interest income 715 147 1,290 266
Interest expense (36) (39) (81) (83)
------- ------- ------- -------
Loss before income taxes (2,837) (2,371) (4,768) (5,211)
Provision for income taxes - - - -
------- ------- ------- -------
Net loss $(2,837) $(2,371) $(4,768) $(5,211)
======= ======= ======= =======
Net loss per share $ (0.20) $ (0.21) $ (0.34) $ (0.46)
======= ======= ======= =======
Shares used in per share computation 14,039 11,401 14,004 11,352
======= ======= ======= =======
</TABLE>
See accompanying notes
3
<PAGE> 5
GEOWORKS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
Sept. 30, Sept. 30,
1996 1995
-------- ---------
<S> <C> <C>
Operating activities:
Net loss $(4,768) $(5,211)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 634 533
Changes in operating assets and liabilities (2,280) (785)
------- -------
Net cash used in operating activities (6,414) (5,463)
------- -------
Investing activities:
Purchases of furniture and equipment (1,531) (335)
Sales of marketable securities 1,689 4,681
Other (41) 101
------- -------
Net cash provided by investing activities 117 4,447
------- -------
Financing activities:
Proceeds from sale/leaseback of equipment - 206
Payments of obligations under capital leases (133) (101)
Net proceeds from issuance of common stock 669 247
------- -------
Net cash provided by financing activities 536 352
------- -------
Net decrease in cash and cash equivalents (5,761) (664)
Cash and cash equivalents at beginning of period 10,765 1,788
------- -------
Cash and cash equivalents at end of period $ 5,004 $ 1,124
======= =======
</TABLE>
See accompanying notes
4
<PAGE> 6
GEOWORKS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements for the three months and
six months ended September 30, 1996 and 1995 are unaudited but reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the consolidated
financial position and operating results for the interim periods. The
condensed consolidated financial statements should be read in conjunction with
the financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's Annual Report to Shareholders for the fiscal year
ended March 31, 1996. The results of operations for the three months and six
months ended September 30, 1996 are not necessarily indicative of the results
to be expected for the entire fiscal year.
2. Net loss per share is computed using the weighted average number of shares
of common stock outstanding. Common equivalent shares from stock options are
not included in the computation as they are antidilutive.
3. In October 1995, the Financial Accounting Standards Board issued Statement
No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation," which is
effective for fiscal years beginning after December 15, 1995. SFAS No. 123
allows a company to adopt a new fair value-based method or continue to
measure compensation cost for its stock-based compensation plans using the
intrinsic value-based method of accounting prescribed by Accounting Principles
Board Opinion No. 25 (APB No. 25). The Company will continue to follow APB No.
25 but will be required to make pro forma disclosures of net income or loss and
earnings per share as if the fair value-based method had been applied.
5
<PAGE> 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Results of Operations
Net Revenues
Net revenues for the six months ended September 30, 1996 increased
$3,125,000, or 234%, compared to the six months ended September 30, 1995.
License revenue and product sales increased between the two periods by
$2,267,000, or 195%, due primarily to the restructuring of two OEM license
agreements in the current fiscal year for which there were non-refundable,
prepaid royalty balances. The prepaid balances related to these agreements had
been recorded as deferred revenue, and had not yet been fully amortized at the
time the agreements were restructured. Revenue recognized upon the
restructuring of these two agreements was included in license revenue and
product sales, and accounted for $2,234,000, or 65%, of the Company's license
revenue and product sales during the six months ended September 30, 1996. For
the corresponding period of the previous fiscal year, revenue resulting from
the restructuring of OEM license agreements amounted to $675,000.
In addition to revenue recognized upon the restructuring of license
agreements, license revenue and product sales for the six months ended
September 30, 1996 included $743,000 of source code license fees paid by an OEM
customer. Revenues associated with source code license fees and license
agreement restructurings are non-recurring. As a result of these one-time
events, revenues for the six months ended September 30, 1996 are not indicative
of revenues to be recognized in future periods. The remainder of license
revenue and product sales during the six months ended September 30, 1996
consisted of royalties on units sold by OEM licensees and royalties from
software republishers.
Revenue related to research and development fees for the six months
ended September 30, 1996 increased $758,000, or 433%, compared to the
corresponding period of the previous fiscal year. Research and development
fees represent amounts received pursuant to contracts with OEM licensees under
which the Company is reimbursed for a portion of its development costs related
to specific products up to the amounts specified in the contracts. The Company
is typically paid by the OEM licensee as certain project milestones are
achieved. Revenue under these research and development arrangements is
recognized under the percentage of completion method. The extent to which
such revenue is reported can vary considerably among periods, depending upon
the specific terms of the Company's contracts with OEM licensees and the
relative level of development effort devoted towards projects on which research
and development fees are charged.
Service revenue increased $100,000 for the six months ended September
30, 1996 compared to the corresponding period of the previous fiscal year.
Service revenue represents amounts earned for the support and maintenance of
software pursuant to contracts with OEM licensees.
For the three months ended September 30, 1996, net revenues increased
$1,081,000, or 114%, compared to the corresponding period of the previous
fiscal year. License revenue and product sales increased $311,000, or 36%,
principally due to source code license fees received and recognized as revenue
during the three months ended September 30, 1996. Research and development
fees increased $670,000, or 893%, while service revenue increased by $100,000
in the three months ended September 30, 1996, compared to the corresponding
period of the previous fiscal year.
6
<PAGE> 8
Operating Expenses
Cost of Revenues. The Company's gross margin percentage was 98% for
the six months ended September 30, 1996 and 97% for the corresponding period of
the previous fiscal year. Gross margin percentage was 99% for the quarter
ended September 30, 1996, and 97% for the corresponding quarter of the previous
fiscal year. Cost of revenues for all periods presented consisted of license
payments to third parties for software that is incorporated into the Company's
software.
Sales and Marketing. Sales and marketing expense increased
$1,158,000, or 61%, for the six month period ended September 30, 1996, and
$751,000, or 81%, for the three month period ended September 30, 1996, in
comparison with the corresponding periods of the previous fiscal year. These
increases resulted from the Company's expanded efforts in pursuit of
opportunities in the consumer computing device (CCD) market. As this market
has evolved, the Company has dedicated additional resources towards content and
services for wireless devices, and has also broadened its services to VARs and
other outside developers of software for the CCD market. To support these
activities, staffing and related costs for travel, benefits, and facilities
increased in the three month and six month periods ended September 30, 1996, as
compared to the corresponding periods of the previous fiscal year.
Research and Development. Research and development expense increased
$1,913,000, or 51%, for the six month period ended September 30, 1996, and
$966,000, or 50%, for the three month period ended September 30, 1996, in
comparison with the corresponding periods of the previous fiscal year. These
increases were due primarily to the continuing expansion of the Company's
engineering staff, which resulted in higher compensation costs and related
increases in costs for employee benefits, travel, and facilities. The Company
expects that research and development expense will continue to increase in
future periods, as the Company expands its efforts to develop products for the
emerging CCD market.
General and Administrative. General and administrative expense
increased $578,000, or 54%, for the six month period ended September 30, 1996,
and $398,000, or 71%, for the three month period ended September 30, 1996, in
comparison with the corresponding periods of the previous fiscal year. Higher
costs for compensation and recruiting were primarily responsible for these
increases.
Other Income (Expense)
Interest income rose $1,024,000, or 385%, for the six month period
ended September 30, 1996, and $568,000, or 386%, for the three month period
ended September 30, 1996, in comparison with the corresponding periods of the
previous fiscal year. These increases were attributable to the significantly
higher balances available to the Company for short-term investment as a direct
result of the Company's secondary public offering of common stock and
concurrent sale of common stock to a private investor in November 1995. These
concurrent equity offerings raised over $40 million for the Company.
7
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Provision for Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." Income
tax expense consists of foreign income tax withholding on foreign source
royalties paid to the Company. The Company has a July 31 year end for income
tax purposes. As of March 31, 1996, the Company had net operating loss
carryforwards for federal income tax purposes of approximately $37,246,000 and
for state income tax purposes of approximately $14,449,000. The Company also
had research and development credit carryforwards for federal income tax
purposes of approximately $1,255,000 and for state income tax purposes of
approximately $561,000. Pursuant to the Tax Reform Act of 1986, annual
utilization of the Company's net operating loss and tax credit carryforwards is
partially limited.
Liquidity and Capital Resources
The Company's cash, cash equivalents, and marketable securities
declined to $42.9 million at September 30, 1996 from $50.4 million at March
31, 1996. This decrease of $7.5 million resulted primarily from the use of
cash during the period of $6.4 million for operating activities and $1.5
million for the purchase of furniture and equipment. The Company expects to
incur additional substantial losses at least through its fiscal year ending
March 31, 1997, but anticipates that its existing capital resources will be
adequate to satisfy its operating and capital requirements throughout the
fiscal year.
Prepaid expenses and other current assets increased $450,000 from
March 31, 1996 to September 30, 1996 due to increases in the balance of prepaid
insurance premiums in connection with the Company's directors and officers
liability insurance coverage. Furniture and equipment, net of depreciation,
increased $985,000 from March 31, 1996 to September 30, 1996, due to furniture
and equipment purchases for new employees, leasehold improvements related to
office expansions, and ongoing enhancements to the Company's computer equipment
used for research and development. Accounts payable and accrued liabilities
increased $156,000 at September 30, 1996 as compared to March 31, 1996,
principally because of higher accrual balances in the current fiscal year for
marketing events and for expenses in connection with the Company's secondary
offering common stock in November 1995. Deferred revenue at September 30, 1996
fell $2,118,000 from March 31, 1996, as the Company recognized as revenue
certain advance royalty payments collected in previous periods under contracts
with OEM customers. The amount of such advance royalty payments recognized as
revenue during the six month period ended September 30, 1996 exceeded the
amount of actual payments collected during the period, causing the balance in
deferred revenue to decline. The significant decrease in the Company's deferred
revenue balance during the period was attributable primarily to the recognition
as revenue of $2,234,000 in connection with the restructuring of two OEM
license agreements for which there had been non-refundable, prepaid royalty
balances outstanding at the time of the restructuring. Other current
liabilities increased $192,000 from March 31, 1996 to September 30, 1996 as a
result of higher accrual balances for certain incentive compensation and
employee benefit programs. Lease obligations decreased $193,000 from March 31,
1996 to September 30, 1996, as monthly lease payments amortized outstanding
principal balances.
Future Operating Results
Since its inception in 1983, the Company has incurred significant
losses, has had substantial negative cash flow, and has realized limited
revenues. At September 30, 1996, the Company had an accumulated deficit of
$46.4 million, and had incurred operating losses of approximately $9.9 million,
$10.2 million, and $7.9 million in the fiscal years ended March 31,
8
<PAGE> 10
1996, 1995 and 1994, respectively, and $4.8 million in the six month period
ended September 30, 1996. The Company expects to continue to incur substantial
annual operating losses at least through its fiscal year ending March 31, 1997,
and it is unclear how soon thereafter, if ever, the Company will operate
profitably. The Company's strategic plan to achieve profitability includes
focusing on the mobile segment of the CCD market in the near term, establishing
additional relationships with CCD manufacturers, continuing to enhance the
Company's GEOS system software, and offering CCD aftermarket services and
products. The duration and outcome of any of these efforts is uncertain, and
the Company's future operating results will depend upon the emergence of the
CCD market, the Company's ability to establish licensing relationships with
leading CCD hardware manufacturers, the introduction by those manufacturers of
successful CCDs, and the Company's ability to achieve and maintain a
competitive advantage.
Limited retail sales of first generation CCDs incorporating the
Company's software have adversely affected, and will continue to adversely
affect, the amount of license revenue realized by the Company. The limited
sales to date indicate a slow adoption rate for the device category, which has
had and will continue to have a material adverse effect on the Company's
operating results. In particular, the Casio Z-7000, a first generation
personal digital assistant which was based upon the Company's GEOS system
software and introduced in 1994, achieved only modest unit sales. Sharp
Electronics Corporation and Toshiba Corporation each developed a GEOS-based
device, and subsequently elected to cancel introduction of such devices into
the market. License revenue from the education CCD market fell short of
Company expectations, causing the Company to discontinue its development
efforts in this segment and restructure its licensing agreement with
IBM/Eduquest. The Brother Ensemble, a personal desktop publishing system, and
the Hewlett-Packard OmniGo 100, a second generation electronic organizer, both
contain the Company's software and were both introduced during calendar year
1995. To date, however, royalties earned on reported unit shipments of these
products have not made a significant favorable contribution to the Company's
operating results. In August 1996, Nokia Mobile Phones released a digital
cellular telephone ("smart phone") in selected geographic markets which
incorporates the Company's software. It is unclear, however, what effect this
new product will have on the Company's reported royalties or CCD adoption
rates. Many factors relating to the market introduction and promotion of
these and other CCDs are not within the control of the Company, and there can
be no assurance as to the timing of release or success of any such products,
the impact they may have on adoption rates within the CCD market, or the effect
they may have on the Company's operating results.
Because the Company has focused its development resources towards
products in the mobile segment of the CCD market, its efforts to develop
products for other CCD market segments have been deferred indefinitely.
Ultimately, the Company expects that its long-term results will depend upon its
success in developing and marketing aftermarket products and services that
operate on GEOS-based CCDs. There can be no assurance that the CCD market will
evolve as anticipated or that the Company will be able to develop and market
aftermarket products and services successfully in order to execute its business
plan.
The Company's operating results have in the past been, and are
expected in the future to be, subject to significant fluctuations on both a
quarterly and annual basis. Specifically, the Company expects that its
operating results will fluctuate as a result of the timing and success of the
Company's efforts to establish and maintain relationships with significant CCD
market participants; the introduction and market acceptance of new GEOS-based
CCDs by these participants; the introduction and distribution of new system and
application software by the Company; actions by competitors of the Company; and
actions by its partners. License revenue related to OEM customer products which
contain the Company's software is contingent upon those customers' success in
meeting anticipated shipment dates, obtaining market acceptance for their
products, and realizing significant sales volume of those products. The
Company's results are also affected by the timing and extent of product
development, engineering, and sales and marketing expenses. The Company
presently intends to devote substantial resources towards product
9
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development, which may affect its investment and performance in other
activities and in turn affect reported operating results in future periods. In
addition, the Company's results may be affected by seasonal and other
fluctuations in demand for CCDs and for related software products and services,
as well as by the general state of the domestic and global economies. The
Company expects the CCD market to be characterized by significant seasonal
swings in demand similar to those in the consumer electronics market, in which
demand typically peaks in the fourth calendar quarter of each year.
The Company's operating results may also vary as a result of the
receipt of one-time technology license or engineering fees, and the recognition
as revenue of paid but unamortized advance royalties under OEM agreements
(currently recorded as deferred revenue) upon the restructuring or termination
of such agreements or upon product discontinuation. Amounts recognized upon
such restructurings or terminations have accounted in the past, and could
account in the future, for a material portion of the Company's revenue, with no
corresponding cash flow benefit in the period in which the revenue is
recognized.
Shortfalls in the Company's revenues or results of operations in
comparison with levels expected by securities analysts could have an immediate
and significant adverse effect on the trading price of the Company's common
stock. Moreover, the Company' stock price is subject to the volatility
generally associated with technology stocks and may also be affected by broader
market trends unrelated to the Company's specific performance.
Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such statements include those referring to the Company's
future plans, capital needs and operating results, the acceptance of the
activities and products of the Company and its partners in the CCD market, the
extent of the Company's investment in research and development in future
periods, and the development of the CCD market in general. Actual events and
results could differ materially from those projected in the forward-looking
statements as a result of a variety of factors, including those risk factors
set forth in the preceding five paragraphs and elsewhere in this report,
especially those regarding the Company's operating results and future
activities and those regarding the CCD market itself.
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PART 2 OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Shareholders on August 21, 1996.
(b) The Company's Board of Directors is elected at each Annual Meeting of
Shareholders. The Directors elected at the meeting were: Brian P. Dougherty,
Bruce W. Dunlevie, Gordon E. Mayer, Harry W. McKinney, Reijo Paajanen, Eric E.
Schmidt, Clive G. Smith, and R. Duff Thompson.
(c) The matters described below were voted on at the Annual Meeting of
Shareholders, and the votes cast with respect to each matter and with respect
to the election of directors for each nominee were as indicated.
1. To elect directors to serve until the next Annual Meeting of
Shareholders and until their successors are duly elected.
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD NOT VOTED
------- --- ---------- ---------
<S> <C> <C> <C>
Brian P. Dougherty 12,036,111 22,770 1,944,277
Bruce W. Dunlevie 12,045,061 13,820 1,944,277
Gordon E. Mayer 12,045,611 13,270 1,944,277
Harry W. McKinney 12,045,111 13,770 1,944,277
Reijo Paajanen 12,045,411 13,470 1,944,277
Eric E. Schmidt 12,045,611 13,270 1,944,277
Clive G. Smith 12,017,472 41,409 1,944,277
R. Duff Thompson 12,041,985 16,896 1,944,277
</TABLE>
2. To approve an amendment to the Company's 1994 Stock Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 650,000 shares.
<TABLE>
<CAPTION>
FOR OPPOSED NOT VOTED
--- ------- ---------
<S> <C> <C> <C>
Common Stock 10,018,592 1,860,597 2,123,969
</TABLE>
3. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 31, 1997.
<TABLE>
<CAPTION>
FOR OPPOSED NOT VOTED
--- ------- ---------
<S> <C> <C> <C>
Common Stock 12,046,784 6,621 1,949,753
</TABLE>
11
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.03 1994 Stock Plan and Form of Stock Option Agreement
10.35 Supplemental Stock Option Plan *
10.36 Technology License Agreement between NEC Corporation and
Geoworks, dated September 9, 1996 **
10.37 Amendment Number One to Technology License Agreement
between Sharp Corporation and Geoworks, dated
September 13, 1996
27.1 Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed in the quarter ended
September 30, 1996.
* Incorporated by reference to the exhibit filed with the
Registrant's Registration Statement on Form S-8 (File No.
333-09569), effective August 5, 1996
** Confidential treatment requested as to portions thereof
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 13 , 1996
GEOWORKS
by: /s/ Daniel L. Sicotte
--------------------------------
Daniel L. Sicotte
Treasurer
(Duly Authorized Officer and
Principal Financial Officer)
13
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GEOWORKS
EXHIBITS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.03 1994 Stock Plan and Form of Stock Option Agreement
10.35 Supplemental Stock Option Plan *
10.36 Technology License Agreement between NEC Corporation and Geoworks,
dated September 9, 1996 **
10.37 Amendment Number One to Technology License Agreement between Sharp
Corporation and Geoworks, dated September 13, 1996
27.1 Financial Data Schedule
</TABLE>
* Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form S-8 (File No. 333-09569), effective
August 5, 1996
** Confidential treatment requested as to portions thereof
14
<PAGE> 1
EXHIBIT 10.03
GEOWORKS
1994 STOCK PLAN
(As amended and restated August 15, 1996)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility to provide additional incentive to Employees, Consultants and
Outside Directors of the Company and its Subsidiaries and to promote the success
of the Company's business by granting Options and Performance Awards. Options
granted under the Plan may be incentive stock options (as defined under Section
422 of the Code) or non-statutory stock options, as determined by the
Administrator at the time of grant of an option and subject to the applicable
provisions of Section 422 of the Code, as amended, and the regulations
promulgated thereunder. The Plan also provides for automatic grants of
Nonstatutory Stock Options to Outside Directors. Performance Awards granted
under the Plan may be cash or stock bonus awards granted either alone, in
addition to or in tandem with other awards granted under the Plan and/or awards
made outside the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 or Section 15 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Geoworks, a California corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and who is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "Continuous Status as an Employee, Consultant or Outside
Director" means the absence of any interruption or termination of service as an
Employee, Consultant or Outside Director. Continuous Status as an Employee,
Consultant or Outside Director shall not be considered interrupted in the case
of: (i) sick leave; (ii) military leave; (iii) any other leave of absence
approved by the Company, provided that such leave is for a period of not more
than
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ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) in the case of transfers
between locations of the Company or between the Company, its Subsidiaries or its
successor.
(i) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market system of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such system or exchange), for the last market trading day prior to the time
of determination as reported in the Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the National Market system thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Common Stock or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(o) "Option" means a stock option granted pursuant to the Plan.
(p) "Optioned Stock" means the Common Stock subject to an Option.
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<PAGE> 3
(q) "Optionee" means an Employee, Consultant or Outside Director
who receives an Option.
(r) "Outside Director" shall mean a member of the Board who is not
an Employee or a Consultant.
(s) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(t) "Performance Award" means a performance award granted pursuant
to Section 14 of the Plan.
(u) "Plan" means this 1994 Stock Plan.
(v) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(w) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 2,150,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and Officers.
With respect to grants of Options or Performance Awards to Employees who are
officers or directors of the Company and Outside Directors, the Plan shall be
administered by (A) the Board if the Board may administer the Plan in compliance
with Rule 16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") with respect to a plan intended to qualify thereunder as a
discretionary plan, or (B) a Committee designated by the Board to administer the
Plan, which Committee shall be constituted in such a manner as to permit the
Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members
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<PAGE> 4
in substitution therefor, fill vacancies, however caused, and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options or Performance Awards to Employees
or Consultants who are neither directors nor officers of the Company, the Plan
shall be administered by (A) the Board or (B) a Committee designated by the
Board, which Committee shall be constituted in such a manner as to satisfy the
legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws and of the Code (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees to
whom Options or Performance Awards may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options or
Performance Awards are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder ;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any Option and/or
the shares of Common Stock relating thereto, based in each case on such factors
as the Administrator shall determine, in its sole discretion);
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<PAGE> 5
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral period); and
(ix) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options and Performance Awards may be granted
to Employees, Consultants and Outside Directors. Incentive Stock Options may be
granted only to Employees. An Employee, Consultant or Outside Director who has
been granted an Option or Performance Award may, if he is otherwise eligible, be
granted additional Options and Performance Awards.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as
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<PAGE> 6
described in Section 19 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be determined by the Board, but shall be
subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the
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<PAGE> 7
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (5) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, (6) by
delivering an irrevocable subscription agreement for the Shares which
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve months after the date of delivery of the subscription agreement, (7)
delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price; (8) any combination of the
foregoing methods of payment, (9) or such other consideration and method of
payment for the issuance of Shares to the extent permitted under Applicable
Laws. In making its determination as to the type of consideration to accept, the
Board shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company (Section 315(b) of the California corporation
law).
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment. In the event of termination of an
Optionee's Continuous Status as an Employee, Consultant or Outside Director,
such Optionee may, but only within thirty (30) days, or within such other period
of time as is determined by the Board, with
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<PAGE> 8
such determination in the case of an Incentive Stock Option being made at the
time of grant of the Option and such time period not exceeding ninety (90) days)
after the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
his Option to the extent that Optionee was entitled to exercise it at the date
of such termination. To the extent that Optionee was not entitled to exercise
the Option at the date of such termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee, Consultant or Outside Director as a result of his
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
while Optionee is an Employee, Consultant or Outside Director, the Option may be
exercised at any time within twelve (12) months following the date of death (but
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent the Optionee was entitled to exercise the Option at the date of
death. To the extent that Optionee was not entitled to exercise the Option at
the date of death, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options and Performance Awards. Options and
Performance Awards may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
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11. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option or Performance Award, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume the Option or to substitute an equivalent option, the Board
shall, in lieu of such assumption or substitution, provide for the Optionee to
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. If the Board
makes an Option fully exercisable in lieu of assumption or substitution in the
event of a merger, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of fifteen (15) days from the date of such
notice, and the Option will terminate upon the expiration of such period.
12. Limitation on Number of Option Shares. The following limitations
shall apply to grants of options to Employees hereunder:
(a) No Employee shall be granted, in any fiscal year of the Company,
options to purchase more than 250,000 shares of Common Stock.
(b) The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 11 hereof.
(c) If an option is canceled in the same fiscal year of the Company
in which it was granted (other than in connection with a transaction described
in Section 11), the canceled option will be counted against the limit set forth
in Section 12 (a) above. For this purpose, if the
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<PAGE> 10
exercise price of an option is reduced, the transaction will be treated as a
cancellation of the option and the grant of a new option.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. Performance Awards.
(a) Performance Awards are cash or stock bonus awards that may be
granted either alone, in addition to or in tandem with other awards granted
under the Plan and/or awards made outside of the Plan. Performance Awards shall
not require payment by the recipient of any consideration for the Performance
Award or for the shares of Common Stock covered by such award. The Board or a
committee created by the Board for the purpose of administering Performance
Awards (the "Performance Award Committee") in accordance with Section 4 shall
determine the performance and/or employment factors to be used in the
determination of the amount of Performance Awards and the extent to which such
Performance Awards have been earned. Shares issued pursuant to a Performance
Award may be made subject to various conditions, including vesting or forfeiture
provisions. Performance Awards may vary from participant to participant and
between groups of participants and shall be based upon the achievement of
Company and/or individual performance factors or upon such other criteria as the
Performance Award Committee may deem appropriate.
(b) Adjustment of Awards. The Performance Award Committee may, after
the grant of Performance Awards, adjust the performance factors applicable to
such Performance Awards to take into account changes in the law or in accounting
or tax rules and to make such adjustments as the Committee deems necessary or
appropriate to reflect the inclusion or exclusion of the impact of extraordinary
or unusual items, events or circumstances in order to avoid windfalls or
hardships.
The foregoing amendment shall become effective as of September 1,
1995, subject to shareholder approval at the Company's August 29, 1995 annual
meeting of shareholders.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
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Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
18. Agreements. Options and Performance Awards shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
19. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
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<PAGE> 1
EXHIBIT 10.36
CONFIDENTIAL TREATMENT REQUESTED
----------------------------
### This portion has been
omitted and filed separately
pursuant to a request of
confidential treatment.
----------------------------
GEOWORKS - NEC
TECHNOLOGY LICENSE AGREEMENT
This Agreement is effective as of April 26, 1996 (the "Effective Date"), by and
between GEOWORKS, a California corporation ("GEOWORKS"), and NEC Corporation, a
Japanese corporation ("NEC").
RECITALS
A. NEC is a developer, manufacturer, and distributor of computer,
communication and consumer electronics equipment.
B. GEOWORKS is a developer, manufacturer, distributor, and publisher of
computer software technologies.
C. GEOWORKS and NEC desire that GEOWORKS grant to NEC the right to embed
certain GEOWORKS technologies in a new portable computing and
communication device to be developed by NEC, code-named #####.
AGREEMENT
1. DEFINITIONS
1.1 "PARTY" and "PARTIES" refer to GEOWORKS and/or NEC.
1.2 "LICENSEE" means, collectively, (i) NEC and (ii) any
corporation, company or other entity at least fifty percent
(50%) of whose outstanding shares or securities or ownership
interests (representing the right to vote for the election of
directors or other managing authorities) are owned or
controlled by NEC, but such corporation, company or other
entity shall be deemed to be "Licensee" only so long as such
ownership or control exists.
1.3 "LICENSED TECHNOLOGY" means the GEOS(R) operating system
software and GEOS-based application software, described in
Exhibit A, including but not limited to, the Licensed
Technology modified to the Product Specification for the #####
Product .
1.4 "PRODUCT MATERIALS" means the documentation described in
Exhibit A.
<PAGE> 2
1.5 "TOOLS" means the software development tools described in
Exhibit A.
1.6 "UPDATE" means a modification to the Licensed Technology which
incorporates corrections of Errors and/or provides functional
or performance improvements. Updates include any update,
supplement, version up and upgrade of the Licensed Technology.
1.7 #####
1.8 "GEOWORKS PROMOTIONAL MATERIALS" means the GEOWORKS
promotional materials described in Section 8.6 (GEOWORKS
Promotional Materials Packed with the Licensee Product).
1.9 "EMBEDDED LICENSED TECHNOLOGY" means the Licensed Technology,
in Object Code form only, reproduced in solid state media
(e.g., Read Only Memory (ROM), Programmable Read Only Memory
(PROM) or Flash Memory) and physically integrated into the
Product and distributed with the Product as a single physical
and commercial unit. "Embedded Licensed Technology" may also
include the Licensed Technology, in Object Code form only,
reproduced on removable media (e.g., HDD units that fit in
type III PCMCIA slots), provided that such media are sold with
the Product as a single commercial unit and are never sold
separately.
1.10 "ERROR" means (i) a failure of the Licensed Technology, as
delivered to NEC by GEOWORKS, to operate in the Product in the
manner described in the Product Specification, or (ii) any of
the errors or problems described in Section 13.3
(Classification); #####
1.11 "PRODUCT" or "Products" means any and all ##### devices
capable of #####, including, but not limited to, the "#####
Product" as defined in Exhibit B ("##### Product"). Product
will include units bearing Licensee's label ("LICENSEE LABELED
PRODUCTS") and units bearing the label of Licensee's Private
Label customers ("PRIVATE LABELED PRODUCTS").
1.12 "PRODUCT SPECIFICATION" means a description of the
characteristics, functionality and the specification of the
##### Product ("##### PRODUCT SPECIFICATION"), and that of the
Licensed Technology ("LICENSED TECHNOLOGY SPECIFICATION"), as
set forth in Exhibit B. #####
1.13 "PRODUCT SHIPMENT" means a shipment of a unit of Product
embedding the Licensed Technology from a factory or warehouse
of a Licensee which manufactured or have manufactured the
Product to another party. #####
1.14 "OBJECT CODE." The computer programming code for the Licensed
Technology
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<PAGE> 3
in machine readable form.
1.15 "SOURCE CODE." The computer programming code for Licensed
Technology in human readable form, including internal
programmer documentation and commentary regarding the
structure and operation of the code.
2. FORM OF AGREEMENT
2.1 EXHIBITS
This Agreement has the following Exhibits which form an integral
part hereof:
Exhibit A Identification of the Licensed Technology.
This Exhibit is a description of all Licensed
Technology licensed to Licensee under this
Agreement.
Exhibit B The NEC ##### Project. This Exhibit includes
a description of the ##### Product, the
Product Specification, a timetable for
development, and other terms.
Exhibit C Addresses for Notices
Exhibit D GEOWORKS Trademarks, Logos and Proprietary
Markings
Exhibit E Payments. This Exhibit specifies the
royalties and NRE payable under this
Agreement, and certain other financial terms.
Exhibit F NEC End User License Agreement. This Exhibit
states the minimum terms to be included in
the End User License Agreement to be
distributed with the Embedded Licensed
Technology.
2.2 MODIFICATION AND INTERPRETATION OF EXHIBITS
The Exhibits shall be kept up-to-date and modifications and additions
thereto shall be executed as a result of agreed modifications and
additions. All Exhibits shall be subject to the terms and conditions
of this Agreement, unless otherwise provided in any such Exhibit. In
the event of a conflict between the terms of a Exhibit and the terms
of this Agreement, the terms of the Exhibit shall be given effect for
the subject matter covered by that Exhibit.
2.3 ENTIRE AGREEMENT
This Agreement and the Exhibits hereto state the entire agreement
between the Parties and supersede all prior communications, written
or oral, between the Parties.
2.4 SEVERABILITY
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If any provision contained in this Agreement is determined to be
invalid or unenforceable, in whole or in part, the remaining
provisions and any partially enforceable provision will,
nevertheless, be binding and enforceable, and the Parties agree to
substitute for the invalid provision a valid provision which most
closely approximates the intent and economic effect of the invalid
provision.
2.5 WRITING.
No amendment or modification of this Agreement may be made except by
an instrument in writing signed by both Parties
3. GRANT OF LICENSES.
Subject to all the terms and conditions herein, GEOWORKS hereby grants
to Licensee the following:
3.1 OBJECT CODE DISTRIBUTION
a worldwide, non-exclusive, non-transferable license, for the Term
(Section 14.1) and subject to the terms of this Agreement, (i) to
distribute the Embedded Licensed Technology in Object Code form only
and (ii) to distribute the Licensed Technology in Object Code form
(whether embedded or not) for use by end users who have previously
purchased a royalty-bearing Product, for back up, warranty,
maintenance, upgrade and version up purposes only. #####
3.2 OBJECT CODE REPRODUCTION
a worldwide, non-exclusive, non-transferable license, for the term of
this Agreement, to make, and to have made by subcontractors in
connection with their production for Licensee of the Product or
Product components ##### exact copies of the Licensed Technology, in
Object Code form only.
3.3 SOURCE CODE
3.3(a) a worldwide, non-exclusive, non-transferable license to
copy and use the Source Code #####
3.3(b) the license to exercise the rights set forth in
subsections 3.1 (Object Code Distribution) and 3.2
(Object Code Reproduction) with respect to the Object
Code versions of such modifications, #####.
3.4 TOOLS AND PRODUCT MATERIALS
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a worldwide, non-exclusive, non-transferable, royalty-free internal
license to use, copy and modify (including the right to extend such
rights to Licensee's sub-contractors, subject to Section 15 hereof if
applicable) the Tools and Product Materials identified in Exhibit A,
for the purposes set forth in Section 3.3.; #####.
3.5 TRADEMARKS
a worldwide, non-exclusive, non-transferable, royalty-free license,
for the term of this Agreement, to use GEOWORKS' trademarks and logos
identified in Exhibit D solely for the purpose of marketing and
distributing the Licensed Technology.
3.6 NO IMPLIED LICENSES
There are no implied licenses under this Agreement, and any rights not
expressly granted to Licensee hereunder are reserved by GEOWORKS.
Except as expressly provided above, Licensee may not authorize any
other party to make copies of the Licensed Technology. Licensee
agrees that it will not use, copy, distribute, modify or transfer the
Licensed Technology except as expressly permitted in writing by
GEOWORKS or otherwise in accordance with the terms of this Agreement.
4. PROPRIETARY RIGHTS
4.1 LICENSED TECHNOLOGY OWNERSHIP
GEOWORKS warrants, and Licensee acknowledges and agrees, that GEOWORKS
and GEOWORKS' licensers are and shall remain the owners of all
intellectual property rights in and to the Licensed Technology. The
terms "purchase", "sell," "sold" and "distributed," when used with
respect to the Licensed Technology in this Agreement, refer only to
the purchase, sale or distribution of a license to use the Licensed
Technology.
4.2 LICENSEE MODIFICATIONS TO LICENSED TECHNOLOGY
#####
5. DELIVERY OF THE LICENSED TECHNOLOGY AND ACCEPTANCE
5.1 MARKETING REQUIREMENTS DOCUMENT
NEC shall prepare and deliver to GEOWORKS a market requirements
documents, #####
5.2 SPECIFICATION
The Product Specification, #####, shall be signed by both Parties and
attached to Exhibit B of this Agreement. All modifications thereto
shall be made by mutual agreement only and shall be confirmed in
writing.
5.3 DEVELOPMENT
GEOWORKS agrees to perform the software development services which are
necessary
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<PAGE> 6
to cause the GEOWORKS Licensed Technology to conform to the Product
Specification according to the schedule set forth in Exhibit B
attached hereto.
5.4 TESTING BY GEOWORKS
GEOWORKS Licensed Technology will be tested by GEOWORKS in accordance
with the mutually agreeable test plan to be included with the Product
Specification. GEOWORKS will provide NEC with the test results
together with the deliverables.
5.5 DELIVERY
#####
5.6 TESTING BY NEC
#####
5.7 ACCEPTANCE
The Licensed Technology will be deemed accepted ("Acceptance") on the
earliest to occur of the following:
#####
6. #####, UPDATES AND #####
6.1 #####
The Parties understand and agree that #####. GEOWORKS will, upon
NEC's written request and mutual agreement of the Parties perform the
modification work of the Licensed Technology in accordance with a
product specification, a delivery schedule, acceptance criteria, non-
recurring engineering ("NRE") payment terms, and other pertinent
provisions, to be agreed upon by the Parties through mutual
consultation in good faith.
6.2 UPDATES
GEOWORKS shall provide NEC written reports of the latest information
concerning Updates from time to time, and upon NEC's request, deliver
the Updates to NEC #####.
6.3 #####
#####
6.4 COMPENSATION
#####
6.5 SUPPORT OF UPDATED TECHNOLOGY
#####
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<PAGE> 7
6.6 ##### TOOLS AND PRODUCT MATERIALS
#####
7. PAYMENTS
7.1 ROYALTY PAYMENTS
NEC agrees to pay to GEOWORKS royalty payments as set forth in Exhibit
E. Such payments are due and payable within sixty (60) days after the
close of the quarter in which Product Shipments occur.
7.2 NOT FOR RESALE UNITS
NEC will not incur any royalty payments for "not for resale" units of
Product which are provided free of charge to third party end users or
to a distributor or dealer of the Licensee, or used by Licensee solely
for (i) demonstration and/or sales promotion purposes, (ii) testing
purpose, and/or (iii) warranty or other customer support of the
Product; or for the Product units returned by a distributor or dealer;
provided, however, that a royalty payment will become due if and when
Licensee receives a payment or other compensation for the delivery of
any such Product units or Licensee uses such Product units for
internal purposes other than those set forth in this Section.
7.3 CONSIDERATION FOR SOFTWARE ADAPTATION
In consideration for GEOWORKS' services in adapting its Licensed
Technology to conform to the initial Product Specification, NEC shall
pay to GEOWORKS the ##### expense set forth in Exhibit E. ##### If
any change to the Product Specification requested by NEC causes an
increase or decrease in the cost of development in the GEOWORKS,
either Party may request the other Party to equitably adjust the NRE
expenses, provided that no adjustment shall be made unless agreed in
writing by the Parties on or before the date of written confirmation
of the change of the Product Specifications by both Parties.
7.4 TRAVEL REIMBURSEMENT
#####
7.5 CURRENCY
All payments under this Agreement are to be made in U.S. dollars._@Any
royalties that accrued in any currency other than U.S. dollars shall
be converted to U.S. dollars at TTS exchange rate quoted by an
authorized foreign exchange bank located in Tokyo, Japan on the last
business day of the calendar quarter during which such royalties
accrued.
7.6 TAX, ETC.
#####
7.7 RECORDS
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NEC shall maintain complete and correct records establishing the
amount of royalties due hereunder at least for a period of ##### after
the occurrence of each event.
7.8 REPORTS
No later than sixty (60) days after the end of each quarter, NEC shall
send to GEOWORKS a report stating the number of royalty-bearing units
of Product Shipment during the quarter and amount of royalty due on
each Product. No report shall be required if Licensee notify GEOWORKS
that it discontinues the shipment of the Product and the amount of
royalty due is zero. From time to time, GEOWORKS may request that
Licensee provide such information as GEOWORKS may reasonably require
in order to register and protect its trademarks and other intellectual
property rights. #####.
7.9 AUDITS
During the term of this Agreement and for ##### after the later of (i)
expiration or any termination of this Agreement, or (ii) the date on
which Licensee last ships units of any Product in accordance with
Section 14.4 (Limited Rights After Termination), an independent
third-party representative of GEOWORKS, reasonably acceptable to NEC,
upon reasonable notice and during NEC's normal business hours, shall
have the right to conduct an audit of the relevant portions of NEC's
books of account to verify the accuracy of the royalty report of NEC.
Prompt adjustment shall be made for any over or under payments
revealed by such audit(s), #####. Such audit(s) may be conducted no
more than once in any twelve-month period. #####. All information
obtained by GEOWORKS' independent third-party representative during
any such audit shall be treated as Confidential Information as defined
in Section 15 (Nondisclosure and Restricted Use). The auditor shall
report to GEOWORKS only the result of the audit and shall not disclose
any Confidential Information of Licensee.
8. ADVERTISING, TRADEMARK USAGE/PROTECTION AND PUBLICITY
8.1 CO-PROMOTION OF GEOWORKS
#####
8.2 LICENSEE-LABELED PRODUCTS
GEOWORKS' name, logo and proprietary notices, in the forms provided in
Exhibit D, will appear prominently, in a style, size and location
reasonably determined by Licensee, on or in connection with all
Licensee-labeled Products, as follows:
#####
8.3 PRIVATE LABELED PRODUCTS
#####
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8.4 ACKNOWLEDGMENT OF NEC
##### Such approval may be given by the officer identified in Exhibit
C. NEC shall review all such requests made by GEOWORKS under this
Subsection without undue delay.
8.5 PUBLIC RELATIONS PROGRAMS
#####
8.6 GEOWORKS PROMOTIONAL MATERIALS PACKED WITH THE LICENSEE-LABELED
PRODUCT #####
8.7 MARKETING PLANS
#####
9. CUSTOMER SUPPORT
9.1 FIRST LEVEL CUSTOMER SUPPORT
Licensee shall provide and/or shall require its Private Label
customers to provide customer support for end users who acquire
Product units, in accordance with Licensee's commercially reasonable
and customary customer support practices. In the event that
Licensee's customers first call GEOWORKS directly for technical
support, GEOWORKS may refer such customers to Licensee. #####
9.2 SECOND LEVEL CUSTOMER SUPPORT
In the event that trained Licensee technical personnel are unable to
answer the end users' questions regarding the Licensed Technology
after using reasonable efforts, such technical personnel may contact
GEOWORKS at its customer support center with respect to such technical
support questions. #####
9.3 TESTING EQUIPMENT
During the development process, Licensee shall deliver to GEOWORKS
##### of the ##### Product, together with such special equipment and
supplies as GEOWORKS may reasonably require and be accepted by
Licensee, for the exclusive use in testing the operation of the
Licensed Technology in the ##### Products.
Upon the first commercial shipment of each Product, Licensee will
deliver ##### of the release version of the Product, including all
packaging and documentation included in the Product. GEOWORKS shall
have and retain use of such Product units to meet its second-level
support and Error-correction obligations under this Agreement, and in
order to protect its trademarks and copyrights.
9.4 ##### SALES
#####
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<PAGE> 10
10. MANUFACTURING RESPONSIBILITIES.
Licensee will manufacture accurate copies of the Licensed Technology in the
Product, at its expense and responsibility. Any Product bearing a GEOWORKS
trademark shall be manufactured in accordance with Licensee's customary quality
control standards. Unless GEOWORKS otherwise agrees in writing, all of the
Licensed Technology computer programs (including data files) identified in
Exhibit A under the heading "Minimum Configuration" shall be loaded in the
Product so that the Product meets the minimum requirements of the GEOWORKS
operating system platform.
11. GEOWORKS' INDEMNITIES
11.1 INDEMNITY
GEOWORKS shall defend and hold harmless Licensee, its Private Label
customers, and their distributors and customers against, and pay any
resulting awards and settlements arising from, any claim, demand, suit
or action to the extent it alleges that the Licensed Technology,
Product Materials, Tools or GEOWORKS trademarks ("Licensed Items") as
supplied by GEOWORKS infringes upon any patent or trademark or
copyright or trade secret or other intellectual property right of any
third party, provided that (1) NEC promptly informs GEOWORKS in
writing of any such claim, demand, action or suit, (2) GEOWORKS is
given control over the defense thereof and NEC cooperates in the
defense, at GEOWORKS' expense, and (3) Licensee will not agree to the
settlement of any such claim, demand, action or suit prior to a final
judgment thereon without the prior written consent of GEOWORKS, which
consent will not be unreasonably withheld. Licensee shall have the
right to select its own counsel to participate in any such defense, at
Licensee's expense. GEOWORKS' indemnity obligations do not apply to
(1) modifications to the Licensed Technology specified by NEC, if the
modification causes an infringement without regard to the manner in
which the modification is implemented by GEOWORKS (and provided,
however, that GEOWORKS' indemnity obligations shall apply to
infringements caused by the manner in which GEOWORKS implements such a
modification), (2) modifications made to the Licensed Technology not
by or for GEOWORKS, (3) distribution of a superseded infringing
version of the Licensed Technology by Licensee after release by
GEOWORKS (and acceptance by NEC, which acceptance shall not be
unreasonably withheld or delayed) of a non- infringing version by
GEOWORKS in accordance with Section 11.2 hereof (GEOWORKS' Rights),
and (4) any use or combination of the Licensed Technology with any
technology, software or hardware not supplied by GEOWORKS, if such
alleged infringement would be avoided by use of the Licensed
Technology alone or with other technology, software or hardware.
11.2 GEOWORKS' RIGHTS
If a claim, demand, suit or action alleging infringement is brought or
GEOWORKS reasonably believes one may be brought, GEOWORKS shall be
fully responsible and have the right at its entire expense to (1)
modify the Licensed Technology to avoid the allegation of
infringement, while at the same time maintaining compliance of the
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Licensed Technology with the Product Specification, or (2) obtain for
Licensee a license to continue to exercise the rights granted herein.
11.3 LIMITATIONS
#####
12. NEC'S INDEMNITIES
12.1 INDEMNITY.
NEC shall defend and hold harmless GEOWORKS against, and pay any
resulting awards and settlements arising from any claim, demand, suit
or action to the extent it alleges that any Product embedding the
Licensed Technology (excluding the Licensed Technology) infringes upon
any patent or any trademark or copyright or trade secret or other
intellectual property rights of any third party, provided that (1)
GEOWORKS promptly informs NEC in writing of any such claim, demand,
action or suit, (2) NEC is given control over the defense thereof and
GEOWORKS cooperates in the defense at NEC's expense, and (3) GEOWORKS
will not agree to the settlement of any such claim, demand, action or
suit prior to a final judgment thereon without the written consent of
NEC, which consent will not be unreasonably withheld. GEOWORKS shall
have the right to select its own counsel to participate in any such
defense at GEOWORKS' expense. NEC's indemnity obligations do not
apply to (1) modifications made to the Product not by or for Licensee,
and (2) any use or combination of the Product with any technology,
software or hardware not supplied by Licensee, if such alleged
infringement would be avoided by use of the Product alone or with
other technology, software or hardware.
12.2 LIMITATIONS
#####
13. ERROR CORRECTION
13.1 TERM AND COST OF ERROR CORRECTION
GEOWORKS shall provide Error correction, as set forth herein, at no
charge for a period of ##### after Acceptance of the Licensed
Technology. Thereafter during the term of this Agreement and #####
after the last delivery of any Update, upon the request of NEC, such
Error correction will be provided in accordance with conditions to be
agreed upon by the Parties.
13.2 REQUEST FOR CORRECTION
#####
13.3 CLASSIFICATION
Errors shall be classified as ##### as follows:
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#####
GEOWORKS will have primary responsibility to classify the Errors and
will inform NEC of the result of it classification without delay,
provided that if NEC has a different opinion both Parties will consult
each other in good faith to determine the classification of the
Errors.
13.4 TIMEFRAME
GEOWORKS will respond to reports of suspected Errors as follows:
#####
13.5 DEFINITION OF ##### ERROR
For purposes of this Section, an ##### Error is one specific Error
#####. For this purpose, GEOWORKS may request that Licensee provide
the information of its intended date of first commercial shipment, and
Licensee agrees to respond to such requests with the information as is
available without delay.
13.6 LIABILITY FOR COST OF CORRECTION
GEOWORKS shall be responsible for all internal engineering expenses
incurred by GEOWORKS in connection with its correction of any Error.
Licensee shall be responsible for all costs and expenses associated
with Licensee's refund, recall, or replacement of any unit of any
Product affected by any Error. #####
13.7 DISCLAIMER OF IMPLIED WARRANTIES
EXCEPT AS SET FORTH IN THIS AGREEMENT, AND TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ALL IMPLIED WARRANTIES WITH RESPECT TO THE LICENSED
TECHNOLOGY, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY
EXCLUDED.
14. TERM OF AGREEMENT AND TERMINATION
14.1 TERM
Unless terminated earlier in accordance with this Agreement, this
Agreement shall begin on the Effective Date and shall continue to be
effective for seven (7) years from the Effective Date and shall
thereafter automatically be extended for succeeding every three (3)
year periods unless either party gives to the other a written notice
of termination at least one (1) year prior to the expiration of the
original or extended term of this Agreement.
14.2 TERMINATION FOR BREACH
Each Party shall have the right to terminate this Agreement upon
thirty (30) days prior
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written notice if the other Party is in breach of any material term of
this Agreement and the breaching Party fails to remedy such breach
within the thirty-day notice period.
14.3 BANKRUPTCY
Each Party shall have the right to terminate this Agreement
immediately upon written notice in the event that the other Party
becomes insolvent, files for any form of bankruptcy, makes any
assignment for the benefit of creditors, or ceases to conduct business
(other than in connection with an assignment permitted under Section
18.1 (Assignment)). Each Party acknowledges that if it is a
debtor-in- possession, or if a trustee in bankruptcy in a case under
the United States Bankruptcy Code rejects this Agreement or any
agreement supplementary hereto, the other Party may elect to retain
its rights under this Agreement and/or any supplementary agreement as
provided in Section 365(n) of the United States Bankruptcy Code. Upon
written request of the other Party to the bankrupt Party or the
Bankruptcy Trustee, the bankrupt Party or such Bankruptcy Trustee
shall not interfere with the rights of the other Party as provided in
this Agreement and any supplementary agreement.
14.4 LIMITED RIGHTS AFTER TERMINATION
Upon any termination this Agreement due to the material breach by
Licensee, all rights granted hereunder, including without limitation
the licenses granted under Section 3 (GRANT OF LICENSES), shall
terminate, as follows:
14.4(a) INVENTORY: When this Agreement is terminated, Licensee may
continue to distribute its on-hand inventory of Product
units embedding the Licensed Technology in accordance with
the terms and conditions of this Agreement for a period of
##### following such termination.
14.4(b) USE AND PRODUCTION: Licensee will immediately cease all
modification, copying, embedding and production of any
additional copies of the Licensed Technology and any
additional units of the Product as of the termination date
and will cause any third parties who obtained from it the
right to manufacture copies of the Licensed Technology or
units of Product to do likewise.
14.4(c) CUSTOMERS' RIGHTS: Any termination or expiration shall not
affect any end user's rights to use Product units and shall
further not affect the right of any non-affiliated third
party who purchased units of Product from NEC to sell such
units to its customers.
14.4(d) RETURN OF MATERIALS: Within ##### of such termination or
expiration (or immediately upon termination in the case of
a termination for breach by Licensee), Licensee shall
return all copies of the Licensed Technology then in its
possession, including without limitation master diskettes
and tapes, and user manuals. #####. Each Party shall
destroy or return to the other all Confidential Information
provided by the other Party, except that each Party may
retain one
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copy for archival purposes only, as a record of the
confidential disclosures made to it under this Agreement.
Within ##### of such termination or expiration, each Party
shall confirm in writing to the other Party that all of the
foregoing has been completed.
14.5 PAYMENT
Within ##### of such termination or expiration NEC shall pay to
GEOWORKS any and all sums due under this Agreement.
15. NONDISCLOSURE AND RESTRICTED USE
15.1 CONFIDENTIAL INFORMATION
In the course of performing this Agreement, each Party (the
"Disclosing Party") may disclose to the other Party ("the Receiving
Party") trade secrets and confidential and proprietary information of
the Disclosing Party, (i) disclosed in written or other tangible form
and clearly marked with a legend identifying it as confidential or,
(ii) disclosed in verbal or visual communications with the
identification of confidential at the time of such disclosure and
within ##### after such verbal or visual disclosure is provided in
written or other tangible form to the Receiving Party marked with such
legend ("Confidential Information"). #####. Both Parties agree that
all Confidential Information of the other Party shall be held in
strict confidence, will not be disseminated or disclosed to any third
party and will not be used by the Receiving Party for any purpose
other than performing its rights under this Agreement without the
express written consent of the Disclosing Party for ##### from the
date of disclosure, #####. Both Parties agree to use at least the
degree of diligence to protect the other Party's Confidential
Information as a reasonably prudent technology company would normally
use to protect any of its own trade secrets and other confidential
information. #####. The provisions of this Section shall not apply to
any information or materials:
(i) which are in the public domain at the time of
disclosure to the Receiving Party or which thereafter
enter the public domain through no action or inaction
by the Receiving Party or its employees; or
(ii) which were in the possession of, or known by, the
Receiving Party prior to its receipt from the
Disclosing Party; or
(iii) which are rightfully disclosed to the Receiving Party
by another party without restriction; or
(iv) which have been independently developed by the
Receiving Party, provided that the persons developing
the same have not had access to the Confidential
Information furnished to the Receiving Party by the
Disclosing Party hereunder; or
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<PAGE> 15
(v) which are required to be disclosed pursuant to law,
provided, however, that a minimum of ##### written
notice shall be provided by the Party intending to
disclose in order to permit the other Party to take
such action as it deems appropriate to prevent or
limit such disclosure.
15.2 RESTRICTED USE
Without prejudice to the generality of the foregoing, each Party
agrees not to use any of the Confidential Information or Licensed
Technology of the other Party for any use or purposes except those
expressly specified herein.
16. LIMITATION OF LIABILITY
REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL
PURPOSE, NEITHER PARTY TO THIS AGREEMENT SHALL BE LIABLE TO THE OTHER PARTY FOR
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OR THE LOSS OF ANTICIPATED PROFITS
ARISING FROM ANY PERFORMANCE OR BREACH OF THIS AGREEMENT BY SUCH PARTY EVEN IF
NOTICE IS GIVEN OF THE POSSIBILITY OF SUCH DAMAGES.
17. SOURCE CODE ESCROW
17.1 APPOINTMENT
Upon NEC's written request, the Parties will appoint a mutually
agreeable escrow agent, and will execute an Escrow Agreement
acceptable to both Parties and to the escrow agent.
17.2 DEPOSIT
If the Escrow Agreement is established, then, within thirty (30) days
after Acceptance, and thereafter upon NEC's Acceptance of any Update,
GEOWORKS will deliver to the escrow agent the most current copy of
those portions of the Source Code of the Licensed Technology that have
not already been made available to NEC under this Agreement, in a form
which can be used by a technically competent computer programmer to
edit, debug, modify and compile the programs. If third party hardware
and/or software is needed to so edit, debug, modify or compile the
programs, an identification of such hardware and/or software shall
also be deposited.
17.3 RELEASE FROM ESCROW
The escrow agent will deliver the deposit to NEC upon: (a) the
bankruptcy, liquidation or other permanent cessation of business by
GEOWORKS (except in connection with an assignment permitted under
Section 18.1 (Assignment)); (b) a finding of a court or arbitrator
that GEOWORKS failed to cure a material breach of its obligations to
correct Errors under Section 13 (Error Correction) within thirty (30)
days after written notice of such breach from NEC, and a finding that
delivery of the source code to NEC is thereby made necessary; or (c)
other instructions signed by both parties.
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17.4 COST
The expenses to be paid to the escrow agent shall be borne and paid by
#####.
17.5 CONDITIONAL LICENSE UPON RELEASE OF SOURCE CODE FROM ESCROW
Upon release of the Source Code to NEC hereunder, Licensee shall have
a nonexclusive, worldwide, perpetual license to use and modify the
Source Code in order to correct Errors. Licensee shall treat the
source code as confidential, and shall protect the Source Code from
disclosure in the same manner and with the same level of care with
which Licensee protects the Source Code to Licensee's proprietary
products from disclosure.
18. GENERAL
18.1 ASSIGNMENT
This Agreement may not be assigned in whole or in part by either Party
without the prior written consent of the other Party; provided,
however, that a successor in interest by merger, by operation of law,
assignment or purchase of the entire business of either Party, shall
acquire all interest and all obligations of such Party hereunder,
without the necessity of obtaining prior written consent. Any
prohibited assignment shall be null and void. The terms and
conditions of this Agreement shall be binding upon and enforceable by
the successor and permanent assigns of either Party.
18.2 GOVERNING LAW; ARBITRATION
This Agreement will be governed and interpreted in accordance with the
laws of the State of California, U.S.A., except for that body of law
pertaining to conflicts of law, but excluding the Convention on
Contracts for the International Sale of Goods. All disputes arising
in connection with this Agreement shall, unless amicably settled by
the parties, be finally settled by arbitration under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce
by three (3) arbitrators appointed in accordance with the Rules. The
place of arbitration shall be, unless otherwise agreed between the
parties, the country and the city in which the respondent has its
principal place of business. Judgment upon the award rendered may be
entered in any Court having jurisdiction or application may be made to
such Court for a judicial acceptance of the award and an order of
enforcement, as the case may be. All the arbitrators shall be
conversant in the English language, and all proceedings shall be
conducted and all documentary evidence shall be presented in English.
Notwithstanding the foregoing, either party may request injunctions,
seizure orders, writs of attachment, and other extraordinary remedies
from any court having jurisdiction in the case of an actual or
threatened infringement of such party's patents, copyrights,
trademarks, trade secrets or other intellectual property rights by the
other party. The filing of a proceeding for such extraordinary
remedies shall not constitute a waiver by the filing party of the
right to compel arbitration of all demands for other remedies.
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18.3 CHOICE OF LANGUAGE
The original of this Agreement has been written in English and English
is the governing language of this Agreement.
18.4 INDEPENDENT CONTRACTORS
Each Party will be deemed to have the status of an independent
contractor towards the other Party, and nothing in this Agreement will
be deemed to place the Parties in the relationship of
employer-employee, principal-agent, partners or joint ventures.
18.5 ATTORNEYS' FEES
#####
18.6 WAIVER
The failure of either Party to enforce any provision of this Agreement
shall not be deemed a waiver of that or any other provision of this
Agreement.
18.7 FORCE MAJEURE
Neither Party will be deemed in default of this Agreement to the
extent that performance of its obligations is delayed or prevented by
reason of any act of God, fire, natural disaster, accident, act of
government, or any other cause beyond the control of such Party
("Force Majeure"), provided that such Party gives the other Party
written notice thereof promptly and uses its good faith efforts to
cure the breach. In the event of such a Force Majeure, the time for
performance or cure will be extended for a period equal to the
duration of the Force Majeure but not in excess of six (6) months.
18.8 NOTICES
Notices to either Party shall be in writing, in the English language,
and shall be deemed delivered when served in person or two business
days after being dispatched by an internationally recognized express
courier service, and delivered to the addresses set forth in Exhibit
C. A Party may change its address for purposes of receiving notices
by giving notice of the change to the other Party.
18.9 SURVIVAL
The rights and obligations under Sections 3 (GRANT OF LICENSES)
(except in the case of termination by GEOWORKS due to material breach
by NEC), 4 (PROPRIETARY RIGHTS), 7 (PAYMENTS), 9.1 (First Level
Customer Support), 10 (MANUFACTURING RESPONSIBILITIES), 11 (GEOWORKS'
INDEMNITIES), 12 (NEC'S INDEMNITIES), 13. (ERROR CORRECTION), 14.4
(Limited Rights After Termination), 15 (NONDISCLOSURE AND RESTRICTED
USE), 16 (LIMITATION OF LIABILITY), and 18 (GENERAL) shall survive the
expiration and any termination of this Agreement.
18.10 COMPLIANCE WITH LAWS
17
<PAGE> 18
Both Parties agree to comply with all applicable laws and regulations
in performing their duties hereunder. Both Parties understand that
the Licensed Technology may be restricted by the governments of the
United States and/or Japan from export to certain countries and each
Party agrees that it will not distribute or reexport directly or
indirectly, the Licensed Technology, or its direct product, in any way
which will violate any of the export control laws or regulations of
the United States or Japan, or to any prohibited country under such
laws and regulations.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
Effective Date.
GEOWORKS NEC CORPORATION
- ----------------------------------- -----------------------------------
Signature Signature
Leland J. Llevano Takashi Hiyama
- ----------------------------------- -----------------------------------
Print Name Print Name
General Manager,
Title Vice President Title Mobile Communications Division
- ----------------------------------- -------------------------------
Date Sep 9, 1996 Date Sep 5, 1996
- ----------------------------------- --------------------------------
18
<PAGE> 19
EXHIBIT A
IDENTIFICATION OF THE LICENSED TECHNOLOGY
A. OPERATING SYSTEM
#####
B. APPLICATIONS #####
#####
C. PRODUCT MATERIALS
#####
D. TOOLS #####
#####
E. THIRD PARTY TECHNOLOGIES SUB-LICENSED TO NEC BY GEOWORKS #####
#####
F. MINIMUM CONFIGURATION
The following is a preliminary identification of the GEOS files that must be
present in a GEOS-based Product in order to meet the minimum configuration
requirements of the platform:
The following libraries must be present in any GEOS-based Product:
#####
Currently each GEOS Product must also contain the following:
#####
19
<PAGE> 20
EXHIBIT B
THE NEC "#####" PROJECT
1. Product Definition
##### Product is a ##### and communication device initially designed
for #####.
2. Product Specification
2-1 ##### Product Specification To be attached
2-2 Licensed Technology Specification To be attached
3. GEOWORKS' Testing Plan
To be determined in Product Specification
4. NEC's Testing Plan
To be determined in Product Specification
5. NEC's Coding Responsibilities
#####
End User Documentation
6. Timetable
#####
* The terms "Pre-Alpha," "Alpha," "Beta" and "Final" are to be defined by the
Parties in the Product Specification.
7. NEC Proprietary Elements:
a) Program Modules
The following specific program modules, if developed by NEC, shall be
NEC Proprietary Elements:
#####
b) ##### Look and Feel and Specific UI Library
#####
20
<PAGE> 21
c) GEOWORKS' Retained Rights
GEOWORKS retains ownership of all intellectual property rights in ##### User
Interface.
Subject to item a) and b) above. GEOWORKS retains ownership of all intellectual
property rights in ideas, methods, programming routines and subroutines,
algorithms, screen handling techniques, I/O techniques and similar reusable
elements, which are included in the ##### Specific UI Software Library
furnished by GEOWORKS hereunder (the "Incorporated Procedures").
The licenses granted to NEC in Section 3 (GRANT OF LICENSES.) shall include a
perpetual, world-wide, non-transferable license to include the ##### User
Interface and the Incorporated Procedures in any Product.
21
<PAGE> 22
EXHIBIT C
ADDRESSES FOR NOTICES
GEOWORKS' ADDRESS NEC'S ADDRESS
960 Atlantic Avenue #####
Alameda, CA 94501 U.S.A.
GEOWORKS' TELEPHONE NUMBER NEC'S TELEPHONE NUMBER
+1 510 814 1660 #####
GEOWORKS' FACSIMILE NUMBER NEC'S FACSIMILE NUMBER
+1 510 814 4250 #####
GEOWORKS' NOTICE RECIPIENT NEC'S NOTICE RECIPIENT
Leland J. Llevano #####
Vice President, Strategic Partnerships
copy to
Jordan J. Breslow
GEOWORKS General Counsel
GEOWORKS OFFICER FOR APPROVALS NEC OFFICER FOR APPROVALS
Leland J. Llevano #####
Vice President, Strategic Partnerships
22
<PAGE> 23
EXHIBIT D
GEOWORKS TRADEMARKS, LOGOS AND PROPRIETARY MARKINGS
[Not all marks are available in all countries]
1. Trademarks
GEOWORKS(R)
GEOS(R)
#####
2. Company Name
GEOWORKS
3. Logos
[LOGO]
[LOGO]
4. Proprietary Markings [preliminary list]
A. For Documentation
GEOWORKS(R) application software and GEOS(R) operating system
software copyright (C) 1990-1996 GEOWORKS. All rights
reserved. United States Patent 5,327,529.
#####
[Final list of trademark references to be determined when
Product Specifications are complete]
GEOWORKS(R), GEOS(R) the GEOS logo are Trademarks of GEOWORKS
in the United States of America and other countries.
#####
23
<PAGE> 24
All other brand and product names are trademarks or registered
trademarks of their respective holders.
#####
B. For Screen Display:
[subject to technical feasibility given small screen size]:
Copyright (C)1990-1996 GEOWORKS. United States Patent
5,327,529.
5. GEOWORKS encourages Licensee to incorporate the following copy right
notice on Screen Display, provided that such incorporation shall be
Licensee's discretion. [GEOWORKS to request appropriate modification
of notice requirements from third parties, as necessary]
#####
24
<PAGE> 25
EXHIBIT E
NEC PAYMENTS
1. ROYALTIES:
NEC will pay GEOWORKS a royalty for each Product Shipment, net of returns
(excluding "Not For Resale Units" under Section 7.2).
1.1 Rate of Royalties
The rate of royalty will be the following ##### of each Product, or following
#####:
#####
#####
#####
1.2 Updates
For purposes of this per-unit royalty provision, a Major Update is one which
introduces significant new functionality. A Minor Update is one which
incrementally improves the operating system, but does not add significant new
functionality. #####
#####
Notwithstanding the provisions of item 1.1 above, the Parties agree that #####.
2. #####
2.1 ##### NEC shall have the right to have an independent auditor from
time to time audit GEOWORKS' compliance with this provision, and
GEOWORKS shall grant such auditor confidential access to other license
agreements and corresponding files. The auditor shall report to NEC
only the compliance or non-compliance of GEOWORKS. #####.
2.2 If, within #####, any third party OEM customer of GEOWORKS commences
commercial shipment in Japan of a ##### and is based upon the Licensed
Technology or Minor Update (not including Major Update and not
including #####), #####
3. #####
If the total amount of per-unit royalties during the period from the #####
occurs does not equal #####, the balance will be paid by NEC within sixty (60)
days after the end of such period. #####.
25
<PAGE> 26
4. #####FEES
NEC will pay to GEOWORKS a ##### fee ##### for GEOWORKS' development under this
Agreement. Said fee shall be payable as follows:
#####
26
<PAGE> 27
EXHIBIT F
MINIMUM TERMS OF END USER LICENSE AGREEMENT
1. Statement of end user's acceptance of software license and of end
user's right to return for refund if terms not acceptable
2. Copying and installation:
a) For the software to be used on the Product, limited to one
Product and one archive copy
b) For the software to be used on the connected PCs, limited to
two (2) PCs and one archive (if feasible)
3. Decompilation, reverse engineering prohibited
4. U.S. Government restricted rights notices to be included (in U.S.
jurisdiction only)
5. Export law notices to be included
6. Warranty limited to replacing defective media. All other express and
implied warranties are disclaimed
7. Licensee's (or Private Labeled customer's) standard Limitation of
Liability
27
<PAGE> 1
EXHIBIT 10.37
AMENDMENT NUMBER ONE TO
TECHNOLOGY LICENSE AGREEMENT
The Technology License Agreement (the "Agreement") effective as of October 21,
1993, by and between GEOWORKS, a California corporation ("GEOWORKS"), and the
Information Systems Group of Sharp Corporation ("SHARP") is amended as follows:
1. SHARP and GEOWORKS agree that there will be no further distribution,
reproduction or sublicensing by SHARP of the Embedded Licensed
Technology under Section 2 (Grant of Licenses) of the Agreement, and
no further manufacture or distribution of the Products, as defined in
Sections 1.6 and 3 and Exhibit B. SHARP may continue to distribute
any existing inventory of Products on hand as of the Effective Date
of this Agreement, but shall not be required to account or pay
GEOWORKS for such units.
2. SHARP shall have no further obligation to report shipments or
royalties to GEOWORKS under the Agreement, including but not limited
to Section 6.7, (Reports).
3. SHARP shall have no further obligation to pay to GEOWORKS any further
engineering fees, advances against royalties, or actual royalties
under the Agreement, including but not limited to sections 5.3
(Consideration for Software Adaptation), 6.1 (Royalty Payments) and
6.3 (Other Payments), and Exhibit F ("Sharp Minimum Commitment,
Advanced Payment, Royalties and Best Efforts").
4. All fees, royalties and advances paid to GEOWORKS under the Agreement
shall be fully earned by GEOWORKS, and GEOWORKS shall have no
obligation to refund to SHARP any portion of any fee paid to GEOWORKS
under the Agreement.
5. SHARP shall have no further obligations under Sections 7
(Advertising, Trademark Usage/Protection and Publicity), 9.3
(Training) and 10 (Manufacturing Responsibilities) and Exhibit E
(Geoworks Engineering Services for the Bullet Project).
6. GEOWORKS shall have no further obligations to SHARP under sections
5.1 (Delivery of the Software), 8 (Licensed Technology Enhancements),
9 (Customer Support), 13 (Error Correction) and Exhibit E (Geoworks
Engineering Services for the Bullet Project).
AMENDMENT ONE 1 7/2/96
<PAGE> 2
7. The Effective Date of this Addendum is June 15, 1995
GEOWORKS
By
--------------------------------
Leland J. Llevano
- ----------------------------------
Print Name
Vice President
- ----------------------------------
Title
26 Sept 1996
- ----------------------------------
Date
SHARP
By
--------------------------------
Yasuo Sakata
- ----------------------------------
Print Name
General Manager
Information Systems Product
Development Laboratories
- -----------------------------------
Title
September 18, 1996
- ----------------------------------
Date
AMENDMENT ONE 2 7/2/96
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF GEOWORKS AS OF SEPTEMBER 30, 1996, AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS THEN ENDED. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<PERIOD-END> SEP-30-1996
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<SECURITIES> 37,936,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43,606,000
<PP&E> 5,429,000
<DEPRECIATION> (2,312,000)
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<COMMON> 86,952,000
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<INTEREST-EXPENSE> 81,000
<INCOME-PRETAX> (4,768,000)
<INCOME-TAX> 0
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