<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the Commission
/X/ Definitive proxy statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive additional materials
/ / Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
GEOWORKS
--------
(Name of Registrant as Specified in Its Charter)
------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
is determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
GEOWORKS
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 21, 1996
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Geoworks (the "Annual Meeting"), a California corporation (the "Company"), will
be held on August 21, 1996 at 11:00 a.m., local time, at the Company's principal
executive offices, located at 960 Atlantic Avenue, Alameda, California 94501 for
the following purposes:
1. To elect directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected.
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.
3. To ratify the appointment of Ernst & Young L.L.P. as independent
auditors of the Company for the fiscal year ending March 31, 1997.
4. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on June 27, 1996
are entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage-prepaid envelope enclosed for that purpose. Any shareholder
attending the Annual Meeting may vote in person even if such shareholder has
returned a proxy.
FOR THE BOARD OF DIRECTORS
JORDAN J. BRESLOW
Secretary
Alameda, California
July 10, 1996
<PAGE> 3
GEOWORKS
---------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Geoworks, a California corporation (the "Company"), for use at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held on August 21, 1996 at
11:00 a.m., local time, or at any adjournment thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Shareholders.
The Annual Meeting will be held at the Company's principal executive offices,
located at 960 Atlantic Avenue, Alameda, California 94501. The telephone number
at that location is (510) 814-1660. Only holders of record of the Company's
Common Stock at the close of business on June 27, 1996 (the "Record Date") will
be entitled to vote at the Annual Meeting. At the close of business on June 27,
1996, the Company had 14,003,158 shares of Common Stock outstanding and entitled
to vote. A majority of the shares outstanding on the Record Date will constitute
a quorum for the transaction of business. All proxies will be voted in
accordance with the instructions contained therein and, if no choice is
specified, the proxies will be voted in favor of the nominees and the proposals
set forth in the accompanying Notice of Annual Meeting of Shareholders and this
Proxy Statement.
These proxy solicitation materials and the Company's Annual Report to
Shareholders for the year ended March 31, 1996, including financial statements,
were first mailed on or about July 10, 1996 to all shareholders entitled to vote
at the Annual Meeting.
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy
Statement has the power to revoke it prior to the Annual Meeting or at the
Annual Meeting prior to the vote pursuant to the proxy. A proxy may be revoked
by a writing delivered to the Company (Attention: Jordan Breslow, Vice President
and General Counsel) stating that the proxy is revoked, by a subsequent proxy
that is signed by the person who signed the earlier proxy and is presented at
the Annual Meeting or by attendance at the Annual Meeting and voting in person.
Please note, however, that if a shareholder's shares are held of record by a
broker, bank or other nominee and that shareholder wishes to vote at the Annual
Meeting, the shareholder must bring to the Annual Meeting a letter from the
broker, bank or other nominee confirming that shareholder's beneficial ownership
of the shares.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Each shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares held by such
shareholder, or may distribute such shareholder's votes on the same principle
among as many candidates as the shareholder may select, provided that votes
cannot be cast for more than eight directors. However, no shareholder will be
entitled to cumulate votes unless the candidate's name has been placed in
nomination prior to the voting, and the shareholder, or any other shareholder,
has given notice at the Annual Meeting prior to the voting of the intention to
cumulate votes. If any shareholder gives such notice, all shareholders may
cumulate their votes for the candidates in nomination. In the event that
cumulative voting is invoked, the proxy holders will have the discretionary
authority to vote all proxies received by them in such a manner as to ensure the
election of as many of the Board of Directors' nominees as possible. See
"Proposal 1 --Election of Directors." On all other matters, each share has one
vote.
The Company will bear the cost of soliciting the enclosed proxies. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Solicitation of proxies by mail
may be supplemented by telephone,
<PAGE> 4
telegram, facsimile or personal solicitation by directors, officers or regular
employees of the Company. No additional compensation will be paid to such
persons for such activities.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the Company's 1997 Annual Meeting must be
received by the Company no later than March 12, 1997 in order that they may be
included in the proxy statement and form of proxy relating to that meeting.
PROPOSAL 1 -- ELECTION OF DIRECTORS
DIRECTORS/NOMINEES
The Company's Bylaws currently provide for a board of eight directors.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for the eight nominees named below, all of whom are currently directors of
the Company. In the event that any nominee of the Company is unable or declines
to serve as a director at the time of the Annual Meeting, the proxies will be
voted for any substitute nominee who shall be designated by the current Board of
Directors to fill the vacancy. It is not expected that any nominee listed below
will be unable or will decline to serve as a director. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them in such a manner in accordance with
cumulative voting as will ensure the election of as many of the nominees listed
below as possible, and, in such event, the specific nominees to be voted for
will be determined by the proxy holders. In any event, the proxy holders cannot
vote for more than eight persons. The term of office of each person elected as a
director will continue until the next Annual Meeting or until his successor has
been elected and qualified.
The names of the nominees, and certain information about them as of
June 27, 1996, are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- -----
<S> <C> <C> <C>
Brian P. Dougherty... 39 Chairman of the Board 1983
Gordon E. Mayer...... 38 President and Chief Executive Officer 1993
Bruce W. Dunlevie (1) 39 General Partner, MPAE V Management Company, 1990
L.P.
Eric E. Schmidt (1).. 40 Chief Technology Officer, Sun Microsystems, 1993
Inc.
Harry W. McKinney(2). 49 General Manager, Home Products, 1994
Hewlett-Packard Company
Clive G. Smith....... 47 Founder, NuCo, Inc. 1987
Reijo Paajanen....... 38 Vice President, Cellular Data, Nokia Mobile 1995
R. Duff Thompson (2). 45 Phones, Ltd. 1996
Special Counsel to Chief Executive Officer,
Novell, Inc. and General Partner, EsNet, Ltd.
</TABLE>
----------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
There are no family relationships between any directors or executive
officers of the Company.
Mr. Dougherty founded Geoworks in 1983 and has served as Chairman of
the Board since its inception. He also served as Chief Executive Officer of the
Company from its inception to March 1994. Mr. Dougherty also founded Imagic
Corporation, an entertainment software company, serving as Vice President of
Engineering and a director from June 1981 to September 1983. Mr. Dougherty is
also currently the Chairman and Chief Executive Officer of Wink Communications,
Inc., a provider of communications protocols for interactive graphical
applications. Mr. Dougherty holds a B.S. in electrical engineering from the
University of California at Berkeley.
2
<PAGE> 5
Mr. Mayer joined the Company in July 1993 as President and became the
Chief Executive Officer in March 1994. Prior to joining Geoworks, he was an
"Entrepreneur in Residence" with Merrill, Pickard, Anderson & Eyre, a venture
capital and investment management firm that manages private investment funds.
From July 1991 to June 1992, Mr. Mayer was President and Chief Executive Officer
of InfoChip, Inc., a developer of data compression hardware and software. From
February 1988 to July 1991, he was Vice President, Sales and Marketing for
Proxim, Inc., a supplier of OEM wireless data communications products. Mr. Mayer
attended Purdue University, where he earned a B.S. and M.S. in electrical
engineering.
Mr. Dunlevie joined the Company's Board of Directors in July 1990.
Since October 1989, he has been a general partner of MPAE V Management Company,
L.P., the general partner of Merrill, Pickard, Anderson & Eyre, a venture
capital and investment management firm that manages private investment funds.
From July 1987 to September 1989, Mr. Dunlevie served as Vice President and
General Manager of the Computer Systems Division for Everex Systems, Inc., a
computer manufacturer. Mr. Dunlevie currently serves as a director of several
privately-held companies.
Dr. Schmidt joined the Company's Board of Directors in January 1993. He
is the Chief Technology Officer of Sun Microsystems, Inc., where he has been
employed since 1983. Dr. Schmidt has held a variety of senior management
positions with Sun Microsystems, Inc. There is no business relationship between
the Company and Sun Microsystems, Inc.
Mr. McKinney joined the Company's Board of Directors in March 1994. He
currently serves as General Manager of Home Products of Hewlett-Packard Company,
where he has been employed since July 1969. At Hewlett-Packard Company, he has
held several research and development and general management positions.
Mr. Smith joined the Company's Board of Directors in October 1987. He
is the founder of a software republishing company where he has been employed
since January 1996. He served as Vice President, Corporate Development from
January 1994 to December 1995. From October 1987 to December 1993, Mr. Smith was
an independent business consultant and advisor to the Company. In addition,
prior to October 1987, Mr. Smith served as Vice President, Corporate Planning
and General Manager of New Product Development for Commodore International Ltd.,
a computer manufacturer, and as Research Director for the Yankee Group, a market
research firm. Mr. Smith holds a B.A. from the University of Witwatersrand,
South Africa and is a Ph.D candidate at MIT in the Inter-disciplinary Research
Program on Communication Policy.
Mr. Paajanen joined the Company's Board of Directors in February 1995.
Mr. Paajanen is Vice President, Cellular Data of Nokia Mobile Phones, Ltd. Since
joining Nokia in 1981, Mr. Paajanen has held several research and development
and general management positions within Nokia. Mr. Paajanen holds a Master of
Science degree in electrical engineering from Helsinki University of Technology.
Mr. Thompson joined the Company's Board of Directors in January 1996.
He is Special Counsel to the Chief Executive Officer and Chairman of Novell,
Inc. Since January 1994 he has also been a general partner of EsNet, Ltd., an
investment management company. From June 1994 to February 1996, he served as
Senior Vice President, Corporate Development for Novell, Inc. and from December
1986 to June 1994, he served as General Counsel of WordPerfect Corporation. Mr.
Thompson is also a director of Santa Cruz Operations. He holds a B.S. in
Economics and M.B.A. and J.D. degrees from Brigham Young University.
VOTE REQUIRED
The nominees receiving the highest number of affirmative votes of the
shares entitled to be voted, up to the number of directors to be elected, shall
be elected as directors. Votes withheld will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
at the meeting, but have no other legal effect upon election of directors under
California law.
3
<PAGE> 6
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five (5) meetings
during the fiscal year ended March 31, 1996. No director attended fewer than 75%
of the meetings of the Board of Directors and its committees upon which such
director served. The Board of Directors has an Audit Committee and a
Compensation Committee. The Board of Directors has no nominating committee or
any committee performing similar functions.
During fiscal 1996, the Audit Committee of the Board of Directors
consisted of director McKinney and former director Neal Dempsey, and held four
(4) meetings. Currently, the Audit Committee consists of directors McKinney and
Thompson. The Audit Committee recommends engagement of the Company's independent
auditors, and is primarily responsible for approving the services performed by
the Company's independent auditors and for reviewing and evaluating the
Company's accounting principles and its system of internal accounting controls.
The Compensation Committee of the Board of Directors currently consists
of directors Dunlevie and Schmidt, and held six (6) meetings during the last
fiscal year. The Compensation Committee reviews and approves the Company's
executive compensation policy, including the salaries and targets and bonuses of
the Company's executive officers, and co-administers the Company's incentive
stock plans together with the Stock Administration Committee.
DIRECTOR COMPENSATION
The Company does not pay to its directors an annual retainer or a fee
for each meeting. During fiscal 1996, automatic stock option grants for 7,500
and 1,875 shares of Common Stock were awarded under the 1994 Stock Plan to
outside directors Paajanen and Schmidt, respectively. The Company no longer
issues automatic stock option grants to its outside directors. Directors may,
however, receive discretionary stock option grants under the 1994 Stock Plan.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE NOMINEES SET FORTH HEREIN.
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<PAGE> 7
PROPOSAL 2 -- APPROVAL OF AMENDMENT TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE UNDER THE 1994 STOCK PLAN
The 1994 Stock Plan (the "Option Plan") was adopted by the Board of
Directors and approved by the shareholders in 1994. The Option Plan was amended
by the Board of Directors in 1995, to allow for the granting of
performance-based stock and cash awards. Such amendment was approved by the
shareholders in 1995.
Stock options and stock grants play a key role in the Company's ability
to recruit, reward and retain employees, consultants and directors. Technology
companies have historically used stock options and stock grants as an important
part of recruitment and retention packages. The Company competes directly with
these technology companies for experienced personnel and must be able to offer
comparable packages to attract the caliber of individuals that the Company
believes is necessary to remain competitive.
PROPOSED AMENDMENT TO THE OPTION PLAN
The Company is seeking shareholder approval for an amendment to the
Option Plan to increase the number of shares of Common Stock reserved
thereunder. Under the proposed amendment, the shares reserved for issuance under
the Option Plan from 1,500,000 shares to 2,150,000 shares (an increase of
650,000 shares). The Board approved the proposed amendment on June 11, 1996, to
be effective upon shareholder approval.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
Approval of the amendment to the Company's Option Plan to increase the
number of shares of Common Stock reserved for issuance thereunder requires the
affirmative vote of the majority of shares of Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote. All votes will
be tabulated by the inspector of election appointed for the Annual Meeting who
will tabulate affirmative and negative votes, abstentions and broker non-votes.
Abstentions will be counted towards a quorum and have the same effect as
negative votes with regard to the proposal. Broker non-votes will also be
counted towards a quorum but will not be counted for any purpose in determining
whether the proposal has been approved. In addition, the affirmative votes must
constitute at least a majority of the required quorum, which quorum is a
majority of the shares outstanding on the Record Date.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE AMENDMENT TO THE OPTION PLAN.
The essential provisions of the Option Plan are set forth below:
GENERAL
The Option Plan provides for the grant of options to employees,
consultants and outside directors of the Company.
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or non-statutory stock options.
See "Tax Information" below for information concerning the tax treatment of both
incentive stock options and non-statutory stock options.
PURPOSE
The purpose of the Option Plan is to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentives to employees, consultants and outside directors of the
Company and to promote the success of the Company's business.
5
<PAGE> 8
ADMINISTRATION
Grants to Officers and Directors. With respect to grants of options to
officers and directors of the Company, the Option Plan is administered (i) by
the Board of Directors, provided that the Board may do so in compliance with
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or (ii) by a
committee designated by the Board to administer the Option Plan, provided that
the committee is also constituted in such a manner as to permit the Option Plan
to comply with Rule 16b-3 and Internal Revenue Code section 162(m).
Grants to Consultants and Other Employees. With respect to grants of
options to employees or consultants who are neither directors nor officers of
the Company, the Option Plan is administered by the Board, or a committee
designated by the Board, which must be constituted in a manner as to satisfy the
legal requirements relating to the administration of incentive stock option
plans of California corporate and securities laws and of the Code.
The interpretation and construction of any provision of the Option Plan
by the Board or its committee is final and conclusive. Members of the Board or
its committee receive no separate compensation for their services in connection
with the administration of the Option Plan.
ELIGIBILITY
The Option Plan provides that options may be granted to employees
(including officers), consultants and outside directors of the Company and its
designated subsidiaries. The Board of Directors or a committee of the Board
selects the optionees and determines the number of shares to be subject to each
option. Directors may receive discretionary grants under the Option Plan. The
Option Plan places a limit on the aggregate market value of shares subject to
incentive stock options which become exercisable for the first time in any one
calendar year. As of May 31, 1996 there were approximately 145 employees
eligible to participate in the Option Plan, 1,386,130 shares were subject to
outstanding options and 37,663 shares were available for future grant under the
Option Plan. Over the term of the Option Plan, the following Named Executive
Officers (defined below) have been granted options to purchase Common Stock as
follows: Gordon E. Mayer, 42,000 shares; Clive G. Smith, 7,500 shares; Craig J.
Taylor, 85,000 shares; Jordan J. Breslow, 52,000 shares; and Christopher M.
Noble, 56,000 shares. Currently, there are eight directors eligible to
participate in the Option Plan and three outside directors holding outstanding
options for 16,875 shares of Common Stock under the Option Plan. Currently,
there are no consultants participating in the Option Plan.
TERMS OF OPTIONS
The terms of options granted under the Option Plan are to be determined
by the Board or its committee but are not to exceed ten years from the date of
grant. Each option is evidenced by a stock option agreement between the Company
and the optionee to whom such option is granted, and is generally subject to the
following additional terms and conditions:
(a) Exercise of the Option. The Option Plan provides the Board
of Directors or its committee with the discretion to determine when
options granted thereunder become exercisable, subject to certain
limitations on the exercisability of options granted to directors. An
option is exercised by giving written notice of exercise to the
Company, specifying the number of full shares of Common Stock to be
purchased, and tendering payment of the purchase price to the Company.
Payment for shares issued upon exercise of an option may consist of
cash, check, promissory note, other shares of Common Stock or such
other consideration as determined by the Board or its committee.
(b) Exercise Price. The exercise price of options granted
under the Option Plan is determined by the Board of Directors, and may
in no event be less than the fair market value of the Common Stock on
the date the option is granted. However, the exercise price of a stock
option granted to a person who, at the time of grant, owns stock
representing 10% of the voting power of all classes of stock of the
Company or any subsidiary, may not be less than 110% of fair market
value on the date of grant. The Board of Directors of the Company or
its committee determines such fair market value based upon the closing
sales price (or the closing bid if no sales are
6
<PAGE> 9
reported) of the Common Stock in the Nasdaq National Market on the date
prior to the date on which the option is granted.
(c) Termination of Employment or Services. The Option Plan
provides that if the optionee's employment by the Company or service as
an outside director or consultant is terminated for any reason other
than death or disability, the option generally may be exercised no more
than 90 days after such termination, but only to the extent the option
was exercisable on the date of termination.
(d) Death. If an optionee should die while employed by the
Company, or while serving as an outside director or consultant of the
Company, options may be exercised at any time within 12 months after
the date of death (but in no event later than the option's expiration
date) to the extent that the options would have been exercisable at the
date of death.
(e) Disability. If an optionee is unable to continue his
employment or service as a director or consultant as a result of his
total and permanent disability, options may be exercised at any time
within six months (or such other period of time not exceeding 12 months
as is determined by the Board or its committee and specified in the
option agreement) after the date of termination, but only to the extent
the option was exercisable on the date of such termination.
(f) Termination of Options. Incentive stock options and
non-statutory stock options granted under the Option Plan expire 10
years from the date of grant, unless otherwise provided in the option
agreement. However, incentive stock options and non-statutory stock
options granted to an optionee who, at the time of the grant of such
option, owned more than 10% of the total combined voting power of all
classes of stock of the Company or a parent or subsidiary corporation
may not have a term of more than five years. No option may be exercised
by any person after such expiration.
(g) Nontransferability of Options. An option is
nontransferable by the optionee, other than by will or the laws of
descent and distribution, and is exercisable during his or her lifetime
only by the optionee, or in the event of death, by a person who
acquires the right to exercise the option by bequest or inheritance or
by reason of the death of the optionee.
(h) Acceleration of Options. In the event of a merger or
consolidation in which the Company is not the surviving entity, the
Board is obligated either to accomplish an assumption or substitution
of options or to give notice of the acceleration of the optionee's
right to exercise his or her outstanding options in full at any time
within 15 days of such notice.
(i) Other Provisions. The option agreement may contain such
other terms, provisions and conditions not inconsistent with the Option
Plan as may be determined by the Board of Directors or its committee.
PERFORMANCE-BASED COMPENSATION LIMITATION
No employee shall be granted, in any fiscal year, options to purchase
more than 250,000 shares. The foregoing limitation, which shall be adjusted
proportionately in connection with any change in the Company's capitalization
(such as a stock split), is intended to satisfy the requirements applicable to
options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code. In the event that the Board or its
committee determines that such limitations are not required to qualify options
as performance-based compensation, the Board or its committee may modify or
eliminate such limitations.
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<PAGE> 10
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization, such
as a stock split or stock dividend, which results in an exchange of Common Stock
for a greater or lesser number of shares, appropriate adjustment shall be made
in the option price and in the number of shares subject to the option.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may amend the Option Plan at any time or may
terminate it without approval of the shareholders. However, no such action by
the Board of Directors or shareholders may alter or impair any option previously
granted under the Option Plan without the consent of the optionee. In any event,
the Option Plan will terminate in 2004.
The Option Plan provides that shareholder approval of any amendment to
the Option Plan will be required only to the extent necessary to comply with
then current provisions of Rule 16b-3 under the Securities Exchange Act of 1934
or Section 422 of the Code (or any other applicable law or regulation).
TAX INFORMATION
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or non-statutory stock options.
Incentive Stock Options. If an option granted under the Option Plan is
an incentive stock option, the optionee will recognize no income upon grant of
the incentive stock option and incur no tax liability due to the exercise of the
option unless the optionee is subject to the alternative minimum tax. Upon the
sale or exchange of the shares more than two years after grant of the option and
one year after exercise of the option, any gain or loss will be treated as
long-term capital gain or loss. If these holding periods are not satisfied at
the time of sale, the optionee will recognize ordinary income at the time of
sale or exchange equal to the difference between the exercise price and the
lower of (i) the fair market value of the stock at the date of the option
exercise or (ii) the sale price of the stock. A different rule of measuring
ordinary income upon such a premature disposition may apply if the optionee is
also an officer, director or 10% shareholder of the Company. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on such a premature disposition of the
shares in excess of the amount treated as ordinary income will be characterized
as long-term or short-term capital gain or loss, depending on the holding
period.
Non-statutory Options. All other options which do not qualify as
incentive stock options are referred to as non-statutory options. An optionee
will not recognize any taxable income at the time he or she is granted a
non-statutory option. However, upon an option exercise, the optionee will
recognize taxable income, or she generally measured as the excess of the then
fair market value of the shares purchased over the purchased price. Any taxable
income recognized in connection with an option exercise by an optionee who is
also an employee of the Company will be subject to tax withholding by the
Company. Upon resale of such shares by the optionee, any difference between the
sales price and the optionee's purchase price, to the extent not recognized as
taxable income as described above, will be treated as a long-term or short-term
capital gain or loss, depending on the holding period. The Company will be
entitled to a tax deduction in the same amount as the ordinary income recognized
by the Optionee with respect to shares acquired under exercise of a
non-statutory option.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION UPON THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE GRANT AND
EXERCISE OF OPTIONS UNDER THE OPTION PLAN, DOES NOT PURPORT TO BE COMPLETE, AND
DOES NOT DISCUSS THE INCOME TAX LAWS OF ANY STATE OR FOREIGN COUNTRY IN WHICH AN
OPTIONEE MAY RESIDE.
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<PAGE> 11
NEW PLAN BENEFITS
As of the date of this proxy statement, there has been no determination
by the administrator of the Option Plan with respect to future awards under the
Option Plan. Accordingly, future awards are not determinable. The following
table sets forth information with respect to options granted under the Option
Plan during the fiscal year ended March 31, 1996 to (i) the Company's Chief
Executive Officer, the three other most highly compensated executive officers
and one additional executive officer who left the Company before the fiscal year
end (collectively, the "Named Executive Officers"), (ii) all current executive
officers as a group, (iii) all current directors who are not executive officers
as a group and (iv) all employees, excluding executive officers, as a group. The
term of all options outstanding under the Option Plan is ten years from the date
of grant:
<TABLE>
<CAPTION>
SHARES SUBJECT TO
NAME AND POSITION OPTIONS GRANTED EXERCISE PRICE PER SHARE
----------------- --------------- ------------------------
<S> <C> <C>
Gordon E. Mayer........................................ -- --
President and Chief Executive Officer
Clive G. Smith......................................... 7,500 $15.50
Former Vice President, Corporate Development
Craig J. Taylor........................................ 15,000 16.50
Vice President, Engineering
Jordan J. Breslow...................................... 50,000 11.25
Vice President, Secretary and General Counsel
Christopher M. Noble................................... 50,000 11.25
Vice President, Business Development
All current executive officers as a group (6 persons).. 221,000 11.25 - 16.50
All current nonexecutive-officer directors as a group
(7 persons).......................................... 16,875 12.25 - 15.50
All current nonexecutive-officer employees as a group
(121 persons)........................................ 820,150 8.00 - 27.25
</TABLE>
PROPOSAL 3 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young L.L.P., independent
auditors, to audit the financial statements of the Company for the year ending
March 31, 1997, and recommends that the shareholders vote for ratification of
such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection. Ernst & Young L.L.P. has
audited the Company's financial statements since the six month period ended
March 31, 1990. Representatives of Ernst & Young L.L.P. are expected to be
present at the Annual Meeting and will have the opportunity to make a statement
if they so desire. The representatives also are expected to be available to
respond to appropriate questions from shareholders.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG L.L.P. AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 1997.
9
<PAGE> 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock as of June 15,
1996 by (a) each beneficial owner of more than 5% of the Company's Common Stock,
(b) the Named Executive Officers, (c) each director/nominee of the Company, and
(d) all directors and executive officers of the Company as a group. Except as
otherwise indicated, each person has sole voting and investment power with
respect to all shares shown as beneficially owned, subject to community property
laws where applicable.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
- - ---------------- ------------------ ------------------
<S> <C> <C>
The Prudential Insurance Company of America(1)......... 1,396,800 10.0%
Jennison Associates Capital Corp.(2)................... 1,393,300 10.0
Nokia Mobile Phones Ltd.(3)............................ 1,000,000 7.1
Metropolitan Life Insurance Company
State Street Research & Management Company(4)....... 720,000 5.1
Bruce W. Dunlevie
Merrill, Pickard, Anderson & Eyre V(5).............. 504,892 3.6
Brian P. Dougherty..................................... 324,008 2.3
Gordon E. Mayer(6)..................................... 270,021 1.9
Clive G. Smith(7)...................................... 100,625 *
Christopher M. Noble(8)................................ 42,858 *
Craig J. Taylor(8)..................................... 32,813 *
Eric E. Schmidt........................................ 28,375 *
Jordan J. Breslow(9)................................... 24,500 *
Harry W. McKinney(10).................................. -- --
Reijo Paajanen(11)..................................... -- --
Duff Thompson(12)...................................... -- --
All directors and executive officers
as a group (13 persons)(13)............................ 1,356,328 9.5
</TABLE>
- - ----------
* Less than one percent of the outstanding Common Stock.
(1) Based on Amendment Number 1 to Schedule 13G filed by the Prudential
Insurance Company of America ("Prudential") in February 1996. The
address of Prudential is Prudential Plaza, Newark, New Jersey 07102.
(2) Based on Amendment Number 1 to Schedule 13G filed by Jennison
Associates Capital Corp. ("Jennison"). The address of Jennison is 466
Lexington Avenue, New York, New York 10017.
(3) Based on the Schedule 13D filed by Nokia Mobile Phones Ltd. ("Nokia")
dated February 17, 1995. The address of Nokia is P.O. Box 68,
Kanslerinkatu 14, 4th Floor, Fin-33721, Tampere, Finland.
(4) Based on Schedules 13G filed by Metropolitan Life Insurance Company
("Metlife") and State Street Research & Management Company ("State
Street") filed in February 1996. State Street is a wholly owned
subsidiary of Metlife. The address of State Street is One Financial
Center, 30th Floor, Boston, Massachusetts 02111 and the address of
Metlife is One Madison Avenue, New York, New York 10010.
(5) Includes 18,750 shares issuable pursuant to options exercisable within
60 days of June 15, 1996 and 29,104 shares held by Bruce W. Dunlevie.
Mr. Dunlevie, a director of the Company, is a general partner of MPAE V
Management Company, L.P. ("MPAE V"), the general partner of Merrill,
Pickard, Anderson & Eyre V ("Merrill"). The general partners of MPAE V
share the power to direct the voting of MPAE V, and MPAE V has the
power to direct the voting and disposition of the 457,038 shares held
by Merrill. Accordingly, Mr.
10
<PAGE> 13
Dunlevie may be deemed to beneficially own the 457,038 shares held
by Merrill. The address of Mr. Dunlevie, Merrill and MPAE V is 2480
Sand Hill Road, Suite 200, Menlo Park, California 94025
(6) Includes 89,375 shares subject to repurchase rights of the Company as
of June 15, 1996. Includes 6,375 shares issuable pursuant to options
exercisable within 60 days of June 15, 1996, 36,000 shares held by the
Mayer Family partnership and 89,500 shares held by the Mayer Family
Revocable Trust dated 10/5/95.
(7) Represents 75,625 shares issuable pursuant to options exercisable
within 60 days of June 15, 1996, and 25,000 shares held in irrevocable
trust for the benefit of Mr. Smith's child (as to which shares Mr.
Smith disclaims beneficial ownership).
(8) Represents shares issuable pursuant to options exercisable within 60
days of June 15, 1996.
(9) Includes 23,847 shares issuable pursuant to options exercisable within
60 days of June 15, 1996.
(10) Mr. McKinney, a director of the Company, is a general manager at
Hewlett-Packard Company. Mr. McKinney disclaims beneficial ownership of
the shares of the Company held by Hewlett-Packard Company.
(11) Mr. Paajanen, a director of the Company, is a Vice President of Nokia
Mobile Phones Ltd. Mr. Paajanen disclaims beneficial ownership of the
shares of the Company held by Nokia Mobile Phones Ltd.
(12) Mr. Thompson, a director of the Company, is Special Counsel to the
Chief Executive Officer of Novell, Inc. Mr. Thompson disclaims
beneficial ownership of the shares of the Company held by Novell, Inc.
(13) Includes 210,504 shares issuable pursuant to options exercisable within
60 days of June 15, 1996.
11
<PAGE> 14
EXECUTIVE COMPENSATION
The following table sets forth all compensation received for services
rendered to the Company in all capacities, for the last three fiscal years ended
March 31, 1996, by the Named Executive Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
-------------------------
ANNUAL COMPENSATION NUMBER OF
--------------------------------------------- RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING
POSITION YEAR SALARY BONUS(1) COMPENSATION AWARDS OPTIONS
- - ------------------ ---- ------ -------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gordon E. Mayer(2)........ 1996 $200,275 $35,000 -- -- --
President and 1995 200,069 5,007 $71,409(3) -- 12,000
Chief Executive Officer 1994 152,308 -- -- $220,000(4) --
Clive G. Smith(5)......... 1996 112,191(6) 37,500 -- -- 7,500
Vice President, Corporate 1995 126,069 25,000 -- -- --
Development 1994 230,252(7) -- -- -- 105,000
Craig J. Taylor(8)........ 1996 125,275 21,875 12,000 -- 15,000
Vice President, 1995 50,092 -- 4,000 -- 70,000
Engineering 1994 -- -- -- -- --
Jordan J. Breslow......... 1996 130,275 16,500 -- -- 50,000
Vice President, 1995 115,069 14,924 -- -- --
General Counsel 1994 102,500 -- -- -- 3,750
Christopher M. Noble...... 1996 120,276 18,500 -- -- 50,000
Vice President, 1995 108,819 13,007 -- -- 6,000
Business Development 1994 92,500 -- -- -- 22,500
</TABLE>
- - ----------
(1) Includes cash profit sharing and cash bonuses earned for the fiscal
year, whether accrued or paid.
(2) Gordon E. Mayer joined the Company in July 1993, and, accordingly,
salary information for fiscal 1994 reflects only nine months of
service.
(3) Represents relocation expenses.
(4) Pursuant to an agreement entered into in July 1993, the Company issued
330,000 shares of its Common Stock in October 1993 to Gordon E. Mayer,
President and Chief Executive Officer of the Company, at a purchase
price equal to the then fair value of the Common Stock, as determined
by the Board of Directors. In exchange for such shares, Mr. Mayer
delivered to the Company a $220,000 promissory note secured by the
foregoing stock and by a deed of trust on Mr. Mayer's principal
residence. The note bears interest at the rate of five percent (5%) per
annum, compounded semiannually, and is payable in October 1998. In
consideration for Mr. Mayer's agreement to make an accelerated payment
to the Company of $100,000 of principal in March 1995, the Company
agreed to subordinate its security interest in the shares to those of
an institutional lender. The Company's security interest in Mr. Mayer's
residence was not affected. The stock vested to the extent of 25% of
the shares on June 28, 1994 and vests ratably thereafter at the rate of
1/48th per month over the succeeding three years. With respect to such
stock, Mr. Mayer is entitled to receive any dividends paid to
shareholders generally; however, stock issued upon stock splits and
dividends is subject to the same restrictions as the underlying stock.
12
<PAGE> 15
As of March 31, 1996, Mr. Mayer had sold 53,854 shares from the amount
originally issued to him, leaving a balance of 276,146 shares held by
him.
(5) Mr. Smith resigned from the Company as an employee and an officer in
December 1995.
(6) Includes $17,484 of accrued sick leave and vacation pay.
(7) Includes $198,752 (including $57,842 travel and expense reimbursement)
as compensation for consulting services and reimbursement of related
expenses.
(8) Mr. Taylor joined the Company in October 1994, and, accordingly, salary
information for fiscal 1995 reflects only five months of service.
13
<PAGE> 16
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to
stock options granted to each of the Named Executive Officers during the fiscal
year ended March 31, 1996. In accordance with the rules of the Securities and
Exchange Commission, also shown below is the potential realizable value over the
term of the options (the period from the grant date to the expiration date)
based on assumed rates of stock appreciation of 5% and 10%, compounded annually.
These amounts are based on certain assumed rates of appreciation and do not
represent the Company's estimate of future stock price. Actual gains, if any, on
stock option exercises will be dependent on the future performance of the Common
Stock.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED(1) FISCAL 1996 PER SHARE DATE 5% 10%
- - ---------------------- ---------- ------------ ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Gordon E. Mayer....... -- -- -- -- -- --
Clive G. Smith........ 7,500 0.7% $15.50 09/21/05 $73,109 $185,273
Craig J. Taylor....... 15,000 1.4 16.50 12/21/05 286,901 394,451
Jordan J. Breslow..... 50,000 4.8 11.25 08/08/05 353,753 896,480
Christopher M. Noble.. 50,000 4.8 11.25 08/08/05 353,753 896,480
</TABLE>
- - ----------
(1) Options have a ten-year term and vest over four years, ratably at 1/48
per month, except that the option granted to Mr. Smith vests in full
one-year from the date of grant.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to option
exercises in fiscal 1995 by the Named Executive Officers and the value of such
officers' unexercised options at March 31, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(2)
ACQUIRED ON VALUE -------------------------- -----------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gordon E. Mayer...... -- -- 3,250 8,750 $76,375 $205,625
Clive G. Smith....... 60,000 $864,163 87,500 21,250 2,579,164 512,083
Craig J. Taylor...... -- -- 25,730 59,270 595,275 1,252,225
Jordan J. Breslow.... 8,153 116,655 19,717 46,380 501,191 908,487
Christopher M. Noble. 7,000 153,883 44,838 57,661 1,235,964 1,214,604
</TABLE>
- - ----------
(1) Market value of underlying securities on the exercise date, minus the
exercise price.
(2) Value is based on the last reported sale of the Company's Common Stock
on the Nasdaq National Market of $30.00 per share on March 31, 1996
(the last trading day for fiscal 1996), minus the exercise price.
14
<PAGE> 17
CERTAIN TRANSACTIONS
In April 1996, the Company granted a license to its desktop personal
computer products to NuCo, Inc., a Delaware corporation. Clive Smith, a director
of Geoworks, is a founder and principal of NuCo, Inc., which has agreed to pay
royalties to the Company in exchange for certain exclusive and non-exclusive
licenses in the personal computer market. To date, no royalties have been paid.
In January 1995, the Company transferred certain technology and rights
to Wink Communications, Inc. ("Wink"), in exchange for a minority interest in
Wink and certain other consideration. Brian Dougherty, Chairman of the Company's
Board of Directors, is Chairman and Chief Executive Officer of Wink and
currently holds approximately 38% of the outstanding securities of Wink.
Mr. Dougherty, the Company's Chairman of the Board of Directors,
received salary in the amount of $125,275 in fiscal 1996 for services rendered
to the Company in his capacity as an employee.
In February 1995, the Company sold 1,000,000 unregistered shares of its
Common Stock to Nokia Mobile Phones Ltd. ("Nokia") at an aggregate purchase
price of $7,500,000. As part of such transaction, the Company amended its bylaws
to increase the size of its Board of Directors from seven members to eight
members, and appointed a Nokia representative, Mr. Paajanen, to fill the vacancy
so created. Further, the Company agreed to nominate a Nokia representative as
one of management's nominees for the Company's Board of Directors, and to use
its best efforts to cause his election, for so long as Nokia holds at least five
percent of the combined voting power of all outstanding voting stock. The
Company also granted Nokia registration rights with respect to the shares
purchased. Such rights are shared by certain other shareholders of the Company.
In December 1994, the Company and Nokia entered into an Agreement for
the Terms and Conditions Regarding Software Development and Licensing. Under
this agreement, the Company has licensed certain software technology to Nokia
for incorporation by Nokia into various of its hardware products. In exchange,
Nokia is required to pay certain engineering fees and royalties to the Company.
In fiscal 1995, Nokia paid the Company $250,000 pursuant to the agreement, and
in fiscal 1996 the Company recognized revenues of $150,000 in connection with
these payments from Nokia.
During fiscal 1994, the Company agreed to lend $220,000 to Gordon E.
Mayer, the Company's President and Chief Executive Officer, for the purchase of
330,000 shares of the Company's Common Stock under a promissory note bearing
interest at 5% per annum, compounded semiannually. The loan was secured by a
pledge of Mr. Mayer's shares of the Company's Common Stock and his principal
residence. The note matures in October 1998. As of March 31, 1996, $120,000 of
principal and $3,431 of accrued interest were outstanding under the note. See
"Management - Executive Compensation".
In September 1994, the Company granted to Hewlett-Packard a
non-exclusive license to its CCD software. Harry W. McKinney, a director of the
Company, is General Manager of Home Products of Hewlett-Packard. During fiscal
1996, the Company received royalties totalling $223,000 from Hewlett-Packard.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee currently consists of directors
Dunlevie and Schmidt. No executive officer of the Company served on the
compensation committee of another entity or on any other committee of the board
of directors of another entity performing similar functions during the last
fiscal year.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership on Form 3 and changes in
ownership on Forms 4 or 5 with the Securities and Exchange Commission (the
"SEC") within specified time periods. Executive officers, directors and 10%
shareholders are also required by the SEC rules to furnish the Company with
copies of all Section 16(a) forms
15
<PAGE> 18
they file. Based solely upon its review of copies of such forms received by it,
or written representations from such persons that no filings were required for
them, the Company believes that during the year ended March 31, 1996, all
Section 16(a) filing requirements applicable to its executive officers and
directors were complied except that:
Brian P. Dougherty, the Chairman of the Board of Directors of the
Company, filed one Form 5 late in connection with two gifts of Common Stock in
January 1995 and three Forms 4 late in connection with four sales of Common
Stock in August 1995, one sale of Common Stock in November 1995 and a transfer
from direct to indirect ownership of Common Stock in December 1995; Gordon E.
Mayer, President, Chief Executive Officer and a director of the Company, filed a
Form 5 late for fiscal 1995 in connection with an option grant in February 1995
and a Form 3 late in connection with the transfer of shares to a trust;
Christopher M. Noble, Vice President, Business Development of the Company, filed
a Form 5 late for fiscal 1995 in connection with an option grant in January
1995; and Clive G. Smith, a director of the Company, filed two Forms 4 late in
connection with six option exercises and three sales of Common Stock in August
1995 and two option exercises and one sale of Common Stock in November 1995.
PERFORMANCE GRAPH
The stock price performance graph below is required by the SEC and
shall not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933, as amended, or the Exchange Act, except to the extent
the Company specifically incorporates this information by referencing and shall
not otherwise be deemed soliciting material or filed under such Acts.
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvested basis, for Geoworks, the NASDAQ
Composite Stock Market Index (US) and the Hambrecht & Quist Software Sector
Index. The graph assumes that $100 was invested in the Company's Common Stock,
the NASDAQ Composite Stock Market Index (US) and the Hambrecht & Quist Software
Sector Index from the date of the Company's initial public offering on June 23,
1994 through March 31, 1996. Note that historic stock price performance is not
necessarily indicative of future stock price performance.
GEOWORKS
H&Q SOFTWARE SECTOR INDEX
NASDAQ STOCK MARKET-U.S. INDEX
[GRAPHIC OMITTED]
16
<PAGE> 19
<TABLE>
<CAPTION>
NASDAQ STOCK
DATES GEOWORKS MARKET-U.S. H&Q SOFTWARE SECTOR
----- -------- ----------- -------------------
<S> <C> <C> <C>
06/23/94 100.00 100.00 100.00
06/30/94 108.33 102.54 103.70
07/31/94 104.17 104.64 104.00
08/31/94 116.67 111.31 112.39
09/30/94 129.17 111.03 113.69
10/31/94 145.83 113.21 121.88
11/30/94 77.08 109.46 120.53
12/31/94 112.50 109.76 123.09
01/31/95 112.50 110.38 121.18
02/29/95 137.50 116.22 135.53
03/31/95 135.42 119.66 140.73
04/30/95 154.17 123.43 146.33
05/31/95 137.50 126.61 147.75
06/30/95 208.33 136.87 162.75
07/31/95 225.00 146.93 171.43
08/31/95 212.50 149.90 171.79
09/30/95 320.83 153.35 176.94
10/31/95 356.25 152.48 180.36
11/30/95 295.83 156.06 182.08
12/31/95 316.67 155.25 176.43
01/31/96 412.50 156.04 180.15
02/29/96 395.83 162.03 183.84
03/31/96 500.00 162.48 192.55
</TABLE>
17
<PAGE> 20
COMPENSATION COMMITTEE REPORT
INTRODUCTION
The Compensation Committee report below is required by the SEC and
shall not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933, as amended, or the Exchange Act, except to the extent
the Company specifically incorporates this information by referencing and shall
not otherwise be deemed soliciting material or filed under such Acts.
The Compensation Committee of the Board of Directors (the "Committee")
is composed only of nonemployee directors. It is responsible for reviewing and
recommending for approval by the Board of Directors (with assistance from the
Stock Administration Committee of the Board established pursuant to the 1994
Stock Plan) the Company's compensation practices, executive salary levels and
compensation programs, both cash-based and equity-based. The Committee generally
determines the base salary levels and performance-based incentive compensation
levels for executives at the end of each fiscal year, and reviews both those
levels and the executives' performance against those levels on a quarterly
basis.
COMPENSATION PHILOSOPHY
The Committee has adopted an executive pay-for-performance philosophy
covering all officers, including the Chief Executive Officer. This philosophy
emphasizes variable compensation in order to align executive compensation with
the Company's business objectives and performance. Further, the overall
compensation philosophy is to attract, retain and reward executives who
contribute both to the short-term and long-term success of the Company, and to
motivate them through incentive compensation tied to performance objectives. The
Committee believes that the interests of its executives are best aligned with
those of the Company and its shareholders when the executives' overall
compensation depends upon the Company's performance, and when the executives are
themselves owners of stock in the Company. The Company encourages broad-based
employee ownership of its stock through stock option and stock purchase programs
in which all regular, full-time employees are eligible to participate. Pay is
sufficiently variable that above-average performance results in above-average
total compensation, and below-average performance for the Company or the
individual results in below-average total compensation. At the highest level,
the focus is on corporate performance against objectives and individual
contributions toward that performance. Secondarily, the focus is on strategic
departmental objectives in support of the corporate mission, and individual
contribution toward and satisfaction of those objectives.
COMPENSATION PROGRAM
The Company has a comprehensive compensation program which consists of
cash compensation, both fixed and variable, and equity-based compensation. The
program has the following principal components:
Cash-Based Compensation
Base Salary: Base salary is predicated on industry and peer group
comparisons and on performance judgments as to the past and expected future
contribution by the individual executive officer, including, where appropriate,
adjustment for any promotion or substantial increase in responsibilities. Market
information and salary surveys are used as a frame of reference for annual
salary adjustments and starting salaries. Executive officers of the Company are
paid salaries in line with their responsibilities. These salaries are structured
to be within the median range of salaries paid by competitors in the computer
industry. In general, salary increases are made based on median increases in
salaries for similar executives of similar sized companies in the high
technology industry. The Committee's approach to base compensation is to offer
competitive salaries in comparison with market practices. However, commencing
with fiscal 1996, base salary has become a relatively smaller element in the
total executive officer compensation package, as the Company has introduced
greater pay-for-performance programs.
Bonuses: The Company has an incentive program pursuant to which
executive officers and a limited number of key employees may receive periodic
cash bonuses beyond their base salary. The Committee has established for each
officer, including the Chief Executive Officer, a set of performance objectives
for the fiscal year and a target bonus
18
<PAGE> 21
tied to those objectives. The objectives, and the performance of each executive
against his or her objectives, are reviewed quarterly, with input from the Chief
Executive Officer. Generally, executives may be eligible to receive a bonus of
approximately fifteen percent of their base salary if the objectives are met to
the satisfaction of the Committee. The Committee also has the discretion to
reduce the bonus to zero percent in the case of performance below expectations,
or, conversely, to increase the bonus in recognition of exemplary contribution
to the successful performance by the Company of its short- and long-term
objectives.
Equity-Based Compensation
Stock Options: Consistent with prevailing compensation practices in
high technology companies, stock options are a key component of each employee's
total compensation package. The Company's practice is to grant stock options to
all full-time, regular employees. Options are generally granted upon
commencement of employment, and vest over four years to encourage the option
holders to continue in the employ of the Company. Subsequent stock options are
granted periodically to provide additional incentive and in the case of a
promotion or substantial increase in responsibilities, and occasionally to
reward exemplary performance. The Company takes into account the compensation
practices of the companies referenced above in its salary surveys as well as the
past and expected performance in determining the size of grants made to
executives.
Stock Grants: As an alternative to stock options, the Company has
occasionally sold stock to executive officers, subject to a right of repurchase
by the Company which diminishes over time, thus providing a long-term incentive
for the executive to remain with the Company comparable to that of an
option-vesting schedule. The Company may also provide performance-based stock
grants to employees, including executive officers. These stock grants may, in
part, be granted in combination with, or in lieu of, cash bonus compensation.
Employee Stock Purchase Plan: All regular, full-time employees are
entitled to participate in the Company's Employee Stock Purchase Plan. Under the
plan, employees may purchase stock in the Company, through payroll deductions,
at a discount from the market value of the stock. Executive officers may elect
to participate in the Employee Stock Purchase Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee uses the factors and criteria described above for
compensation decisions regarding the Chief Executive Officer. Mr. Mayer's
compensation is largely based upon the Company's attainment of strategic
objectives.
The Committee recognized a number of significant achievements by the
Company, under the leadership of Mr. Mayer, during the fiscal year. Mr. Mayer
successfully led the Company's follow-on public offering, and advanced the
Company's entry in the emerging CCD market thorough the establishment of
partnerships with leading OEM hardware manufacturers and the introduction of CCD
products. The objective of enhancing the Company's technology was served by the
release of GEOS Version 3.0. Finally, the Committee recognized the Company's and
Mr. Mayer's accomplishments in significantly increasing shareholder value,
controlling spending and managing the growth of the Company within operational
guidelines approved by the Board of Directors. As a result of these
achievements, the Company granted Mr. Mayer a bonus of $35,000.
The Committee believes that Mr. Mayer's compensation is modest relative
to that of other Chief Executive Officers of publicly-held technology companies,
but is appropriate in light of the Company's continued investment in an emerging
market.
COMPENSATION LIMITATIONS FOR TAX PURPOSES
The Committee has considered the potential impact of Section 162(m)
(the "Section") of the Code adopted under the federal Revenue Reconciliation Act
of 1993. The Section disallows any tax deduction for a publicly-held corporation
for individual compensation exceeding $1 million in any taxable year for any
Named Executive Officer, unless compensation is performance-based. Since the
targeted cash compensation of each of the Named Executive Officers is below the
$1 million threshold and the Committee believes that any options granted under
the Option
19
<PAGE> 22
Plan will meet the requirement of being performance-based under the transition
provisions provided in the regulations under the Section, the Committee believes
that the Section will not reduce any tax deduction available to the Company.
SUMMARY
The Committee believes that a fair and motivating compensation program
has played a critical role in the Company's ability to attract and retain highly
qualified executive officers.
Respectfully submitted by:
The Compensation Committee
BRUCE W. DUNLEVIE
ERIC E. SCHMIDT
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
If any other matters properly come before the meeting or any adjournment or
postponement thereof, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend.
BOARD OF DIRECTORS
Dated: July 10, 1996
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<PAGE> 23
GEOWORKS
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
AUGUST 21, 1996
The undersigned hereby appoints Gordon E. Mayer and Jordan J. Breslow, or either
of them, each with power of substitution, to represent the undersigned at the
Annual Meeting of Shareholders of Geoworks (the "Company") to be held at 960
Atlantic Avenue, Alameda, California 94501 on August 21, 1996, at 11:00 a.m.
P.D.T., and any adjournment thereof, and to vote the number of shares the
undersigned would be entitled to vote if personally present at the meeting on
the following matters:
SEE REVERSE
SIDE
<PAGE> 24
PLEASE MARK
- - -------------- ------ X YOUR CHOICES
ACCOUNT NUMBER COMMON LIKE THIS
<TABLE>
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C>
WITHHELD
1. ELECTION FOR FOR ALL 2. AMENDMENT OF 1994 STOCK FOR AGAINST ABSTAIN
OF DIRECTORS / / / / PLAN TO INCREASE THE / / / / / /
NUMBER OF SHARES OF
COMMON STOCK RESERVED
THEREUNDER
Nominees: Brian P. Dougherty Harry W. McKinney 3. RATIFICATION OF FOR AGAINST ABSTAIN
Gordon E. Mayer Clive G. Smith SELECTION OF ERNST & / / / / / /
Bruce W. Dunlevie Reijo Paajanen YOUNG LLP AS THE
Eric E. Schmidt R. Duff Thompson COMPANY'S INDEPENDENT
AUDITORS
</TABLE>
Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name on the space
provided below:
- - -------------------------------------------------------------
The Board of Directors recommends a vote FOR all nominees for election and FOR
Proposals 2 and 3.
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. IN THE ABSENCE OF DIRECTION, THIS
PROXY WILL BE VOTED FOR THE COMPANY'S NOMINEES FOR ELECTION AND FOR PROPOSALS 2
AND 3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof to
the extent authorized by Rule 14a-4(c) promulgated by the Securities and
Exchange Commission.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
1. Dated: _______________________________________________ , 1996
_____________________________________________________________
2. Signature(s)
3. Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares are held of record in the names of two or more persons, or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the proxy. If shares of stock are held of record by a
corporation, the proxy should be executed by the president or vice president and
the secretary or assistant secretary. Executors, administrators, or other
fiduciaries who execute the above proxy for a deceased stockholder should give
their full title. Please date the proxy.
4. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED, POSTAGE PAID ENVELOPE SO THAT
YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
<PAGE> 25
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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(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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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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(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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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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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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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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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.
11
