<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:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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] No fee required.
[ ] 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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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:
- --------------------------------------------------------------------------------
(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
960 ATLANTIC AVENUE
ALAMEDA, CALIFORNIA 94501
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 19, 1997
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of Geoworks, a California corporation (the "Company"), will be held on
August 19, 1997 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 change the state of incorporation of the Company from California to
Delaware, to enable the Company to attract and retain highly qualified
officers and directors, and to take advantage of the flexibility
afforded by Delaware law to adopt measures designed to protect
shareholders in the face of hostile takeover attempts.
3. To approve an increase in the number of authorized shares of Common
Stock issuable by the Company from 20,000,000 to 40,000,000.
4. 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
750,000 shares.
5. To ratify the appointment of Ernst & Young L.L.P. as independent
auditors of the Company for the fiscal year ending March 31, 1998.
6. 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, 1997 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 Annual 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 8, 1997
<PAGE> 3
GEOWORKS
960 ATLANTIC AVENUE
ALAMEDA, CALIFORNIA 94501
------------------------
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 19, 1997 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, 1997 (the "Record Date") will
be entitled to vote at the Annual Meeting. At the close of business on June 27,
1997, the Company had 15,470,361 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, 1997, including financial statements,
were first mailed on or about July 8, 1997 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 VOTE REQUIRED
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 five 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. On all
other matters, each share has one vote.
<PAGE> 4
With respect to Proposal No. 1, 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 Annual Meeting, but have no other legal effect
upon election of directors under California law.
Proposal Nos. 2 and 3 each require for approval the affirmative vote of the
majority of shares of Common Stock outstanding as of the Record Date. With
respect to Proposal Nos. 2 and 3, abstentions and broker non-votes will be
counted towards a quorum and have the same effect as negative votes with regard
to the proposals. Proposal Nos. 4 and 5 each require for approval 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. With respect to
Proposal Nos. 4 and 5, abstentions and broker non-votes will be counted towards
a quorum, but abstentions will have the same effect as negative votes, while
broker non-votes will not be counted for any purpose in determining whether or
not a proposal has been approved. In addition, for Proposal Nos. 4 and 5, the
affirmative votes must constitute at least a majority of the required quorum,
which quorum is a majority of the shares of Common Stock outstanding on the
Record Date.
SOLICITATION OF PROXIES
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, 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. In addition, the
Company has hired and will pay the fees of a proxy solicitor estimated to be
approximately $9,000.
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 1998 Annual Meeting must be received by
the Company no later than March 12, 1998 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 five directors.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for the five 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 five 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.
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The names of the nominees, and certain information about them as of June
27, 1997, are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- -------------------------- --- ----------------------------------------------- --------
<S> <C> <C> <C>
Gordon E. Mayer........... 39 Chairman of the Board, President and Chief 1993
Executive Officer
Bruce W. Dunlevie(1)(2)... 40 General Partner, MPAE V Management Company, 1990
L.P. and General Partner, Benchmark Capital
Management, LLC
Reijo Paajanen(2)......... 39 Vice President, Cellular Data, Nokia Mobile 1995
Phones, Ltd.
Eric E. Schmidt(1)........ 41 Chairman and Chief Executive Officer of Novell, 1993
Inc.
Clive G. Smith............ 48 Founder, New Deal, Inc. 1987
</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. MAYER joined the Company in July 1993 as President and a member of the
Company's Board of Directors, became the Chief Executive Officer in March 1994
and was appointed Chairman of the Board of Directors in May 1997. 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. In addition,
since April 1995, he has also been a general partner of Benchmark Capital
Management, LLC, a venture capital limited partnership. 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. Mr.
Dunlevie holds a degree from Cambridge University/Trinity College, a B.A. in
history from Rice University and an M.B.A. from Stanford University. He is also
a director of Rambus Inc.
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.
DR. SCHMIDT joined the Company's Board of Directors in January 1993. Since
March 1997, he has been the Chairman and Chief Executive Officer of Novell, Inc.
Prior to that, he was the Chief Technology Officer of Sun Microsystems, Inc.,
where he had been employed since 1983. Dr. Schmidt holds a B.S. in electrical
engineering from Princeton University and a Ph.D. in electrical engineering from
the University of California at Berkeley. He is also a director of Siebel
Systems, Inc.
MR. SMITH joined the Company's Board of Directors in October 1987. He is
the Chief Executive Officer of New Deal, Inc., 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
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of Witwatersrand, South Africa and is a Ph.D. candidate at MIT in the
Inter-disciplinary Research Program on Communication Policy.
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, 1997. 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, a Compensation
Committee and a Stock Administration Committee. The Board of Directors has no
nominating committee or any committee performing similar functions.
During fiscal 1997, the Audit Committee of the Board of Directors consisted
of former directors Harry W. McKinney and R. Duff Thompson, and held four (4)
meetings. Currently, the Audit Committee consists of directors Dunlevie and
Paajanen. 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 four (4) meetings during the last
fiscal year. The Compensation Committee reviews and approves the Company's
executive compensation policy, including the salaries and bonuses of the
Company's executive officers, and co-administers the Company's incentive stock
plans together with the Stock Administration Committee.
The Stock Administration Committee consists of directors Dunlevie and
Mayer. The Stock Administration Committee administers stock grants for
non-executive employees and consultants.
DIRECTOR COMPENSATION
The Company does not pay to its directors an annual retainer or a fee for
each Board of Directors meeting. 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. During fiscal 1997,
stock option grants for 2,500 shares of Common Stock were awarded under the 1994
Stock Plan to each of the outside directors Dunlevie (held in the name of MPAE V
Management Co.), Paajanen and Schmidt, respectively. 10,000 shares were also
awarded to former outside director R. Duff Thompson and subsequently cancelled
upon his resignation from the Board of Directors in April 1997.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE
NOMINEES SET FORTH HEREIN.
PROPOSAL NO. 2 -- APPROVAL OF REINCORPORATION OF THE COMPANY INTO
THE STATE OF DELAWARE AND RELATED CHANGES TO THE COMPANY'S
CHARTER DOCUMENTS AND THE RIGHTS OF SHAREHOLDERS
GENERAL
The Board of Directors has unanimously approved a proposal to change the
Company's state of incorporation from California to Delaware. The Board of
Directors believes the change in domicile to be in the best interests of the
Company and its shareholders for several reasons. Principally, the Board of
Directors believes that reincorporation will enhance the Company's ability to
attract and retain qualified members of the Company's Board of Directors as well
as encourage directors to continue to make independent decisions in good faith
on behalf of the Company. To date, the Company has not experienced difficulty in
retaining directors. However, although California Proposition 211, which would
have severely limited the ability of companies to indemnify directors and
officers, was not enacted in November 1996, it seems likely that initiatives and
legislation containing similar provisions will be proposed in California again
in the near future. As a result, the Company believes that the more favorable
corporate environment afforded by Delaware will
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enable it to compete more effectively with other public companies, most of which
are incorporated in Delaware, to attract new directors and officers and to
retain its current directors and officers.
Reincorporation in Delaware will allow the Company the increased
flexibility and predictability afforded by Delaware law. Concurrent with the
reincorporation, the Company proposes to include certain measures designed to
protect shareholder interests in the event of hostile takeover attempts against
the Company. The Board believes that these measures would enable the Board to
consider fully any proposed takeover attempt and to negotiate terms that
maximize the benefit to the Company and its shareholders.
In recent years, a number of major public companies have obtained the
approval of their shareholders to reincorporate in Delaware. For the reasons
explained below, the Company believes it is beneficial and important that the
Company likewise avail itself of Delaware law.
For many years Delaware has followed a policy of encouraging incorporation
in that state. Consequently, Delaware has adopted comprehensive corporate laws
which are revised regularly to meet changing business circumstances. The
Delaware Legislature is particularly sensitive to issues regarding corporate law
and is especially responsive to developments in modern corporate law. The
Delaware courts have developed considerable expertise in dealing with corporate
issues as well as a substantial body of case law construing Delaware's corporate
law. As a result of these factors, it is anticipated that Delaware law will
provide greater predictability in the Company's legal affairs than is presently
available under California law.
In 1986, Delaware amended its corporate law to allow corporations to limit
the personal monetary liability of its directors for their conduct as directors
under certain circumstances. It should be noted that Delaware law does not
permit a Delaware corporation to limit or eliminate the liability of its
directors for intentional misconduct, bad faith conduct or any transaction from
which the director derives an improper personal benefit or for violations of
federal laws such as the federal securities laws. In 1987, California amended
its corporate law in a manner similar to Delaware to permit a California
corporation to limit the personal monetary liability of its directors for their
conduct as directors under certain circumstances. The Company adopted articles
and bylaws and entered into indemnification agreements to take advantage of
these changes in California law. Nonetheless, the Board of Directors believes
that the protection from liability for directors is somewhat greater under the
Delaware law than under the California law and therefore that the Company's
objectives in adopting this type of provision can be better achieved by
reincorporation in Delaware. The directors have elected to adopt such a
provision in the Delaware certificate and bylaws. The Board believes that
Delaware incorporation will enhance the Company's ability to recruit and retain
directors in the future; however, the shareholders should be aware that such a
provision inures to the benefit of the directors, and the interest of the Board
in recommending the reincorporation may therefore be in conflict with the
interests of the shareholders. See "Limitation of Liability and Indemnification"
for a more complete discussion of these issues.
The interests of the Board of Directors of the Company, management and
affiliated shareholders in voting on the reincorporation proposal may not be the
same as those of unaffiliated shareholders. Delaware law does not afford
minority shareholders some of the rights and protections available under
California law. Reincorporation of the Company in Delaware may make it more
difficult for minority shareholders to elect directors and influence Company
policies. A discussion of the principal differences between California and
Delaware law as they affect shareholders begins on page 8 of this Proxy
Statement.
In addition, although the reincorporation proposal contains only a limited
number of changes to the Company's charter and Bylaws, portions of the
reincorporation proposal may have the effect of deterring hostile takeover
attempts. A hostile takeover attempt may have a positive or a negative effect on
the Company and its shareholders, depending on the circumstances surrounding a
particular takeover attempt. Takeover attempts that have not been negotiated or
approved by the board of directors of a corporation can seriously disrupt the
business and management of a corporation and generally present to the
shareholders the risk of terms which may be less than favorable to all of the
shareholders than would be available in a board-approved transaction.
Board-approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the corporation and all of
its shareholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation and maximum strategic deployment of corporate assets.
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<PAGE> 8
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts are
sufficiently great such that prudent steps to reduce the likelihood of such
takeover attempts are in the best interests of the Company and its shareholders.
Accordingly, the reincorporation plan includes certain proposals that may have
the effect of discouraging or deterring hostile takeover attempts.
Notwithstanding the belief of the Board as to the benefits to shareholders
of the changes, shareholders should recognize that one of the effects of such
changes may be to discourage a future attempt to acquire control of the Company
which is not presented to and approved by the Board of Directors, but which a
substantial number and perhaps even a majority of the Company's shareholders
might believe to be in their best interests or in which shareholders might
receive a substantial premium for their shares over the current market price. As
a result, shareholders who might desire to participate in such a transaction may
not have an opportunity to do so.
The Company's current Restated Articles of Incorporation, as amended (the
"California Articles") and Bylaws (the "California Bylaws") lack certain
provisions available to certain public companies under California law that deter
hostile takeover attempts, such as a classified board of directors and the
elimination of cumulative voting. Under the proposed Delaware certificate and
bylaws following the reincorporation, cumulative voting for directors will be
eliminated and shareholders will not be able to call special meetings. In
addition, the Delaware certificate and bylaws will contain provisions
eliminating action by written consent of shareholders and requiring vacancies on
the board resulting from an increase in number of directors to be filled by the
majority vote of the directors.
In considering the proposals, shareholders should be aware that the overall
effect of certain of the proposed provisions is to make it more difficult for
holders of a majority of the outstanding shares of Common Stock to change the
composition of the Board of Directors and to remove existing management in
circumstances where a majority of the shareholders may be dissatisfied with the
performance of the incumbent directors or otherwise desire to make changes.
These provisions are balanced by the ability of the holders of a majority of the
outstanding voting stock to remove directors with or without cause and to amend
the Delaware certificate and the Delaware bylaws.
The provisions in the Company's new charter documents could make a proxy
contest a less effective means of removing or replacing existing directors or
could make it more difficult to make a change in control of the Company which is
opposed by the Board of Directors. This strengthened tenure and authority of the
Board of Directors could enable the Board of Directors to resist change and
otherwise thwart the desires of a majority of the shareholders. Because this
provision may have the effect of continuing the tenure of the current Board of
Directors, the Board has recognized that the individual directors have a
personal interest in this provision that may differ from those of the
shareholders. However, the Board believes that the primary purpose of these
provisions is to ensure that the Board will have sufficient time to consider
fully any proposed takeover attempt in light of the short and long-term benefits
and other opportunities available to the Company and, to the extent the Board
determines to proceed with the takeover, to effectively negotiate terms that
would maximize the benefits to the Company and its shareholders.
The Board of Directors has considered the potential disadvantages and
believes that the potential benefits of the provisions included in the proposed
charter documents outweigh the possible disadvantages. In particular, the Board
believes that the benefits associated with attracting and retaining skilled and
experienced outside directors and with enabling the Board to fully consider and
negotiate proposed takeover attempts, as well as the greater sophistication,
breadth and certainty of Delaware law, make the proposed reincorporation
beneficial to the Company, its management and its shareholders.
The proposal to include these anti-takeover provisions in the proposed
reincorporation does not reflect knowledge on the part of the Board of Directors
or management of any proposed takeover or other attempt to acquire control of
the Company. Management may in the future propose other measures designed to
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discourage takeovers apart from those proposed in this Proxy Statement, if
warranted from time to time in the judgment of the Board of Directors.
The proposed reincorporation would be accomplished by merging the Company
into a newly formed Delaware corporation which, just before the merger, will be
a wholly owned subsidiary of the Company (the "Delaware Company"), pursuant to
an Agreement and Plan of Merger (the "Merger Agreement"), in substantially the
form attached as Exhibit A to this Proxy Statement. Upon the effective date of
the merger, the Delaware Company's name will be Geoworks Corporation. The
reincorporation will not result in any change in the Company's business, assets
or liabilities, will not cause its corporate headquarters to be moved and will
not result in any relocation of management or other employees.
On the effective date of the proposed reincorporation, each outstanding
share of Common Stock of the Company will automatically convert into one share
of Common Stock of the Delaware Company, and shareholders of the Company will
automatically become shareholders of the Delaware Company. On the effective date
of the reincorporation, the number of outstanding shares of Common Stock of the
Delaware Company will be equal to the number of shares of Common Stock of the
Company outstanding immediately prior to the effective date of the
reincorporation. In addition, each outstanding option or right to acquire shares
of Common Stock of the Company will be converted into an option or right to
acquire an equal number of shares of Common Stock of the Delaware Company, under
the same terms and conditions as the original options or rights. All of the
Company's employee benefit plans, including the 1987 Stock Option Plan, the 1994
Stock Plan, the Supplemental Stock Option Plan, the 1997 Supplemental Stock Plan
and the Employee Stock Purchase Plan will be adopted and continued by the
Delaware Company following the reincorporation. Shareholders should recognize
that approval of the proposed reincorporation will constitute approval of the
adoption and assumption by the Delaware Company of those plans which had
previously been approved by the shareholders.
No action need be taken by shareholders to exchange their stock
certificates now; this will be accomplished at the time of the next transfer by
the shareholder. Certificates for shares in the Company will automatically
represent an equal number of shares in the Delaware Company upon completion of
the merger. The Company intends to apply for the listing and registration of the
Common Stock of the Delaware Company on the Nasdaq National Market.
Under the California Bylaws, the affirmative vote of a majority of the
outstanding shares of the Company's voting stock is required for approval of the
reincorporation. If approved by the shareholders, it is anticipated that the
reincorporation would be completed as soon thereafter as practicable. The
reincorporation may be abandoned or the Merger Agreement may be amended (with
certain exceptions), either before or after shareholder approval has been
obtained, if in the opinion of the Board of Directors, circumstances arise that
make such action advisable; provided that any amendment that would effect a
material change from the charter provisions discussed in this Proxy Statement
would require further approval by the holders of a majority of the outstanding
voting shares.
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, the Company's corporate affairs are governed at present by the
corporate law of California, the Company's state of incorporation, and by the
California Articles and the California Bylaws, which have been adopted pursuant
to California law. The California Articles and California Bylaws are available
for inspection during business hours at the principal executive offices of the
Company. In addition, copies may be obtained by writing to the Company at
Geoworks, 960 Atlantic Avenue, Alameda, California 94501, Attention: Corporate
Secretary.
If the reincorporation proposal is adopted, the Company will merge into,
and its business will be continued by, the Delaware Company. Following the
merger, issues of corporate governance and control would be controlled by
Delaware, rather than California law (however, see "Application of California
Law After Reincorporation"). The California Articles and California Bylaws,
will, in effect, be replaced by the Certificate of Incorporation of the Delaware
Company (the "Delaware Certificate") and the bylaws of the Delaware Company (the
"Delaware Bylaws"), copies of which are attached as Exhibits B and C to this
Proxy
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Statement. Accordingly, the differences among these documents and between
Delaware and California law are relevant to your decision whether to approve the
reincorporation proposal.
A number of differences between California and Delaware law and among the
various charter documents are summarized in the chart below. Shareholders are
requested to read the following chart in conjunction with the discussion
following the chart and the Merger Agreement, the Delaware Certificate and the
Delaware Bylaws attached to this Proxy Statement. For each item summarized in
the chart, there is a reference to a page of this Proxy Statement on which a
more detailed discussion appears.
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
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<S> <C> <C>
Limitation of Liability of Delaware law permits the California law contains
Directors and Officers limitation of liability of additional exceptions to the
(see page 10). directors and officers to the liability limitations of
Company except in connection directors and officers. See
with (i) breaches of the duty "Limitation of Liability and
of loyalty; (ii) acts or Indemnification."
omissions not in good faith or
involving intentional
misconduct or knowing
violations of law; (iii) the
payment of unlawful dividends
or unlawful stock repurchases
or redemptions; or (iv)
transactions in which a
director received an improper
personal benefit.
Indemnification of Directors Delaware law permits somewhat California law permits
and Officers (see page 11). broader indemnification and indemnification under certain
could result in circumstances, subject to
indemnification of directors certain limitations. See
and officers in circumstances "Limitation of Liability and
where California law would not Indemnification."
permit indemnification. See
"Indemnification and
Limitation of Liability."
Cumulative Voting for Cumulative voting is not California law permits Nasdaq
Directors (see page 13). available under Delaware law National Market corporations
because it is not provided for with over 800 equity security
in the Delaware Certificate. holders to eliminate
cumulative voting; the
California Articles have not
eliminated cumulative voting.
Number of Directors Determined solely by Determined by Board within
(see page 13). resolution of the Board. range set in the California
Bylaws. Changes in the
authorized range must be
approved by the shareholders.
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Filling Board Vacancies Delaware law provides for the California law permits (a) any
(see page 14). Delaware Court of Chancery to holders of 5% or more of the
order an election to fill corporation's Voting Stock or
vacancies or newly created (b) the superior court of the
directorships upon the appropriate county to call a
application of the holders of special meeting of
10% or more of the outstanding shareholders to elect the
shares having a right to vote entire board if, after filling
for such directors, if at the any vacancy, the directors
time of filling such vacancies then in office who have been
or directorships, the elected by the shareholders
directors then in office constitute less than a
constitute less than a majority of the directors then
majority of the entire board in office.
as constituted immediately
prior to any increase.
Removal of Directors by Delaware law permits the California law permits the
Shareholders (see page 14). removal of a director with or removal of a director with or
without cause. without cause by affirmative
vote of a majority of the
outstanding shares.
Who May Call a Special The Board, the Chairman of the The Board, the Chairman of the
Shareholder Meeting Board or the Chief Executive Board, the President, or
(see page 14). Officer. holders of 10% of the shares
entitled to vote at the
special meeting.
Action by Written Consent of Actions by written consent not Actions by written consent
Shareholders in Lieu of a permitted by Delaware permitted by California
Shareholder Vote at Certificate. All shareholder Bylaws.
Shareholder Meeting (see page action must take place by a
15). shareholder vote at a meeting
of shareholders.
Tender Offer Statute; Fair Restricts hostile two-step No comparable statute; the
Price Provision (see page 16). takeovers; the Delaware California Articles do not
Certificate does not contain a contain a fair price
fair price provision. provision.
Amendment of Certificate Amendments of the Delaware Amendments of the California
(see page 17). Certificate require approval Articles require approval by a
by a majority of the voting majority of the voting stock
stock of the Delaware Company. of the California Company.
Amendment of Bylaws By the Board or the holders of By the Board or the holders of
(see page 17). a majority of the outstanding a majority of the outstanding
voting shares. voting shares, except that the
Board may not amend the range
of authorized directors.
Loans to Officers and Board may authorize if Certain loans must be approved
Directors (see page 17). expected to benefit the or ratified by a majority of
Company. the outstanding shares.
Class Vote for Reorganization Generally not required unless A reorganization transaction
(see page 18). a reorganization adversely must generally be approved by
affects a specific class of a majority vote of each class
shares. of shares outstanding.
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Right of Shareholders to Permitted for any purpose Permitted for any purposes
Inspect Shareholder List (see reasonably related to a reasonably related to a
page 18). shareholder's interest as a shareholder's interest as a
shareholder. shareholder. Also, an absolute
right to 5% shareholders and
certain 1% shareholders.
Appraisal Rights (see page Generally available if Available in certain
18). shareholders receive cash in circumstances if the holders
exchange for the shares and in of 5% of the class assert such
certain other circumstances. rights.
Dividends (see page 19). Paid from surplus (including Generally limited to the
paid-in and earned surplus or greater of (i) retained
net profits). earnings or (ii) an amount
which would leave the Company
with assets of 125% of
liabilities and current assets
of 100% of current
liabilities.
Other Responsive legislature and
larger body of corporate case
law in Delaware provides more
predictable corporate legal
environment in Delaware.
</TABLE>
LIMITATION OF LIABILITY AND INDEMNIFICATION
Limitations on Director Liability. Both California and Delaware permit a
corporation to limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of certain duties as a
director. The California and Delaware laws adopt a self-governance approach by
enabling a corporation to take advantage of these provisions only if an
amendment to the charter limiting such liability is approved by a majority of
the outstanding shares or such language is included in the original charter.
The California Articles eliminate the liability of directors to the
corporation to the fullest extent permissible under California law. California
law does not permit the elimination of monetary liability where such liability
is based on: (a) intentional misconduct or knowing and culpable violation of
law; (b) acts or omissions that a director believes to be contrary to the best
interests of the corporation or its shareholders, or that involve the absence of
good faith on the part of the director; (c) receipt of an improper personal
benefit; (d) acts or omissions that show reckless disregard for the director's
duty to the corporation or its shareholders, where the director in the ordinary
course of performing a director's duties should be aware of a risk of serious
injury to the corporation or its shareholders; (e) acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the corporation and its shareholders; (f) interested
transactions between the corporation and a director in which a director has a
material financial interest; or (g) liability for improper distributions, loans
or guarantees.
The Delaware Certificate also eliminates the liability of directors to the
fullest extent permissible under Delaware law, as such law exists currently or
as it may be amended in the future. Under Delaware law, such provision may not
eliminate or limit director monetary liability for (a) breaches of the
director's duty of loyalty to the corporation or its shareholders; (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (d) transactions in which the director received
an improper personal benefit. Such limitation of liability provision also may
not limit director's liability for violation of, or otherwise relieve the
Delaware Company or its directors from the necessity of complying with, federal
or state securities laws or affect the availability of non-monetary remedies
such as injunctive relief or rescission.
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<PAGE> 13
Shareholders should recognize that the proposed reincorporation and
associated measures are designed to shield a director from suits by the Delaware
Company or its stockholders for monetary damages for negligence or gross
negligence by the director in failing to satisfy the director's duty of care. As
a result, an action for monetary damages against a director predicated on a
breach of the duty of care would be available only if the Delaware Company or
its shareholders were able to establish that the director was disloyal in his
conduct, failed to act in good faith, engaged in intentional misconduct,
knowingly violated the law, derived an improper personal benefit or approved an
illegal dividend or stock repurchase or redemption. Consequently, the effect of
such measures may be to limit or eliminate an effective remedy which might
otherwise be available to a shareholder who is dissatisfied with Board of
Directors' decisions. Although an aggrieved shareholder could sue to enjoin or
rescind an action taken or proposed by the Board of Directors, such remedies may
not be timely or adequate to prevent or redress injury in all cases.
The Company believes that directors are motivated to exercise due care in
managing the Company's affairs primarily by concern for the best interests of
the Company and its shareholders rather than by the fear of potential monetary
damage awards. As a result, the Company believes that the reincorporation
proposal should sustain the Board of Directors' continued high standard of
corporate governance without any decrease in accountability by directors to the
Company and its shareholders.
Indemnification of Officers and Directors. The California Articles and
Bylaws and the Delaware Certificate and Bylaws relating to indemnification
similarly require that the California Company and the Delaware Company,
respectively, indemnify its directors and its executive officers to the fullest
extent permitted by the respective state law; provided, that the Company may
modify the extent of such indemnification by individual contracts with its
directors and executive officers, and, provided, further, that the Company will
not be required to indemnify any director or executive officer in connection
with a proceeding initiated by such person, with certain exceptions. Such
charter documents and Bylaws permit the California Company and the Delaware
Company, respectively, to provide indemnification to its other officers,
employees and agents as set forth in the respective state law. Such
indemnification is intended to provide the full flexibility available under such
laws. The Delaware Bylaws contain provisions similar to the California Bylaws
with respect to advances in that the Company is required to advance expenses
related to any proceeding contingent on such persons' commitment to repay any
advances unless it is determined ultimately that such persons are entitled to be
indemnified.
California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. There are
nonetheless certain differences between the laws of the two states.
California law permits indemnification of expenses incurred in derivative
or third-party actions, except that with respect to derivative actions (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine and (b) no indemnification
may be made under California law, without court approval in respect of amounts
paid or expenses incurred in settling or otherwise disposing of a threatened or
pending action or amounts incurred in defending a pending action which is
settled or otherwise disposed of without court approval. Delaware allows
indemnification of such expenses without court approval.
Indemnification is permitted by both California and Delaware law providing
the requisite standard of conduct is met, as determined by a majority vote of a
disinterested quorum of the directors, independent legal counsel (if a quorum of
independent directors is not obtainable), a majority vote of a quorum of the
shareholders (excluding shares owned by the indemnified party) or the court
handling the action.
California law requires indemnification when the individual has
successfully defended the action on the merits, as opposed to Delaware law which
requires indemnification relating to a successful defense on the merits or
otherwise.
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<PAGE> 14
Delaware law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by independent legal
counsel or by a majority vote of a quorum of the shareholders that the person
seeking indemnification acted in good faith and in a manner reasonably believed
to be in or (in contrast to California law) not opposed to the best interests of
the corporation. Without court approval, however, no indemnification may be made
in respect of expenses incurred in any derivative action in which such person is
adjudged liable in the performance of his or her duty to the corporation.
Delaware law requires indemnification of expenses when the individual being
indemnified has successfully defended the action on the merits or otherwise.
California corporations may include in their Articles of Incorporation a
provision which extends the scope of indemnification through agreements, bylaws
or other corporate action beyond that specifically authorized by statute. The
California Articles include such a provision. In addition, the Company,
following shareholder approval, entered into indemnification agreements with its
officers and directors providing for indemnification beyond that expressly
mandated by the California Corporations Code.
A provision of Delaware law states that the indemnification provided by
statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise. Under
Delaware law, rights to indemnification and expenses are non-exclusive, in that
they need not be limited to those expressly provided by statute. California law
is similar in that it permits non-exclusive indemnification if authorized in the
Company's charter. The California Articles contain such an enabling provision.
Under Delaware law and the Delaware Bylaws, the Delaware Company is permitted to
indemnify its directors, officers, employees and other agents, within the limits
established by law and public policy, pursuant to an express contract, bylaw
provision, shareholder vote or otherwise, any or all of which could provide
indemnification rights broader than those currently available under the
California Bylaws or the California indemnification statutes. The California
Company has entered into indemnification agreements with its officers and
directors. The Delaware Company plans to enter into similar agreements with its
officers and directors upon completion of the proposed reincorporation. The new
indemnification agreements contain certain additional limitations on
indemnification for expenses in suits against the Company not contained in the
indemnification agreements currently in effect. If the proposed reincorporation
is approved, the indemnification agreements will be approved by the Company's
shareholders. Thus a vote in favor of the proposed reincorporation will also
approve the indemnification agreements in substantially the form attached as
Exhibit D to this Proxy Statement. Although the law in this regard is not
certain, shareholders who vote in favor of the reincorporation proposal, and
thereby approve the indemnity contracts, may be prevented from challenging the
validity of the indemnity contracts in a subsequent court proceeding.
The indemnification and limitation of liability provisions of California
law, and not Delaware law, will apply to actions of the directors and officers
of the California Company made prior to the proposed reincorporation.
Nevertheless, the Board has recognized in considering this reincorporation
proposal that the individual directors have a personal interest in obtaining the
application of Delaware law to such indemnity and limitation of liability issues
affecting them and the Company in the event they arise from a potential future
case, and that the application of Delaware law, to the extent that any director
or officer is actually indemnified in circumstances where indemnification would
not be available under California law, would result in expense to the Company
which the Company would not incur if the Company were not reincorporated. The
Board believes, however, that the overall effect of reincorporation is to
provide a corporate legal environment that enhances the Company's ability to
attract and retain high quality outside directors and thus benefits the
interests of the Company and its shareholders.
There is no pending or, to the Company's knowledge, threatened litigation
to which any of its directors is a party in which the rights of the Company or
it's shareholders would be affected if the Company currently were subject to the
provisions of Delaware law rather than California law.
California and Delaware corporate law, the bylaws of both the Company and
of the Delaware Company, as well as any indemnity agreements, may permit
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act") or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Board of Directors has been advised that, in
the opinion of the Securities and
12
<PAGE> 15
Exchange Commission ("SEC"), indemnification for liabilities arising under the
Securities Act is contrary to public policy and is therefore unenforceable,
absent a decision to the contrary by a court of appropriate jurisdiction.
CUMULATIVE VOTING FOR DIRECTORS
Cumulative voting permits the holder of each share of stock entitled to
vote in the election of directors to cast that number of votes which equal the
number of directors to be elected. The holder may allocate all votes represented
by a share to a single candidate or may allocate those votes among as many
candidates as he or she chooses. Thus, a shareholder with a significant minority
percentage of the outstanding shares may be able to elect one or more directors
if voting is cumulative. In contrast, the holder or holders of a majority of the
shares entitled to vote in an election of directors are able to elect all the
directors in the absence of cumulative voting.
Under California law, cumulative voting in the election of directors is
mandatory upon notice given by a shareholder at a shareholder's meeting at which
directors are to be elected. In order to cumulate votes a shareholder must give
notice at the meeting, prior to the voting, of the shareholder's intention to
vote cumulatively. If any one shareholder gives such a notice, all shareholders
may cumulate their votes. However, California law permits a company, by amending
its articles of incorporation or bylaws, to eliminate cumulative voting when the
Company's shares are listed on a national stock exchange or traded on the Nasdaq
National Market and are held by at least 800 equity security holders. Cumulative
voting has not been eliminated under the California Articles or Bylaws.
Cumulative voting is not available under Delaware law unless so provided in
the corporation's certificate of incorporation. The Delaware Certificate does
not provide for cumulative voting.
The elimination of cumulative voting could deter investors from acquiring a
minority block in the Company, with a view toward obtaining a board seat and
influencing Company policy. It is also conceivable that the absence of
cumulative voting might deter efforts to seek control of the Company on a basis
which some shareholders might deem favorable.
OTHER MATTERS RELATING TO DIRECTORS
Number of Directors. California law allows the number of persons
constituting the board of directors of a corporation to be fixed by the bylaws
or the articles of incorporation, or permits the bylaws to provide that the
number of directors may vary within a specified range. California law further
provides that, in the case of a variable board, the maximum number of directors
may not exceed two times the minimum number minus one. The California Bylaws
provide for a board of directors that may vary between five and nine members,
inclusive, and the exact number of directors has been fixed at five. California
law also requires that any change in the range of a variable board of directors
specified in the articles and bylaws must be approved by a majority in interest
of the outstanding shares entitled to vote (or such greater proportion of the
outstanding shares as may be required by the articles of incorporation),
provided that a change reducing the minimum number of directors to less than
five cannot be adopted if votes cast against its adoption are equal to more than
16 2/3% of the outstanding shares entitled to vote. The California Bylaws
require the vote of a majority in interest of the voting power of all of the
then outstanding shares to change the range of the Company's variable Board of
Directors.
Delaware law permits a board of directors to change the authorized number
of directors by amendment to the bylaws unless the number of directors is fixed
in the certificate of incorporation or the manner of fixing the number of
directors is set forth in the certificate of incorporation, in which case the
number of directors may be changed only by amendment of the certificate of
incorporation or consistent with the manner specified in the certificate of
incorporation, as the case may be. The Delaware Certificate and Bylaws provide
that the exact number of directors shall be fixed from time to time exclusively
by the Board of Directors by resolution.
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<PAGE> 16
Removal of Directors. Under California law, a director may be removed with
or without cause by the affirmative vote of a majority of the outstanding
shares. Under Delaware law, a director can be removed from office during his
term by shareholders with or without cause.
Filling Board Vacancies. Under California law, if, after the filling of any
vacancy by the directors of a corporation, the directors then in office who have
been elected by the corporation's shareholders constitute less than a majority
of the directors then in office, then: (i) any holder of more than 5% of the
corporation's outstanding shares of voting stock entitled to vote (the "Voting
Stock") may call a special meeting of shareholders, or (ii) the superior court
of the appropriate county may order a special meeting of the shareholders to
elect the entire board of directors of the corporation. Delaware law provides
that if, at the time of filling any vacancy or newly created directorship, the
directors then in office constitute less than a majority of the entire board of
directors as constituted immediately prior to any increase, the Delaware Court
of Chancery may, upon application of any shareholder or shareholders holding at
least 10% of the total number of shares at the time outstanding having the right
to vote for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships or to replace the directors chosen
by the directors then in office.
The proposed Delaware Certificate and Bylaws provide that vacancies shall,
unless the Board of Directors determines by resolution that any such vacancies
be filled by the shareholders or as otherwise provided by law, be filled only by
the affirmative vote of a majority of directors then in office, even if such
directors comprise less than a quorum of the Board of Directors.
CAPITALIZATION; BLANK CHECK PREFERRED
The Company's capital stock currently consists of 20,000,000 authorized
shares of Common Stock, no par value, of which 15,470,361 shares were issued and
outstanding as of June 27, 1997, and 2,000,000 authorized shares of Preferred
Stock, no par value, none of which are outstanding as of June 27, 1997.
Upon the effectiveness of the reincorporation, the Delaware Company will
have the same number of outstanding shares of Common Stock that the Company had
outstanding immediately prior to the reincorporation.
The capitalization of the Delaware Company is identical to the
capitalization of the Company in California. Upon the approval of the increase
in the number of authorized shares of Common Stock pursuant to Proposal No. 3,
the Company's capital stock will consist of 40,000,000 authorized shares of
Common Stock, $0.001 par value and 2,000,000 shares of Preferred Stock, $0.001
par value, consistent with maintaining adequate capitalization for the current
needs of the Company. If Proposal No. 3 is not approved, the Company's capital
stock will consist of 20,000,000 authorized shares of Common Stock, $0.001 par
value, and 2,000,000 shares of Preferred Stock, $0.001 par value, consistent
with maintaining adequate capitalization for the current needs of the Company.
The Delaware Company's authorized but unissued shares of Preferred Stock will be
available for future issuance.
Under the Delaware Certificate, as under the California Articles, the Board
of Directors has the authority to determine or alter the rights, preferences,
privileges and restrictions to be granted to or imposed upon any wholly unissued
series of Preferred Stock and to fix the number of shares constituting any such
series and to determine the designation thereof.
The Board may authorize the issuance of Preferred Stock for the purpose of
adopting shareholder rights plans and in connection with various corporate
transactions, including corporate partnering arrangements. If the
reincorporation is approved, it is not the present intention of the Board of
Directors to seek shareholder approval prior to any issuance of Preferred Stock,
except as required by law or regulation. See "Anti-Takeover Measures."
SHAREHOLDER POWER TO CALL SPECIAL SHAREHOLDERS' MEETING
Under California law, a special meeting of shareholders may be called by
the Board of Directors, the Chairman of the Board of Directors, the President or
the holders of shares entitled to cast not less than 10% of
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<PAGE> 17
the votes at such meeting and such persons as are authorized by the articles of
incorporation or bylaws. Under Delaware law, a special meeting of shareholders
may be called by the Board of Directors or by any other person authorized to do
so in the certificate of incorporation or the bylaws. The Delaware Certificate
and Bylaws provide that such a meeting may be called by the Board of Directors,
the Chairman of the Board of Directors or the Chief Executive Officer. Pursuant
to the Delaware Certificate and Delaware Bylaws, if the meeting is called by a
person or persons other than the Board of Directors, (i.e., by the Chairman of
the Board of Directors or the Chief Executive Officer) the Board of Directors
shall determine the time and the place of such meeting which shall be from 35 to
120 days after the receipt of the request of the meeting.
ACTIONS BY WRITTEN CONSENT OF SHAREHOLDERS
Under California and Delaware law, shareholders may execute an action by
written consent in lieu of a shareholder meeting. Both California and Delaware
law permits a corporation to eliminate such actions by written consent in its
charter. The California Articles permits shareholders to act by written consent.
The Delaware Certificate eliminates actions by written consent of shareholders.
Elimination of such shareholders' written consents may lengthen the amount
of time required to take shareholder actions because certain actions by written
consent are not subject to the minimum notice requirement of a shareholders'
meeting. The elimination of shareholders' written consents may deter hostile
takeover attempts because of the lengthened shareholder approval process.
Without the ability to act by written consent, a holder or group of holders
controlling a majority in interest of the Delaware Company's capital stock will
not be able to amend the Delaware Bylaws or remove directors pursuant to a
written consent. Any such holder or group of holders would have to wait until a
shareholders' meeting was held to take any such action. The Board believes this
provision, like the other provisions to be included in the Delaware Certificate
and Bylaws, will enhance the Board's opportunity to fully consider and
effectively negotiate in the context of a hostile takeover attempt.
ADVANCE NOTICE REQUIREMENT FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
There is no specific statutory requirement under either California or
Delaware law with regard to advance notice of director nominations and
shareholder proposals. Absent a bylaw restriction, director nominations and
shareholder proposals may be made without advance notice at the annual meeting.
However, federal securities laws generally provide that shareholder proposals
that the proponent wishes to include in the Company's proxy materials must be
received not less than 120 days in advance of the date of the proxy statement
released in connection with the previous year's annual meeting.
Both the California Bylaws and the Delaware Bylaws provide that in order
for director nominations or shareholder proposals to be properly brought before
the meeting, the shareholder must have delivered timely notice to the Secretary
of the corporation. To be timely, notice must be delivered not less than 120
days prior to the anniversary of the mailing date for the previous year's annual
meeting under the California Bylaws, and not less than 60 days prior to the date
of the Company's proxy statement released to stockholders in connection with the
previous year's annual meeting under the Delaware Bylaws. If no annual meeting
was held in the previous year or the date of the annual meeting has been changed
by more than 30 days from the date contemplated at the time of the previous
year's proxy statement, the California Bylaws provide that notice must be
provided a reasonable time before the solicitation is made and the Delaware
Bylaws will provide that notice must be given no later than the later of 60 days
prior to the annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Proper notice under the
federal securities laws for a proposal to be included in the company's s proxy
materials will constitute proper notice under the Delaware Bylaws. These notice
requirements help ensure that shareholders are aware of all proposals to be
voted on at the meeting and have the opportunity to consider each proposal in
advance of the meeting.
ANTI-TAKEOVER MEASURES
Delaware law has been widely viewed to permit a corporation greater
flexibility in governing its internal affairs and its relationships with
shareholders and other parties than do the laws of many other states,
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<PAGE> 18
including California. In particular, Delaware law permits a corporation to adopt
a number of measures designed to reduce a corporation's vulnerability to hostile
takeover attempts. Certain of such measures are either not currently permitted
or are more narrowly drawn under California law. Among these measures are the
elimination of the ability of the stockholders to remove directors without cause
and the elimination of the right of shareholders to call special shareholders'
meetings. The Board of Directors has not eliminated this director removal right
of the shareholders in the Delaware Certificate and the Delaware Bylaws as
described above. In addition, certain types of "poison pill" defenses (such as
shareholder rights plans) have been upheld by Delaware courts, while California
courts have yet to decide on the validity of such defenses, thus rendering their
effectiveness in California less certain.
As discussed herein, certain provisions of the Delaware Certificate and
Delaware Bylaws could be considered to be anti-takeover measures. The Board of
Directors has no knowledge of any contemplated attempt to gain control of the
Company. As discussed above, numerous differences between California and
Delaware law, effective without additional action by the Delaware Company, could
have a bearing on unapproved takeover attempts.
One such difference is the existence of a Delaware statute regulating
tender offers, which statute is intended to limit coercive takeovers of
companies incorporated in that state. California has no comparable statute. The
Delaware law provides that a corporation may not engage in any business
combination with any interested shareholder for a period of three years
following the date that such shareholder became an interested shareholder,
unless (i) prior to the date the shareholder became an interested shareholder
the Board of Directors approved the business combination or the transaction
which resulted in the shareholder becoming an interested shareholder, or (ii)
upon consummation of the transaction which resulted in the shareholder becoming
an interested shareholder, the interested shareholder owned at least 85% of the
Voting Stock, or (iii) the business combination is approved by the Board of
Directors and authorized by 66 2/3% of the outstanding Voting Stock which is not
owned by the interested shareholder. An interested shareholder means any person
that is the owner of 15% or more of the outstanding Voting Stock; however, the
statute provides for certain exceptions to parties who otherwise would be
designated interested shareholders, including an exception for parties that held
15% or more of the outstanding Voting Stock as of December 23, 1987. Any
corporation may decide to opt out of the statute in its original certificate of
incorporation or, at any time, by action of its shareholders. The Company has no
present intention of opting out of the statute.
There can be no assurance that the Board of Directors would not adopt any
further anti-takeover measures available under Delaware law (some of which may
not require shareholder approval). Moreover, the availability of such measures
under Delaware law, whether or not implemented, may have the effect of
discouraging a future takeover attempt which a majority of the Delaware
Company's shareholders may deem to be in their best interests or in which
shareholders may receive a premium for their shares over the then current market
price. As a result, shareholders who might desire to participate in such
transactions may not have the opportunity to do so. Shareholders should
recognize that, if adopted, the effect of such measures, along with the
possibility of discouraging takeover attempts, may be to limit in certain
respects the rights of shareholders of the Delaware Company compared with the
rights of shareholders of the Company.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts (such
as disruption of the Company's business and the possibility of terms which may
be less than favorable to all of the shareholders than would be available in a
board-approved transaction) are sufficiently great such that prudent steps to
reduce the likelihood of such takeover attempts and to enable the Board to fully
consider the proposed takeover attempt and actively negotiate its terms are in
the best interests of the Company and its shareholders.
In addition to the various anti-takeover measures that would be available
to the Delaware Company after the reincorporation due to the application of
Delaware law, the Delaware Company would retain the rights currently available
to the Company under California law to issue shares of its authorized but
unissued capital stock. Following the effectiveness of the proposed
reincorporation, shares of authorized and unissued Common
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<PAGE> 19
Stock and Preferred Stock of the Delaware Company could (within the limits
imposed by applicable law) be issued in one or more transactions, or Preferred
Stock could be issued with terms, provisions and rights which would make more
difficult and, therefore, less likely, a takeover of the Delaware Company. Any
such issuance of additional stock could have the effect of diluting the earnings
per share and book value per share of existing shares of Common Stock and
Preferred Stock, and such additional shares could be used to dilute the stock
ownership of persons seeking to obtain control of the Delaware Company.
It should be noted that the voting rights to be accorded to any unissued
series of Preferred Stock of the Delaware Company ("Delaware Preferred Stock")
remain to be fixed by the Delaware Board of Directors (the "Delaware Board").
Accordingly, if the Delaware Board so authorizes, the holders of Delaware
Preferred Stock might be entitled to vote separately as a class in connection
with approval of certain extraordinary corporate transactions in circumstances
where Delaware law does not ordinarily require such a class vote, or might be
given a disproportionately large number of votes. Such Delaware Preferred Stock
could also be convertible into a large number of shares of Common Stock of the
Delaware Company under certain circumstances or have other terms which might
make acquisition of a controlling interest in the Delaware Company more
difficult or more costly, including the right to elect additional directors to
the Delaware Board. Potentially, the Delaware Preferred Stock could be used to
create voting impediments or to frustrate persons seeking to effect a merger or
otherwise to gain control of the Delaware Company. Also, the Delaware Preferred
Stock could be privately placed with purchasers who might side with the
management of the Delaware Company in opposing a hostile tender offer or other
attempt to obtain control.
Future issuances of Delaware Preferred Stock as an anti-takeover device
might preclude shareholders from taking advantage of a situation which might
otherwise be favorable to their interests. In addition (subject to the
considerations referred to above as to applicable law), the Delaware Board could
authorize issuance of shares of Common Stock of the Delaware Company ("Delaware
Common Stock") or Delaware Preferred Stock to a holder who might thereby obtain
sufficient voting power to ensure that any proposal to alter, amend or repeal
provisions of the Delaware Certificate unfavorable to a suitor would not receive
the necessary vote of a majority of the Voting Stock required for passage of the
proposed amendments.
If the reincorporation is approved it is not the present intention of the
Board of Directors to seek shareholder approval prior to any issuance of the
Delaware Preferred Stock or Delaware Common Stock, except as required by law or
regulation. Frequently, opportunities arise that require prompt action, and it
is the belief of the Board of Directors that the delay necessary for shareholder
approval of a specific issuance would be a detriment to the Delaware Company and
its shareholders. The Board of Directors does not intend to issue any Delaware
Preferred Stock except on terms which the Board of Directors deems to be in the
best interests of the Delaware Company and its then existing shareholders.
AMENDMENT OF CERTIFICATE
The California Articles may be amended by the approval of a majority of the
members of the Board of Directors and by a majority of the outstanding shares.
The Delaware Certificate may also be amended by the approval of a majority of
the members of the Board of Directors and by a majority of the outstanding
shares.
AMENDMENT OF BYLAWS
The California Bylaws may be amended or repealed either by the Board of
Directors or by the holders of a majority in interest of the outstanding stock
of the Company, except that the Board of Directors may not change the authorized
range of directors. Upon the effectiveness of the proposed reincorporation, the
Delaware Bylaws may be adopted, amended or repealed by the Delaware Board or by
the holders of at least a majority of the voting power of the outstanding
capital stock of the Delaware Company.
LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES
California law provides that any loan or guaranty (other than loans to
permit the purchase of shares under certain stock purchase plans) for the
benefit of any officer or director, or any employee benefit plan
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<PAGE> 20
authorizing such loan or guaranty (except certain employee stock purchase
plans), must be approved by the majority of the disinterested shareholders of a
California corporation.
Under Delaware law, a corporation may make loans to, or guarantee the
obligations of, officers or other employees when, in the judgment of the board
of directors, the loan or guaranty may reasonably be expected to benefit the
corporation. Both California law and Delaware law permit such loans or
guaranties to be unsecured and without interest.
CLASS VOTE FOR CERTAIN REORGANIZATIONS
With certain exceptions, California law requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. Delaware law generally does
not require class voting for such transactions, except in certain situations
involving an amendment to the certificate of incorporation which adversely
affects a specific class of shares.
California law also requires that holders of a California corporation's
Common Stock receive nonredeemable Common Stock in a merger of the corporation
with the holder (or an affiliate of the holder) of more than 50% but less than
90% of the California Corporation's Common Stock, unless all of the holders of
its Common Stock consent to the merger or the merger has been approved by the
California Commission of Corporations at a "fairness hearing." This provision of
California law may have the effect of making a cash "freezeout" merger by a
majority shareholder more difficult to accomplish. A cash freezeout merger is a
transaction whereby a minority shareholder is forced to relinquish his or her
share ownership in a corporation in exchange for cash, subject in certain
instances to dissenters rights. Delaware law has no comparable provision.
INSPECTION OF SHAREHOLDER LISTS
California law provides for an absolute right of inspection of the
shareholder list for shareholders holding 5% or more of a corporation's
outstanding voting shares or shareholders holding 1% or more of such shares who
have filed a Schedule 14A with the SEC. Delaware law provides no such absolute
right of shareholder inspection. However, both California and Delaware law
permit any shareholder of record to inspect the shareholder list for any purpose
reasonably related to that person's interest as a shareholder.
APPRAISAL RIGHTS
Under both California law and Delaware law, a shareholder of a corporation
participating in certain mergers and reorganizations may be entitled to receive
cash in the amount of the "fair value" (Delaware) or "fair market value"
(California) of its shares, as determined by a court, in lieu of the
consideration it would otherwise receive in the transaction. The limitations on
such dissenters' appraisal rights are somewhat different in California and
Delaware.
Shareholders of a California corporation, the shares of which are listed on
a national securities exchange or on the OTC margin stock list, generally do not
have appraisal rights unless the holders of at least 5% of the class of
outstanding shares assert the appraisal right. In any reorganization in which
one corporation or the shareholders of one corporation own more than 5/6 of the
voting power of the surviving or acquiring corporation, shareholders are denied
dissenters' rights under California law. For this reason, appraisal rights will
not be available to shareholders in connection with the reincorporation
proposal.
Under Delaware law appraisal rights are not available to shareholders with
respect to a merger or consolidation by a corporation, the shares of which are
either listed on a national securities exchange or designated as a national
market system security or an interdealer quotation system security by the
National Association of Securities Dealers, Inc., or are held of record by more
than 2,000 holders if the shareholders received shares of the surviving
corporation or shares of any other corporation which are similarly listed or
dispersed, and the shareholders do not receive any other property in exchange
for their shares except cash for fractional shares. Appraisal rights are also
unavailable under Delaware law to shareholders of a corporation surviving a
merger if no vote of those shareholders is required to approve the merger
because, among other
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<PAGE> 21
things, the number of shares to be issued in the merger does not exceed 20% of
the shares of the surviving corporation outstanding immediately before the
merger and certain other conditions are met.
VOTING APPRAISAL RIGHTS IN CERTAIN TRANSACTIONS
Delaware law does not provide shareholders with voting or appraisal rights
when a corporation acquires another business through the issuance of its stock,
whether in exchange for assets or stock or in a merger with a subsidiary.
California law treats these kinds of acquisitions in the same manner as a merger
of the corporation directly with the business to be acquired and provides
appraisal rights in the circumstances described in the preceding section.
DIVIDENDS
Under California law, any dividends or other distributions to shareholders,
such as redemptions, are limited to the greater of (i) retained earnings or (ii)
an amount which would leave the corporation with assets (excluding certain
intangible assets) equal to at least 125% of its liabilities (excluding certain
deferred items) and current assets equal to at least 100% (or, in certain
circumstances, 125%) of its current liabilities. Delaware law allows the payment
of dividends and redemption of stock out of surplus (including paid-in and
earned surplus) or out of net profits for the current and immediately preceding
fiscal years. The Company has not paid any cash dividends to date, and it is
anticipated that the Delaware Company will not pay any cash dividends for the
foreseeable future.
APPLICATION OF CALIFORNIA LAW AFTER REINCORPORATION
California law provides that if (i) the average of certain property,
payroll and sales factors results in a finding that more than 50% of the
Delaware Company's business is conducted in California and in a particular
fiscal year more than 50% of the Delaware Company's outstanding voting
securities are held of record by persons having addresses in California, and
(ii) the Company's shares are traded in the Nasdaq National Market and are held
by fewer than 800 equity security holders, as of its most recent annual meeting
of shareholders, then the Delaware Company would become subject to certain
provisions of California law regardless of its state of incorporation. The
Company does not currently meet all of the above requirements.
Because the Company's Common Stock is traded in the Nasdaq National Market
and the Company's shares are held by at least 800 equity security holders as of
its most recent annual meeting of shareholders, California law will not
initially apply to the Delaware Company if the reincorporation is approved. The
Company would not be subject to California law as long as it continued to meet
both of these requirements.
If the Delaware Company were to become subject to the provisions of
California law referred to above, and such provisions were enforced by
California courts in a particular case, many of the Delaware laws described in
this Proxy Statement would not apply to the Delaware Company. Instead, the
Delaware Company could be governed by certain California laws, including those
regarding liability of directors for breaches of the duty of care,
indemnification of directors, dissenters' rights of appraisal, removal of
directors as well as certain other provisions discussed above, to the exclusion
of Delaware law. The effects of applying both Delaware and California laws to a
Delaware corporation whose principal operations are based in California have not
yet been determined.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The reincorporation provided for in the Merger Agreement is intended to be
a tax free reorganization under the Internal Revenue Code of 1986, as amended.
Assuming the reincorporation qualifies as a reorganization, no gain or loss will
be recognized to the holders of capital stock of the Company as a result of
consummation of the reincorporation, and no gain or loss will be recognized by
the Company or the Delaware Company. Each former holder of capital stock of the
Company will have the same basis in the capital stock of the Delaware Company
received by such holder pursuant to the reincorporation as such holder has in
the capital stock of the Company held by such holder at the time of consummation
of the reincorporation. Each shareholder's holding period with respect to the
Delaware Company's capital stock will include the period
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<PAGE> 22
during which such holder held the corresponding Company capital stock, provided
the latter was held by such holder as a capital asset at the time of
consummation of the reincorporation. The Company has not obtained a ruling from
the Internal Revenue Service or an opinion of legal or tax counsel with respect
to the consequences of the reincorporation.
The foregoing is only a summary of certain federal income tax consequences.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY OF THE LAWS OF
ANY STATE OR OTHER JURISDICTION.
BOARD RECOMMENDATION
The foregoing discussion is an attempt to summarize the more important
differences in the corporation laws of Delaware and California and does not
purport to be an exhaustive discussion of all of the differences. Such
differences can be determined in full by reference to the California
Corporations Code and to the Delaware General Corporation Law. In addition, both
California and Delaware law provide that some of the statutory provisions as
they affect various rights of holders of shares may be modified by provisions in
the charter or bylaws of the corporation.
A vote FOR the reincorporation proposal will constitute approval of the
merger, the Delaware Certificate, the Delaware Bylaws, the form of the
indemnification agreements, the adoption and assumption by the Delaware Company
of each of the Company's stock option, stock purchase and employee benefit plans
and all other aspects of this Proposal Two.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
REINCORPORATION INTO DELAWARE
PROPOSAL NO. 3 -- APPROVAL OF INCREASE IN THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to shareholder approval, an
increase to the Company's authorized number of shares of Common Stock from
20,000,000 shares to 40,000,000 shares. If the Company's proposed
reincorporation into the State of Delaware under Proposal No. 2 is approved, the
Company's Common Stock and Preferred Stock will each have a par value of $0.001
per share. If Proposal No. 2 is not approved, the Company's Common Stock and
Preferred Stock will continue to have no par value per share.
On June 27, 1997, 15,470,361 shares of Common Stock were issued and
outstanding and 3,074,135 shares were reserved for issuance upon exercise of
outstanding options. Thus, as of that date, the Company had approximately
1,455,504 shares of Common Stock available for issuance, of which 647,868 shares
were reserved for future grant under the Company's stock option plans and future
issuance pursuant to the Company's employee stock purchase plan. Also as of that
date, there were 2,000,000 authorized shares of Preferred Stock, none of which
were outstanding. The proposed increase in the number of authorized shares of
Common Stock from 20,000,000 to 40,000,000 would result in additional shares
being available for issuance from time to time for corporate purposes (such as
possible stock splits, stock dividends, acquisitions of companies or assets,
sales of stock or securities convertible into stock and issuances pursuant to
stock options or other employee benefit plans). The Company currently has no
specific plans, arrangements or understandings with respect to the issuance of
these additional shares. The Company believes that the availability of the
additional shares will provide it with the flexibility to meet business needs as
they arise, to take advantage of favorable opportunities and to respond to a
changing corporate environment.
The additional shares of Common Stock that would become available for
issuance if this proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further shareholder approval,
the Board could strategically sell shares of Common Stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board. Although this proposal to increase the authorized Common Stock has
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<PAGE> 23
been prompted by business and financial considerations and not by the threat of
any hostile takeover attempt (nor is the Board currently aware of any such
attempts directed at the Company), nevertheless, shareholders should be aware
that approval of this proposal could facilitate future efforts by the Company to
deter or prevent changes in control of the Company, including transactions in
which the shareholders might otherwise receive a premium for their shares over
then current market prices.
If the shareholders approve the share increase pursuant to this Proposal,
the Company will file a Certificate of Amendment to the California Articles with
the Secretary of State of the State of California reflecting the increase in
authorized shares.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
PROPOSAL 4 -- 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. The Option Plan was again amended by the Board of
Directors in June 1996 to increase the number of shares reserved for issuance
under the Option Plan from 1,500,000 to 2,150,000. The Shareholders approved
this increase in August 1996.
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 2,150,000 shares to 2,900,000 shares (an increase of 750,000 shares) or
4.8% of the Company's total shares outstanding as of June 27, 1997. The Board
approved the proposed amendment on May 27, 1997, to be effective upon
shareholder approval.
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 Internal Revenue Code (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.
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<PAGE> 24
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 section 162(m) of the Code.
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 June 27, 1997 there were approximately 207 employees
eligible to participate in the Option Plan, 1,817,927 shares were subject to
outstanding options and 245,675 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, 142,000 shares; Grover P. Righter, 115,000 shares;
Leland J. Llevano, 241,750 shares; Craig J. Taylor, 105,000 shares; and Jordan
J. Breslow, 128,250 shares. Currently, there are five directors eligible to
participate in the Option Plan and four outside directors hold outstanding
options for 129,375 shares of Common Stock under the Option Plan. Currently,
there are 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
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sales price (or the closing bid if no sales are 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 or her
employment or service as a director or consultant as a result of his or her
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.
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.
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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 16-3 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, 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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PROPOSAL 5 -- 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, 1998, 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, 1998.
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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 27,
1997 by (a) each beneficial owner of more than 5% of the Company's Common Stock,
(b) the Named Executive Officers (as defined below), (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>
Metropolitan Life Insurance Company
State Street Research & Management
Company(1).................................. 1,074,000 6.9%
Nokia Mobile Phones Ltd.(2)................... 1,000,000 6.5
Putnam Investments Inc.(3).................... 989,075 6.4
Founders Asset Management, Inc.(4)............ 828,075 5.4
First Union Corporation(5).................... 808,248 5.2
Gordon E. Mayer(6)............................ 396,688 2.6
Bruce W. Dunlevie
Merrill, Pickard, Anderson & Eyre V(7)...... 315,931 2.0
Clive Smith(8)................................ 118,125 *
Leland J. Llevano(9).......................... 89,835 *
Craig J. Taylor(10)........................... 57,455 *
Jordan J. Breslow(11)......................... 46,688 *
Grover P. Righter(12)......................... 41,146 *
Eric E. Schmidt(13)........................... 25,875 *
Reijo Paajanen(14)............................ 2,500 *
All directors and executive officers
as a group (14 persons)(15)................. 1,351,615 8.5
</TABLE>
- ---------------
* Less than one percent of the outstanding Common Stock.
(1) Based on Amendment Number 1 to Schedules 13G filed by Metropolitan Life
Insurance Company ("Metlife") and State Street Research & Management
Company ("State Street") filed in February 1997. 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.
(2) 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.
(3) Based on Amendment Number 1 to Schedule 13G filed by Putnam Investment Inc.
on behalf of itself, Marsh & McLennan Companies, Inc., Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc. The address of
Putnam Investment Inc. is One P.O. Box Square, Boston, Massachusetts 02109.
(4) Based on Amendment Number 1 to Schedule 13G filed by Founders Asset
Management, Inc. ("Founders") in February 1997. The address of Founders is
2930 E. Third Avenue, Denver, Colorado 80206.
(5) Based on Amendment Number 1 to Schedule 13G filed by First Union
Corporation ("First Union"). The address of First Union is One First Union
Center, Charlotte, North Carolina 28288.
(6) Includes 6,875 shares subject to repurchase rights of the Company as of
June 27, 1997. Includes 18,542 shares issuable pursuant to options
exercisable within 60 days of June 27, 1997, 24,000 shares held by Mayer
Family Partners LP, 150,000 shares held by the Mayer Family Revocable Trust
dated
26
<PAGE> 29
10/5/95, 47,500 shares held by the Mayer Family Revocable Trust dated
10/5/96 and 25,000 shares held by Custom Technology Growth Fund L.L.C.
(7) Represents 19,375 shares issuable pursuant to options exercisable within 60
days of June 27, 1997, 53,512 shares held by Bruce W. Dunlevie and 243,044
shares held by MPAE V Management Company, L.P. ("MPAE V"), the general
partner of Merrill, Pickard, Anderson & Eyre V ("Merrill"). Mr. Dunlevie, a
director of the Company, is a general partner of MPAE V. 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 243,044 shares
held by Merrill. Accordingly, Mr. Dunlevie may be deemed to beneficially
own the 243,044 shares held by Merrill.
(8) Includes 90,625 shares issuable pursuant to options exercisable within 60
days of June 27, 1997 and 10,000 shares held in trust for Mr. Smith's minor
child.
(9) Includes 49,729 shares issuable pursuant to options exercisable within 60
days of June 27, 1997.
(10) Includes 56,458 shares issuable pursuant to options exercisable within 60
days of June 27, 1997.
(11) Includes 46,035 shares issuable pursuant to options exercisable within 60
days of June 27, 1997.
(12) Represents 41,146 shares issuable pursuant to options exercisable within 60
days of June 27, 1997.
(13) Includes 2,500 shares issuable pursuant to options exercisable within 60
days of June 27, 1997.
(14) Represents 2,500 shares issuable pursuant to options exercisable within 60
days of June 27, 1997. 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.
(15) Includes 403,705 shares issuable pursuant to options exercisable within 60
days of June 27, 1997.
27
<PAGE> 30
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, 1997, by the Company's Chief Executive Officer and the four other most
highly compensated executive officers who were serving as executive officers at
the end of fiscal 1997 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING
POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS
- ------------------------------------ ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gordon E. Mayer..................... 1997 $220,000 $33,000 -- 130,000
Chairman of the Board, 1996 200,275 35,000 -- --
President and Chief 1995 200,069 5,007 $ 71,409(2) 12,000
Executive Officer
Grover P. Righter(3)................ 1997 160,000 42,000 15,940(2) 15,000
Vice President,
Wireless Content & Services Group 1996 38,820 3,333 -- 100,000
Leland J. Llevano................... 1997 120,000 75,659 -- 40,000
Vice President, 1996 110,000 24,501 -- 50,000
Strategic Partnerships 1995 100,000 20,257 -- 10,000
Craig J. Taylor(4).................. 1997 140,000 39,515 13,167(5) 20,000
Vice President, Engineering 1996 125,275 21,875 12,000(5) 15,000
1995 50,092 -- 4,000(5) 70,000
Jordan J. Breslow................... 1997 140,000 26,250 -- 52,000
Vice President, General Counsel 1996 130,275 16,500 -- 50,000
1995 115,069 14,924 -- --
</TABLE>
- ---------------
(1) Includes cash profit sharing and cash bonuses earned for the fiscal year,
whether accrued or paid.
(2) Represents relocation expenses.
(3) Grover P. Righter joined the Company in January 1996, and, accordingly,
compensation information for fiscal 1996 reflects only three months of
service.
(4) Mr. Taylor joined the Company in October 1994, and, accordingly, salary
information for fiscal 1995 reflects only five months of service.
(5) Represents automobile allowance.
28
<PAGE> 31
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, 1997. 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 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATE OF
SECURITIES % OF TOTAL STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM
GRANTED EMPLOYEES PRICE PER EXPIRATION -----------------------
NAME (1) IN FISCAL 1997 SHARE DATE 5% 10%
- ------------------------------ ---------- -------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gordon E. Mayer............... 100,000 7.0% $ 17.75 02/27/07 $1,116,288 $2,828,893
30,000 2.1 29.00 04/24/06 547,138 1,386,556
Grover P. Righter............. 15,000 1.0 17.75 02/27/07 167,443 424,334
Leland J. Llevano............. 25,000 1.7 17.75 02/27/07 279,072 707,223
10,000 0.7 20.50 08/01/06 128,923 326,717
5,000 0.3 29.00 04/24/06 91,190 231,093
Craig J. Taylor............... 20,000 1.4 17.75 02/27/07 223,258 565,779
Jordan J. Breslow............. 20,000 1.4 17.75 02/27/07 223,258 565,779
30,000 2.1 20.50 08/01/06 386,770 980,152
2,000 0.1 29.00 04/24/06 36,476 92,437
</TABLE>
- ---------------
(1) Options have a ten-year term and vest over four years, ratably at 1/48 per
month.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to option exercises
in fiscal 1997 by the Named Executive Officers and the value of such officers'
unexercised options at March 31, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gordon E. Mayer................ -- -- 8,333 133,667 $ 1,563 $ 1,438
Grover P. Righter.............. -- -- 29,480 85,520 -- --
Leland J. Llevano.............. 8,722 $ 341,888 37,959 75,041 59,906 21,677
Craig J. Taylor................ -- -- 47,397 57,603 10,573 6,927
Jordan J. Breslow.............. 5,000 168,167 35,436 77,661 63,230 4,277
</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 $6.75 per share on March 31, 1997 (the last
trading day for fiscal 1997), minus the exercise price of in-the-money
options.
29
<PAGE> 32
CERTAIN TRANSACTIONS
In April 1996, the Company granted a license to its desktop personal
computer products to New Deal, Inc., a Delaware corporation. Clive Smith, a
director of Geoworks, is a founder and principal of New Deal, 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, a former director of Geoworks
who resigned in May 1997, is Chairman of Wink and currently holds approximately
38% of the outstanding securities of Wink.
In addition, Mr. Dougherty received salary in the amount of $125,275 in
fiscal 1997 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. 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 1997, the Company recognized royalty revenue of $677,000 from Nokia and
received non-recurring engineering fees of $450,000.
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, 1997, $66,722 of principal and
$1,297 of accrued interest were outstanding under the note.
In September 1994, the Company granted to Hewlett-Packard a non-exclusive
license to its CCD software. Harry W. McKinney, a former director of the Company
who resigned in December 1996, is General Manager of Home Products of
Hewlett-Packard. During fiscal 1997, the Company received royalties totalling
$240,000 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.
30
<PAGE> 33
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 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, 1997, all Section 16(a) filing requirements applicable
to its executive officers and directors were complied except that:
James Goldberger, a former executive officer of the Company, filed a Form 3
late; Brian P. Dougherty, a former director of the Company, filed two Forms 4
late with respect to a sale of Common Stock in March 1996 and a change in the
nature of beneficial ownership of certain shares in July 1996; and Clive G.
Smith, a director of the Company, filed three Forms 4 late with respect to the
exercise of options in January 1996, the exercise of options and the sale of
Common Stock in May 1996 and the sale of Common Stock in August 1996.
31
<PAGE> 34
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, 1997. 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
<TABLE>
<CAPTION>
NASDAQ STOCK
MEASUREMENT PERIOD H&Q SOFTWARE MARKET - U.S.
(FISCAL YEAR COVERED) GEOWORKS SECTOR INDEX INDEX
<S> <C> <C> <C>
06/23/94 100.00 100.00 100.00
09/30/94 129.17 111.03 113.69
12/31/94 112.50 123.09 109.76
03/31/95 135.42 119.66 140.73
06/30/95 208.33 162.75 136.87
09/30/95 320.83 153.35 176.94
12/31/95 316.67 176.43 155.25
03/31/96 500.00 162.48 192.55
06/30/96 591.67 209.95 175.76
09/30/96 433.33 182.00 215.94
12/31/96 408.33 214.47 190.92
03/31/97 110.42 180.60 195.72
</TABLE>
32
<PAGE> 35
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 reference 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 employees with six (6) months of service, whose customary
employment is at least twenty (20) hours per week and more than five (5) months
per year 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.
33
<PAGE> 36
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 primarily tied to the Company's financial performance, along with a
target bonus 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 twenty percent of their base salary if the
objectives are fully 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
fulltime, 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 employees with six (6) months of
service, whose customary employment is at least twenty (20) hours per week and
more than five (5) months per year 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 past fiscal year. These
achievements include the successful acquisition of The Eden Group, Ltd., thereby
accelerating the Company's ability to deliver a standardized operating system
product to the smart phone market, continued enhancement of the Company's
potential as a market leader in the smart phone market through establishment of
additional OEM and cellular operator relationships, and managing the growth of
the Company within the operational guidelines as established by the Board of
Directors. As a result of these achievements, the Board of Directors granted Mr.
Mayer a bonus of $33,000 and a grant of 30,000 stock options on April 24, 1996
and 100,000 stock options on February 27, 1997. The stock options were granted
with forty-eight (48) month vesting periods and with prices of $29.00 and
$17.75, respectively, representing the fair market value of the Company's stock
on the respective grant dates.
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.
34
<PAGE> 37
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 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 8, 1997
35
<PAGE> 38
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement") is made as of
August , 1997 by and between Geoworks, a California corporation ("Geoworks
California"), and Geoworks Corporation, a Delaware corporation ("Geoworks
Delaware"). Geoworks California and Geoworks Delaware are hereinafter sometimes
collectively referred to as the "Constituent Corporations."
RECITALS
A. Geoworks California was incorporated on September 27, 1993. Its current
authorized capital stock consists of: (1) 40,000,000 shares of Common Stock, no
par value ("Geoworks California Common Stock"), of which shares are
issued and outstanding; and (2) 2,000,000 shares of Preferred Stock, no par
value ("Geoworks California Preferred Stock"), of which no shares are issued and
outstanding.
B. Geoworks Delaware was incorporated on August , 1997. Its authorized
capital stock consists of: (1) 40,000,000 shares of Common Stock, with a par
value of $0.001 per share ("Geoworks Delaware Common Stock"), of which 1,000
shares are issued and outstanding; and (2) 2,000,000 shares of Preferred Stock,
$0.001 par value ("Geoworks Delaware Preferred Stock"), none of which shares are
issued and outstanding.
C. The respective Boards of Directors of Geoworks California and Geoworks
Delaware deem it advisable and to the advantage of each of the Constituent
Corporations that Geoworks California merge with and into Geoworks Delaware upon
the terms and subject to the conditions set forth in this Merger Agreement for
the purpose of effecting a change of the state of incorporation of Geoworks
California from California to Delaware.
D. The Boards of Directors of each of the Constituent Corporations have
approved this Merger Agreement.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization set
forth in this Merger Agreement and do hereby agree that Geoworks California
shall merge with and into Geoworks Delaware on the following terms, conditions
and other provisions:
1. Merger and Effective Time. At the Effective Time (as defined below),
Geoworks California shall be merged with and into Geoworks Delaware (the
"Merger"), and Geoworks Delaware shall be the surviving corporation of the
Merger (the "Surviving Corporation"). The Merger shall become effective upon the
close of business on the date when a duly executed copy of this Merger
Agreement, along with all required officers' certificates, is filed with the
Secretary of State of the State of California, or upon the close of business on
the date when a duly executed copy of this Merger Agreement, along with all
required officers' certificates, is filed with the Secretary of State of the
State of Delaware, whichever later occurs (the "Effective Time").
2. Effect of Merger. At the Effective Time, the separate corporate
existence of Geoworks California shall cease; the corporate identity, existence,
powers, rights and immunities of Geoworks Delaware as the Surviving Corporation
shall continue unimpaired by the Merger; and Geoworks Delaware shall succeed to
and shall possess all the assets, properties, rights, privileges, powers,
franchises, immunities and purposes, and be subject to all the debts,
liabilities, obligations, restrictions and duties of Geoworks California, all
without further act or deed.
3. Governing Documents. At the Effective Time, the Certificate of
Incorporation of Geoworks Delaware in effect immediately prior to the Effective
Time shall become the Certificate of Incorporation of the Surviving Corporation
and the Bylaws of Geoworks Delaware in effect immediately prior to the Effective
Time shall become the Bylaws of the Surviving Corporation.
4. Directors and Officers. At the Effective Time, the directors and
officers of Geoworks Delaware shall be and become the directors and officers
(holding the same titles and positions) of the Surviving Corporation,
A-1
<PAGE> 39
and after the Effective Time shall serve in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
5. Conversion of Shares of Geoworks California. Subject to the terms and
conditions of this Agreement, at the Effective Time, each share of Geoworks
California Common Stock outstanding immediately prior thereto shall be
automatically changed and converted into an equivalent number of fully paid and
nonassessable, issued and outstanding shares of Geoworks Delaware Common Stock.
6. Cancellation of Shares of Geoworks Delaware. At the Effective Time, all
of the previously issued and outstanding shares of Geoworks Delaware Common
Stock that were issued and outstanding immediately prior to the Effective Time
shall be automatically retired and cancelled.
7. Stock Certificates. At and after the Effective Time, all of the
outstanding certificates that, prior to that date, represented shares of
Geoworks California Common Stock shall be deemed for all purposes to evidence
ownership of and to represent the number of shares of Geoworks Delaware Common
Stock into which such shares of Geoworks California Common Stock are converted
as provided herein. The registered owner on the books and records of Geoworks
California of any such outstanding stock certificate for Geoworks California
Common Stock shall, until such certificate shall have been surrendered for
transfer or otherwise accounted for to Geoworks Delaware or its transfer agent,
be entitled to exercise any voting and other rights with respect to, and to
receive any dividend and other distributions upon, the shares of Geoworks
Delaware Common Stock evidenced by such outstanding certificate as above
provided.
8. Conversion of Options. At the Effective Time, all outstanding and
unexercised portions of all options to purchase Geoworks California Common Stock
under the Geoworks California 1987 Stock Option Plan, 1994 Stock Plan,
Supplemental Stock Option Plan and 1997 Supplemental Stock Plan (collectively,
the "Geoworks California Option Plans"), shall become options to purchase an
equivalent number of shares of Geoworks Delaware Common Stock at the same
exercise price per share and otherwise shall, to the extent permitted by law and
otherwise reasonably practicable, have the same term, exercisability, vesting
schedule, status as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), if applicable, and all
other material terms and conditions (including but not limited to the terms and
conditions applicable to such options by virtue of the Geoworks California Stock
Option Plans). Continuous employment with Geoworks California will be credited
to an optionee for purposes of determining the vesting of the number of shares
of Geoworks Delaware Common Stock subject to exercise under a converted Geoworks
California option at the Effective Time. Additionally, at the Effective Time,
Geoworks Delaware shall adopt and assume the Geoworks California Option Plans.
9. Employee Benefit Plans. At the Effective Time, the obligations of
Geoworks California under or with respect to every plan, trust, program and
benefit then in effect or administered by Geoworks California for the benefit of
the directors, officers and employees of Geoworks California or any of its
subsidiaries shall become the lawful obligations of Geoworks Delaware and shall
be implemented and administered in the same manner and without interruption
until the same are amended or otherwise lawfully altered or terminated.
Effective at the Effective Time, Geoworks Delaware hereby expressly adopts and
assumes all obligations of Geoworks California under such employee benefit
plans.
10. Further Assurances. From time to time, as and when required by the
Surviving Corporation or by its successors or assigns, there shall be executed
and delivered on behalf of Geoworks California such deeds, assignments and other
instruments, and there shall be taken or caused to be taken by it all such
further action, as shall be appropriate, advisable or necessary in order to
vest, perfect or confirm, of record or otherwise, in the Surviving Corporation
the title to and possession of all property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of Geoworks California,
and otherwise to carry out the purposes of this Merger Agreement. The officers
and directors of the Surviving Corporation are fully authorized in the name of
and on behalf of Geoworks California, or otherwise, to take any and all such
actions and to execute and deliver any and all such deeds and other instruments
as may be necessary or appropriate to accomplish the foregoing.
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11. Condition. The consummation of the Merger is subject to the approval of
this Merger Agreement and the Merger contemplated hereby by the shareholders of
Geoworks California and by the sole stockholder of Geoworks Delaware, prior to
or at the Effective Time.
12. Abandonment. At any time before the Effective Time, this Merger
Agreement may be terminated and the Merger abandoned by the Board of Directors
of Geoworks California or Geoworks Delaware, notwithstanding approval of this
Merger Agreement by the Boards of Directors and shareholders of Geoworks
California and Geoworks Delaware.
13. Amendment. At any time before the Effective Time, this Merger Agreement
may be amended, modified or supplemented by the Boards of Directors of the
Constituent Corporations, notwithstanding approval of this Merger Agreement by
the shareholders of Geoworks California and Geoworks Delaware; provided,
however, that any amendment made subsequent to the adoption of this Agreement by
the shareholders of Geoworks California or the sole stockholder of Geoworks
Delaware shall not: (i) alter or change the amount or kind of shares,
securities, cash, property and/or rights to be received in exchange for or upon
conversion of any shares of any class or series of Geoworks California; (ii)
alter or change any of the terms of the Certificate of Incorporation of the
Surviving Corporation to be effected by the Merger; or (iii) alter or change any
of the terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any shares of any class or series of Geoworks
California or Geoworks Delaware.
14. Tax-Free Reorganization. The Merger is intended to be a tax-free plan
of reorganization within the meaning of Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended.
15. Governing Law. This Agreement shall be governed by and construed under
the internal laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California, without reference to the principles of conflicts of law or choice of
laws, except to the extent that the laws of the State of Delaware would apply in
matters relating to the internal affairs of Geoworks Delaware and the Merger.
16. Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, it may be executed in any number of counterparts, each of
which shall be deemed to be an original.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, this Merger Agreement is hereby executed on behalf of
each of the Constituent Corporations and attested by their respective officers
thereunto duly authorized.
<TABLE>
<S> <C> <C>
GEOWORKS, GEOWORKS CORPORATION,
a California corporation a Delaware corporation
By: By:
- --------------------------------------------- ---------------------------------------------
Gordon E. Mayer, President Gordon E. Mayer, President
ATTEST: ATTEST:
By: By:
- --------------------------------------------- ---------------------------------------------
Jordan J. Breslow, Secretary Jordan J. Breslow, Secretary
</TABLE>
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
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EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
GEOWORKS CORPORATION
ARTICLE I
The name of the corporation is Geoworks Corporation.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware, 19805. The name of its
registered agent at that address is Corporation Service Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the corporation
has authority to issue is Forty Two Million (42,000,000) shares, consisting of
two classes: Forty Million (40,000,000) shares of Common Stock, $0.001 par value
per share, and Two Million (2,000,000) shares of Preferred Stock, $0.001 par
value per share.
The Board of Directors is authorized, subject to any limitations prescribed
by the law of the State of Delaware, to provide for the issuance of the shares
of Preferred Stock in one or more series, and, by filing a Certificate of
Designation pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, to fix the designation, powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof,
and to increase or decrease the number of shares of any such series (but not
below the number of shares of such series then outstanding).
The number of authorized shares of Common Stock or Preferred Stock may also
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the stock
of the corporation entitled to vote, unless a vote of any other holders is
required pursuant to a Certificate or Certificates establishing a series of
Preferred Stock.
Except as otherwise expressly provided in any Certificate of Designation
designating any series of Preferred Stock pursuant to the foregoing provisions
of this Article IV, any new series of Preferred Stock may be designated, fixed
and determined as provided herein by the Board of Directors without approval of
the holders of Common Stock or the holders of Preferred Stock, or any series
thereof, and any such new series may have powers, preferences and rights,
including, without limitation, voting rights, dividend rights, liquidation
rights, redemption rights and conversion rights, senior to, junior to or pari
passu with the rights of the Common Stock, the Preferred Stock, or any future
class or series of Preferred Stock or Common Stock.
ARTICLE V
The business and affairs of the corporation shall be managed by or under
the direction of the Board of Directors. The number of directors shall be fixed
from time to time exclusively by a resolution of the Board of Directors adopted
by the affirmative vote of a majority of the total number of directors that the
corporation would have if there were no vacancies.
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Any vacancy on the Board of Directors, however resulting, and any newly
created directorships resulting from any increase in the authorized number of
directors shall be filled only by the affirmative vote of a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director, unless the Board of Directors determines that any such vacancies or
newly created directorships shall be filled by the stockholders.
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal Bylaws of the corporation.
ARTICLE VI
Any action required or permitted to be taken by the stockholders of the
corporation may be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such holders.
Subject to the rights of the holders of any class or series of Preferred Stock,
special meetings of stockholders of the corporation shall be called only by the
Board of Directors or upon the request of the Chairman of the Board of Directors
or the Chief Executive Officer of the corporation. If a special meeting is
requested by the Chairman of the Board of Directors or the Chief Executive
Officer, the Board of Directors shall determine the time and the place of such
meeting, which shall be called for no less than 35 days nor more than 120 days
after the receipt by the Secretary of the corporation of the request for such
meeting.
Election of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
ARTICLE VII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article VII, nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article VII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
ARTICLE VIII
The name and mailing address of the incorporator is Robert A. Freedman, c/o
Fenwick & West LLP, Two Palo Alto Square, Suite 800, Palo Alto, California
94306.
The undersigned incorporator hereby acknowledges that the foregoing
certificate is his act and deed and that the facts stated herein are true.
Date: August , 1997
--------------------------------------
Robert A. Freedman, Incorporator
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EXHIBIT C
GEOWORKS CORPORATION
BY-LAWS
ARTICLE I -- STOCKHOLDERS
SECTION 1. Annual Meeting.
(1) An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months of the last annual meeting of stockholders.
(2) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of the notice provided for in this By-law, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this By-law.
(3) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (2) of this
By-law, the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation, such business must be a proper matter for
stockholder action under the General Corporation Law of the State of Delaware
and, if the stockholder, or the beneficial owner on whose behalf any such
proposal or nomination is made, solicits or participates in the solicitation of
proxies in support of such proposal or nominees, the stockholder must have
timely indicated its, or such beneficial owner's, intention to do so as provided
in subclause (c)(iii) of this paragraph (3). To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices of
the Corporation not less than 60 days prior to the first anniversary of the
preceding year's annual meeting of stockholders; provided, however, that if the
date of the annual meeting is advanced more than 30 days prior to or delayed by
more than 60 days after such anniversary date, notice by the stockholder to be
timely must be so delivered not later than the close of business on the later of
the 60th day prior to such annual meeting or the 10th day following the day on
which public announcement of the date of such meeting is first made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person as would be required to be disclosed in solicitations of
proxies for the election of such nominees as directors pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and such person's written consent to serving as a director if elected; (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of such business, the reasons for conducting such business at
the meeting and any material interest in such business of such stockholder and
the beneficial owner, if any, on whose behalf the proposal is made; (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the Corporation that are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii) whether either such stockholder or beneficial owner intends to solicit or
participate in the solicitation of proxies in favor of such proposal or nominee
or nominees.
(4) Notwithstanding anything in the second sentence of paragraph (3) of
this By-law to the contrary, in the event that the number of directors to be
elected to the Board is increased and there is no public announcement naming all
of the nominees for director or specifying the size of the increased Board made
by the Corporation at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by this By-law
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal
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executive offices of the Corporation not later than the close of business on the
10th day following the day on which such public announcement is first made by
the Corporation.
(5) Only persons nominated in accordance with the procedures set forth in
these By-laws shall be eligible to serve as directors and only such business
shall be conducted at an annual meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
section. The chair of the meeting shall have the power and the duty to determine
whether a nomination or any business proposed to be brought before the meeting
has been made in accordance with the procedures set forth in these By-laws and,
if any proposed nomination or business is not in compliance with these By-laws
to declare that such defective proposed business or nomination shall not be
presented for stockholder action at the meeting and shall be disregarded.
(6) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board may be made at a special meeting of stockholders at which directors are to
be elected pursuant to the Corporation's notice of meeting (a) by or at the
direction of the Board or (b) by any stockholder of record of the Corporation
who is a stockholder of record at the time of giving of notice provided for in
this paragraph, who shall be entitled to vote at the meeting and who complies
with the notice procedures set forth in this By-law. Nominations by stockholders
of persons for election to the Board may be made at such a special meeting of
stockholders if the stockholder's notice required by paragraph (3) of this
By-law shall be delivered to the Secretary at the principal executive offices of
the Corporation not later than the close of business on the later of the 60th
day prior to such special meeting or the 10th day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board to be elected at such meeting.
(7) For purposes of this section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(8) Notwithstanding the foregoing provisions of this By-law, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to matters set forth in this
By-law. Nothing in this By-law shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 2. Special Meetings; Notice.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
shall be called only by the Board of Directors or upon the request of the
Chairman of the Board of Directors or the Chief Executive Officer of the
Corporation. If a special meeting is requested by the Chairman of the Board of
Directors or the Chief Executive Officer, the Board of Directors shall determine
the time and place of such meeting, which shall be called for no less than 35
days nor more than 120 days after the receipt by the Secretary of the
Corporation of the request for such meeting. Notice of every special meeting,
stating the time, place and purpose, shall be given by mailing, postage prepaid,
at least ten but not more than sixty days before each such meeting, a copy of
such notice addressed to each stockholder of the Corporation at his or her post
office address as recorded on the books of the Corporation. The Board of
Directors may postpone or reschedule any previously scheduled special meeting.
Only such business shall be conducted at a special meeting of stockholders
as shall have been brought before the meeting pursuant to the Corporation's
notice of meeting.
SECTION 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and
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hereinafter, as required from time to time by the Delaware General Corporation
Law or the Certificate of Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
SECTION 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law. Where a
separate vote by a class or classes is required, a majority of the shares of
such class or classes present in person or represented by proxy shall constitute
a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting
may adjourn the meeting to another place, date, or time.
SECTION 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board or, in his or her absence,
the Chief Executive Officer of the Corporation or, in his or her absence, such
person as may be chosen by the holders of a majority of the shares entitled to
vote who are present, in person or by proxy, shall call to order any meeting of
the stockholders and act as chairman of the meeting. In the absence of the
Secretary of the Corporation, the secretary of the meeting shall be such person
as the chairman appoints.
SECTION 6. Conduct of Business.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The chairman shall have the power to adjourn the meeting to another place, date
and time. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting.
SECTION 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
The Corporation may, and to the extent required by law, shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Corporation may
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designate one or more persons as alternate inspectors to replace any inspector
who fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting may, and to the extent
required by law, shall, appoint one or more inspectors to act at the meeting.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability. Every vote taken by
ballots shall be counted by a duly appointed inspector or inspectors.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast affirmatively or negatively.
SECTION 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
ARTICLE II -- BOARD OF DIRECTORS
SECTION 1. Number, Election and Term of Directors.
The number of directors shall be fixed from time to time exclusively by a
resolution of the Board of Directors adopted by the affirmative vote of a
majority of the total number of directors that the Corporation would have if
there were no vacancies. At each annual meeting of stockholders, commencing with
the first annual meeting, directors shall be elected for a term of one year with
each director to hold office until his or her successor shall have been duly
elected and qualified.
SECTION 2. Newly Created Directorships and Vacancies.
Subject to applicable law and to the rights of the holders of any series of
preferred stock with respect to such series of preferred stock, any vacancies on
the Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause or any newly created
directorships resulting from any increase in the authorized number of directors
shall be filled only by the affirmative vote of a majority of the directors then
in office, though less than a quorum, or by a sole remaining director, unless
the Board of Directors determines that any such vacancies or newly created
directorships shall be filled by the stockholders. Directors so chosen shall
hold office for a term expiring at the next annual meeting of stockholders and
until such director's successor shall have been duly elected and qualified. No
decrease in the number of authorized directors constituting the entire Board of
Directors shall shorten the term of any incumbent director.
SECTION 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
SECTION 4. Special Meetings.
Special meetings of the Board of Directors may be called by the President
or by two or more directors then in office and shall be held at such place, on
such date, and at such time as they or he or she shall fix.
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Notice of the place, date, and time of each such special meeting shall be given
each director by whom it is not waived by mailing written notice not less than
five (5) days before the meeting or by telephone or by telegraphing or telexing
or by facsimile transmission of the same not less than twenty-four (24) hours
before the meeting. Unless otherwise indicated in the notice thereof, any and
all business may be transacted at a special meeting.
SECTION 5. Quorum.
At any meeting of the Board of Directors, a majority of the total number of
the whole Board shall constitute a quorum for all purposes. If a quorum shall
fail to attend any meeting, a majority of those present may adjourn the meeting
to another place, date, or time, without further notice or waiver thereof.
SECTION 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
SECTION 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
SECTION 8. Powers.
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon
any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for directors, officers, employees and
agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with
these By-laws, for the management of the Corporation's business and
affairs.
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SECTION 9. Compensation of Directors.
Unless otherwise restricted by the certificate of incorporation, the Board
of Directors shall have the authority to fix the compensation of the directors.
The directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or paid a stated salary or paid other
compensation as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
ARTICLE III -- COMMITTEES
SECTION 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the whole Board, may
from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of any member of any committee and any alternate member in his
or her place, the member or members of the committee present at the meeting and
not disqualified from voting, whether or not he or she or they constitute a
quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member.
SECTION 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third ( 1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
ARTICLE IV -- OFFICERS
SECTION 1. Generally.
The officers of the Corporation shall consist of a President, one or more
Vice Presidents, a Secretary, a Treasurer and such other officers as may from
time to time be appointed by the Board of Directors. Officers shall be elected
by the Board of Directors, which shall consider that subject at its first
meeting after every annual meeting of stockholders. Each officer shall hold
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any number of offices may be held by the same
person. The salaries of officers elected by the Board of Directors shall be
fixed from time to time by the Board of Directors or by such officers as may be
designated by resolution of the Board.
SECTION 2. Chairman of the Board.
The Chairman of the Board of Directors shall be selected from the Directors
of the Corporation. Subject to the provisions of these By-laws and to the
direction of the Board of Directors, he or she shall preside at all meetings of
the Board of Directors and all meetings of stockholders. He or she shall have
such additional duties and powers as shall be delegated to him or her by the
Board of Directors.
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SECTION 3. President.
The President shall be the Chief Executive Officer of the Corporation.
Subject to the provisions of these By-laws and to the direction of the Board of
Directors, he or she shall have the responsibility for the general management
and control of the business and affairs of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him or her by the Board of Directors. He or
she shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation.
SECTION 4. Vice President.
Each Vice President shall have such powers and duties as may be delegated
to him or her by the Board of Directors. One (1) Vice President shall be
designated by the Board to perform the duties and exercise the powers of the
President in the event of the President's absence or disability.
SECTION 5. Treasurer.
The Treasurer shall have the responsibility for maintaining the financial
records of the Corporation. He or she shall make such disbursements of the funds
of the Corporation as are authorized and shall render from time to time an
account of all such transactions and of the financial condition of the
Corporation. The Treasurer shall also perform such other duties as the Board of
Directors may from time to time prescribe.
SECTION 6. Secretary.
The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He or
she shall have charge of the corporate books and shall perform such other duties
as the Board of Directors may from time to time prescribe.
SECTION 7. Delegation of Authority.
The Board of Directors may from time to time delegate the powers or duties
of any officer to any other officers or agents, notwithstanding any provision
hereof.
SECTION 8. Removal.
Any officer of the Corporation may be removed at any time, with or without
cause, by the Board of Directors.
SECTION 9. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V -- STOCK
SECTION 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
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SECTION 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
SECTION 3. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may, except as
otherwise required by law, fix a record date, which record date shall not
precede the date on which the resolution fixing the record date is adopted and
which record date shall not be more than sixty (60) nor less than ten (10) days
before the date of any meeting of stockholders, nor more than sixty (60) days
prior to the time for such other action as hereinbefore described; provided,
however, that if no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held, and, for
determining stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or to exercise any rights of change,
conversion or exchange of stock or for any other purpose, the record date shall
be at the close of business on the day on which the Board of Directors adopts a
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
SECTION 5. Regulations.
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI -- NOTICES
SECTION 1. Notices.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, recognized overnight delivery service or by sending such notice by
facsimile, receipt acknowledged, or by prepaid telegram or mailgram. Any such
notice shall be addressed to such stockholder, director, officer, employee or
agent at his or her last known address as the same appears on the books of the
Corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mails or by telegram or mailgram, shall be
the time of the giving of the notice.
SECTION 2. Waivers.
A written waiver of any notice, signed by a stockholder, director, officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice
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required to be given to such stockholder, director, officer, employee or agent.
Neither the business nor the purpose of any meeting need be specified in such a
waiver. Attendance at any meeting shall constitute waiver of notice except
attendance for the sole purpose of objecting to the timeliness of notice.
ARTICLE VII -- MISCELLANEOUS
SECTION 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-laws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
SECTION 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and when
so directed by the Board of Directors or a committee thereof, duplicates of the
seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
SECTION 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
SECTION 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
SECTION 5. Time Periods.
In applying any provision of these By-laws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII -- INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a party
to or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against
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all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid in settlement) reasonably
incurred or suffered by such indemnitee in connection therewith; provided,
however, that, except as provided in Section 3 of this ARTICLE VIII with respect
to proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
SECTION 2. Right to Advancement of Expenses.
The right to indemnification conferred in Section 1 of this ARTICLE VIII
shall include the right to be paid by the Corporation the expenses (including
attorney's fees) incurred in defending any such proceeding in advance of its
final disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 2 or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections 1 and 2 of this ARTICLE VIII
shall be contract rights and such rights shall continue as to an indemnitee who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
SECTION 3. Right of Indemnitee to Bring Suit.
If a claim under Section 1 or 2 of this ARTICLE VIII is not paid in full by
the Corporation within sixty (60) days after a written claim has been received
by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty (20) days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this ARTICLE VIII or otherwise shall be on the
Corporation.
SECTION 4. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses conferred
in this ARTICLE VIII shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, the
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Corporation's Certificate of Incorporation, By-laws, agreement, vote of
stockholders or disinterested directors or otherwise.
SECTION 5. Insurance.
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
SECTION 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE IX -- AMENDMENTS
In furtherance and not in limitation of the powers conferred by law, the
Board of Directors is expressly authorized to make, alter, amend and repeal
these By-Laws subject to the power of the holders of capital stock of the
Corporation to alter, amend or repeal the By-Laws; provided, however, that, with
respect to the powers of holders of capital stock to make, alter, amend and
repeal By-Laws of the Corporation, notwithstanding any other provision of these
By-Laws or any provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law, these
By-Laws or any preferred stock, the affirmative vote of the holders of a
majority of the voting power of all of the then-outstanding shares entitled to
vote generally in the election of directors, voting together as a single class,
shall be required to make, alter, amend or repeal any provision of these
By-Laws.
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EXHIBIT D
INDEMNIFICATION AGREEMENT
This Agreement is made and entered into this day of August, 1997 (the
"Agreement") by and between Geoworks Corporation, a Delaware corporation (the
"Company"), and (the "Indemnitee"):
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve
privately- and publicly-held corporations as directors or in other capacities
unless they are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation;
WHEREAS, directors, officers, and other persons in service to corporations
or business enterprises are being increasingly subjected to expensive and
time-consuming litigation relating to, among other things, matters that
traditionally would have been brought only against the Company or business
enterprise itself;
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons;
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that the increased difficulty in attracting and retaining such persons is
detrimental to the best interests of the Company's stockholders and that the
Company should act to assure such persons that there will be increased certainty
of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will service or continue to serve the
Company free from undue concern that they will not be so indemnified;
WHEREAS, this Agreement is a supplement to and in furtherance of the
Certificate of Incorporation and the Bylaws of the Company and any resolutions
adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to
diminish or abrogate any rights of Indemnitee thereunder;
WHEREAS, the Certificate of Incorporation, the Bylaws and the Delaware
director indemnification statute each is nonexclusive, and therefore each
contemplates that contracts may be entered into with respect to indemnification
of directors, officers and employees;
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify, and to advance expenses on behalf
of, such persons to the fullest extent permitted by applicable law so that they
will serve or continue to serve the Company free from undue concern that they
will not be so indemnified;
WHEREAS, Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
AGREEMENT
1. Services by Indemnitee. Indemnitee agrees to serve and/or continue to
serve as a director, officer, employee and/or agent of the Company and, at the
request of the Company, as a director, officer, employee, agent and/or fiduciary
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise. Indemnitee may at any time and for any reason resign from
such position (subject to any other contractual obligation or any obligation
imposed by operation of law), in which event the Company shall have no
obligation under this Agreement to continue Indemnitee in such position. This
Agreement shall not be
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deemed an employment contract between the Company (or any of its subsidiaries)
and Indemnitee. Indemnitee specifically acknowledges that Indemnitee's
employment with the Company (or any of its subsidiaries), if any, is at will,
and that Indemnitee may be discharged at any time for any reason, with or
without cause, except as may be otherwise provided in any written employment
contract between Indemnitee and the Company (or any of its subsidiaries), other
applicable formal severance policies duly adopted by the Board, or, with respect
to service as a director of the Company, by the Company's Certificate of
Incorporation, Bylaws, and the General Corporation Law of the State of Delaware.
The foregoing notwithstanding, this Agreement shall continue in force after
Indemnitee has ceased to serve as an officer, director, employee and/or agent of
the Company or as a director, officer, employee, agent and/or fiduciary of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise pursuant to Section 12.
2. Indemnification -- General. The Company shall indemnify, and advance
Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this
Agreement and (b) (subject to the provisions of this Agreement) to the fullest
extent permitted by applicable law in effect on the date hereof and as amended
from time to time. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the rights set forth in the
other Sections of this Agreement.
3. Proceedings Other Than Proceedings by or in the Right of the
Company. Indemnitee shall be entitled to the rights of indemnification provided
in this Section 3 if, by reason of his Corporate Status (as hereinafter
defined), he is, or is threatened to be made, a party to or a participant in any
threatened, pending, or completed Proceeding (as hereinafter defined), other
than a Proceeding by or in the right of the Company. Pursuant to this Section 3,
Indemnitee shall be indemnified against all Expenses, judgments, penalties,
fines and amounts paid in settlement (including all interest, assessments and
other charges paid or payable in connection with or in respect of such Expenses,
judgments, penalties, fines and amounts paid in settlement) actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal Proceeding, had no reasonable cause to
believe his conduct was unlawful.
4. Proceedings by or in the Right of the Company. Indemnitee shall be
entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
or a participant in any threatened, pending or completed Proceeding brought by
or in the right of the Company to procure a judgment in its favor. Pursuant to
this Section 4, Indemnitee shall be indemnified against all Expenses (including
all interest, assessments and other charges paid or payable in connection with
or in respect of such Expenses) actually and reasonably incurred by him or on
his behalf in connection with such Proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company; provided, however, that, if applicable law so provides, no
indemnification against such Expenses shall be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company unless and to the extent that the Court of
Chancery of the State of Delaware, or the court in which such Proceeding shall
have been brought or is pending, shall determine that such indemnification may
be made.
5. Partial Indemnification. Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee is, by reason of his Corporate Status,
a party to, or a participant in, and is successful, on the merits or otherwise,
in defense of any Proceeding, he shall be indemnified against all Expenses
actually and reasonably incurred by him or on his behalf in connection
therewith. If Indemnitee is not wholly successful in defense of such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
For purposes of this Section 5 and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses, judgments,
penalties, fines and amounts paid in settlement (including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses, judgments, penalties, fines and amounts paid in settlement)
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actually and reasonably incurred by him or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion to which Indemnitee is entitled.
6. Indemnification for Additional Expenses.
(a) The Company shall indemnify Indemnitee against any and all Expenses
and, if requested by Indemnitee, shall (within twenty (20) business days of such
request) advance such Expenses to Indemnitee, which are incurred by Indemnitee
in connection with any action brought by Indemnitee for (i) indemnification or
advance payment of Expenses by the Company under this Agreement or any other
agreement or bylaw of the Company now or hereafter in effect; or (ii) recovery
under any directors' and officers' liability insurance policies maintained by
the Company, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, advance expense payment or insurance recovery,
as the case may be.
(b) Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding to which Indemnitee is not a party, he shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
7. Advancement of Expenses. The Company shall advance all reasonable
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty (20) days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred or
to be incurred by Indemnitee and shall include or be preceded or accompanied by
an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if
it shall ultimately be determined that Indemnitee is not entitled to be
indemnified against such Expenses. Notwithstanding the foregoing, the obligation
of the Company to advance Expenses pursuant to this Section 7 shall be subject
to the condition that, if, when and to the extent that the Company determines
that Indemnitee would not be permitted to be indemnified under applicable law,
the Company shall be entitled to be reimbursed, within thirty (30) days of such
determination, by Indemnitee (who hereby agrees to reimburse the Company) for
all such amounts theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the Company that Indemnitee
would not be permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the Company for any
advance of Expenses until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been exhausted or
lapsed).
8. Procedure for Determination of Entitlement to Indemnification.
(a) To obtain indemnification under this Agreement, Indemnitee shall submit
to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to the
first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by a
majority vote of the Disinterested Directors (as hereinafter defined), even
though less than a quorum of the Board, or (B) if there are no such
Disinterested Directors or, if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee or (C) if so directed by the Board, by the stockholders
of the Company; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within seven (7) business
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days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including reasonable attorneys' fees and disbursements)
incurred by Indemnitee in so cooperating with the person, persons or entity
making such determination shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 8(b) hereof, the Independent
Counsel shall be selected as provided in this Section 8(c). If a Change of
Control shall not have occurred, the Independent Counsel shall be selected by
the Board of Directors, and the Company shall give written notice to Indemnitee
advising him of the identity of the Independent Counsel so selected. If a Change
of Control shall have occurred, the Independent Counsel shall be selected by
Indemnitee (unless Indemnitee shall request that such selection be made by the
Board of Directors, in which event the preceding sentence shall apply), and
Indemnitee shall give written notice to the Company advising it of the identity
of the Independent Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within ten (10) days after such written notice
of selection shall have been given, deliver to the Company or to Indemnitee, as
the case may be, a written objection to such selection; provided, however, that
such objection may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of "Independent Counsel" as defined
in Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
so made and substantiated, the Independent Counsel so selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court has
determined that such objection is without merit. If, within twenty (20) days
after submission by Indemnitee of a written request for indemnification pursuant
to Section 8(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or Indemnitee may petition the Court of Chancery
of the State of Delaware for resolution of any objection which shall have been
made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the Court or by such other person as the Court shall designate, and the
person with respect to whom all objections are so resolved or the person so
appointed shall act as Independent Counsel under Section 8(b) hereof. The
Company shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with acting pursuant
to Section 8(b) hereof, and the Company shall pay all reasonable fees and
expenses incident to the procedures of this Section 8(c), regardless of the
manner in which such Independent Counsel was selected or appointed. Upon the due
commencement of any judicial proceeding or arbitration pursuant to Section
10(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
(d) The Company shall not be required to obtain the consent of Indemnitee
to the settlement of any Proceeding which the Company has undertaken to defend
if the Company assumes full and sole responsibility for such settlement and such
settlement grants Indemnitee a complete and unqualified release in respect of
the potential liability. The Company shall not be liable for any amount paid by
Indemnitee in settlement of any Proceeding that is not defended by the Company,
unless the Company has consented in writing to such settlement, which consent
shall not be unreasonably withheld.
(e) In the event the Company shall be obligated to advance the Expenses for
any Proceeding against Indemnitee, the Company, if appropriate, shall be
entitled to assume the defense of such proceeding, upon the delivery to
Indemnitee of written notice of its election to do so. After delivery of such
notice and the retention of such counsel by the Company, the Company will not be
liable to Indemnitee under this Agreement for any fees of counsel subsequently
incurred by Indemnitee with respect to the same Proceeding, provided that (a)
Indemnitee shall have the right to employ his own counsel in any such Proceeding
at Indemnitee's expense; (b) Indemnitee shall have the right to employ his own
counsel in connection with any such Proceeding, at the expense of the Company,
if such counsel serves in a review, observer, advice and counseling
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<PAGE> 59
capacity and does not otherwise materially control or participate in the defense
of such Proceeding; and (c) if (i) the employment of counsel by Indemnitee has
been previously authorized by the Company, (ii) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense or (iii) the Company shall not, in
fact, have employed counsel to assume the defense of such Proceeding, then the
reasonable fees and expenses of Indemnitee's counsel shall be at the expense of
the Company.
9. Presumptions and Effect of Certain Proceedings.
(a) In making a determination with respect to entitlement to
indemnification or the advancement of Expenses hereunder, the person or persons
or entity making such determination shall presume that Indemnitee is entitled to
indemnification or advancement of Expenses under this Agreement if Indemnitee
has submitted a request for indemnification or the advancement of Expenses in
accordance with Section 8(a) of this Agreement, and the Company shall have the
burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that presumption.
Neither the failure of the Company (including the Board or independent legal
counsel) to have made a determination prior to the commencement of any action
pursuant to this Agreement that indemnification is proper in the circumstances
because Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Company (including the Board or Independent Counsel) that
Indemnitee has not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that Indemnitee has not met the applicable
standard of conduct.
(b) If the person, persons or entity empowered or selected under Section 8
of this Agreement to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within sixty (60) days after receipt by the
Company of the request therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law; provided, however, that such 60-day period may be extended for a reasonable
time, not to exceed an additional thirty (30) days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided, further, that
the foregoing provisions of this Section 9(b) shall not apply (i) if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 8(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors has resolved to submit such determination
to the stockholders for their consideration at an annual meeting thereof to be
held within seventy-five (75) days after such receipt and such determination is
made thereat, or (B) a special meeting of stockholders is called within fifteen
(15) days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within sixty (60) days after having been so
called and such determination is made thereat, or (C) a written consent of
stockholders is solicited within fifteen (15) days after such receipt for the
purpose of making such determination, and such consent is obtained within sixty
(60) days after such solicitation, or (ii) if the determination of entitlement
to indemnification is to be made by Independent Counsel pursuant to Section 8(b)
of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
(d) For purposes of any determination of "good faith," Indemnitee shall be
deemed to have acted in "good faith" if Indemnitee's action is based on the
records or books of account of the Company or relevant enterprise, including
financial statements, or on information supplied to Indemnitee by the officers
of the Company or relevant enterprise in the course of their duties, or on the
advice of legal counsel for the Company
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<PAGE> 60
or relevant enterprise or on information or records given or reports made to the
Company or relevant enterprise by an independent certified public accountant or
by an appraiser or other expert selected with reasonable care by the Company or
relevant enterprise. The provisions of this Section 9(d) shall not be deemed to
be exclusive or to limit in any way the other circumstances in which Indemnitee
may be deemed to have met the applicable standard of conduct set forth in this
Agreement.
(e) The knowledge and/or actions, or failure to act, of any other director,
officer, agent or employee of the Company or relevant enterprise shall not be
imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement.
10. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to Section 8 of
this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7
of this Agreement, (iii) no determination of entitlement to indemnification
shall have been made pursuant to Section 8(b) of this Agreement within ninety
(90) days after receipt by the Company of the request for indemnification, (iv)
payment of indemnification is not made pursuant to Section 5 or 6 of this
Agreement within twenty (20) days after receipt by the Company of a written
request therefor, or (v) payment of indemnification is not made within seven (7)
business days after a determination has been made that Indemnitee is entitled to
indemnification, Indemnitee shall be entitled to an adjudication by the Court of
Chancery of the State of Delaware of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. Indemnitee
shall commence such proceeding seeking an adjudication or an award in
arbitration within one hundred eighty (180) days following the date on which
Indemnitee first has the right to commence such proceeding pursuant to this
Section 10(a); provided, however, that the foregoing clause shall not apply in
respect of a proceeding brought by Indemnitee to enforce his rights under
Section 5 of this Agreement.
(b) In the event that a determination shall have been made pursuant to
Section 8(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section 10, the
Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made pursuant to Section 8(b) of
this Agreement that Indemnitee is entitled to indemnification, the Company shall
be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee
of a material fact, or an omission of a material fact necessary to make
Indemnitee's statement not materially misleading, in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce his rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
him in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the Expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated. The Company shall indemnify Indemnitee against any and all Expenses
and, if requested by Indemnitee, shall (within twenty (20) days after receipt by
the Company of a written request therefor) advance such Expenses to Indemnitee,
which are incurred by Indemnitee in connection with any action brought by
Indemnitee for indemnification or advance of Expenses from the Company under
this Agreement or under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee ultimately
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<PAGE> 61
is determined to be entitled to such indemnification, advancement of Expenses or
insurance recovery, as the case may be.
(e) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification and to receive advancement of Expenses as
provided by this Agreement shall not be deemed exclusive of any other rights to
which Indemnitee may at any time be entitled under applicable law, the
Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment, alteration or repeal
of this Agreement or of any provision hereof shall limit or restrict any right
of Indemnitee under this Agreement in respect of any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal. To the extent that a change in the General Corporation Law of the State
of Delaware, whether by statute or judicial decision, permits greater
indemnification or advancement of Expenses than would be afforded currently
under the Company's Bylaws and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change. No right or remedy herein conferred is intended to be
exclusive of any other right or remedy, and every other right and remedy shall
be cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees, or
agents of the Company or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such person serves at the
request of the Company, Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee or agent under such policy or
policies.
(c) In the event of any payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
(e) The Company's obligation to indemnify or advance Expenses hereunder to
Indemnitee who is or was serving at the request of the Company as a director,
officer, employee, agent and/or fiduciary of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise shall be reduced
by any amount Indemnitee has actually received as indemnification or advancement
of expenses from such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.
12. Duration of Agreement. This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as a director, officer, employee and/or agent of the
Company or of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which Indemnitee served at the request of the
Company; or (b) the final termination of any Proceeding then pending in respect
of which Indemnitee is granted rights of indemnification or advancement of
expenses hereunder and of any proceeding commenced by Indemnitee pursuant to
Section 10 of this Agreement relating thereto. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to the benefit
of Indemnitee and his heirs, executors and administrators.
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<PAGE> 62
13. Severability. If any provision or provisions of this Agreement shall be
held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; (b) such provision or provisions
shall be deemed reformed to the extent necessary to conform to applicable law
and to give the maximum effect to the intent of the parties hereto; and (c) to
the fullest extent possible, the provisions of this Agreement (including,
without limitation, each portion of any Section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.
14. Exception to Right of Indemnification or Advancement of
Expenses. Except as provided in Section 6(a) of this Agreement, Indemnitee shall
not be entitled to indemnification or advancement of Expenses under this
Agreement with respect to any Proceeding brought by Indemnitee (other than a
proceeding by Indemnitee to enforce his rights under this Agreement), or any
claim therein prior to a Change in Control, unless the bringing of such
Proceeding or making of such claim shall have been approved by the Board of
Directors.
15. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement.
16. Headings. The headings of the paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
17. Definitions. For purposes of this Agreement:
(a) "Change in Control" means a change in control of the Company occurring
after the Effective Date of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any
similar item on any similar schedule or form) promulgated under the Securities
Exchange Act of 1934, as amended (the "Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if after
the Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting power of the
Company's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board in office immediately prior to such
person attaining such percentage interest; and provided, further, that a Change
in Control shall not be deemed to occur as a result of a transfer of Company
securities from a stockholder to any direct or indirect affiliate or general or
limited partner of such stockholder; or (ii) there occurs a proxy contest, or
the Company is a party to a merger, consolidation, sale of assets, plan of
liquidation or other reorganization not approved by at least two-thirds of the
members of the Board then in office, as a consequence of which members of the
Board in office immediately prior to such transaction or event constitute less
than a majority of the Board thereafter.
(b) "Corporate Status" describes the status of a person who is or was a
director, officer, employee, fiduciary or agent of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is not and
was not a party to the Proceeding in respect of which indemnification is sought
by Indemnitee.
(d) "Effective Date" means August , 1997.
(e) "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection
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<PAGE> 63
with prosecuting, defending, preparing to prosecute or defend, investigating,
being or preparing to be a witness in, or otherwise participating in, a
Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law firm, that
is experienced in matters of corporation law and neither presently is, nor in
the past five years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement. The Company agrees to pay the reasonable fees of the Independent
Counsel referred to above and to fully indemnify such counsel against any and
all Expenses, claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
(g) "Proceeding" includes any threatened, pending or completed action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
inquiry, administrative hearing or any other actual, threatened or completed
proceeding, whether brought by or in the right of the Company or otherwise and
whether civil, criminal, administrative or investigative, in which Indemnitee
was, is, may be or will be involved as a party or otherwise, by reason of the
fact that Indemnitee is or was a director, officer, employee and/or agent of the
Company, by reason of any action taken by him or of any inaction on his part
while acting as director, officer, employee and/or agent of the Company, or by
reason of the fact that he is or was serving at the request of the Company as a
director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise; in each case whether or
not he is acting or serving in any such capacity at the time any liability or
expense is incurred for which indemnification or advancement of expenses can be
provided under this Agreement; except one (i) initiated by an Indemnitee
pursuant to Section 10 of this Agreement to enforce his rights under this
Agreement or (ii) pending on or before the Effective Date.
18. Enforcement.
(a) The Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on it hereby in order to induce
Indemnitee to serve as a director, officer, employee and/or agent of the
Company, and the Company acknowledges that Indemnitee is relying upon this
Agreement in serving as a director, officer, employee and/or agent of the
Company.
(b) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral, written and implied, between the parties
hereto with respect to the subject matter hereof.
19. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
20. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification or advancement of Expenses covered
hereunder. The failure of Indemnitee to so notify the Company shall not relieve
the Company of any obligation which it may have to Indemnitee under this
Agreement or otherwise.
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<PAGE> 64
21. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, (ii) mailed by certified or registered
mail, return receipt requested, with postage prepaid, on the third business day
after the date on which it is so mailed, (iii) dispatched by recognized
overnight courier with fees prepaid, on the first business day after dispatch or
(iv) transmitted by facsimile (confirmed by first class mail), on the date of
transmission:
(a) If to Indemnitee, to the address and facsimile number listed on
the signature page hereto.
(b) If to the Company to:
Geoworks Corporation
960 Atlantic Avenue
Alameda, CA 94501
Facsimile: (510) 814-4250
Attention: Jordan J. Breslow, Esq.
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Facsimile: (415) 494-1417
Attention: David W. Healy, Esq.
or to such other address or facsimile number as may have been furnished to
Indemnitee by the Company or to the Company by Indemnitee, as the case may be.
22. Contribution. To the fullest extent permissible under applicable law,
if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in
settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement, in such proportion as is deemed fair
and reasonable in light of all of the circumstances of such Proceeding in order
to reflect (i) the relative benefits received by the Company and Indemnitee as a
result of the event(s) and/or transaction(s) giving cause to such Proceeding;
and/or (ii) the relative fault of the Company (and its directors, officers,
employees and agents) and Indemnitee in connection with such event(s) and/or
transaction(s).
23. Governing Law; Submission to Jurisdiction; Appointment of Agent for
Service of Process. This Agreement and the legal relations among the parties
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware, without regard to its conflict of laws rules. Except with
respect to any arbitration commenced by Indemnitee pursuant to Section 10(a) of
this Agreement, the Company and Indemnitee hereby irrevocably and
unconditionally (i) agree that any action or proceeding arising out of or in
connection with this Agreement shall be brought only in the Chancery Court of
the State of Delaware (the "Delaware Court"), and not in any other state or
federal court in the United States of America or any court in any other country,
(ii) consent to submit to the exclusive jurisdiction of the Delaware Court for
purposes of any action or proceeding arising out of or in connection with this
Agreement, (iii) appoint, to the extent such party is not a resident of the
State of Delaware, irrevocably Corporation Service Company, 1013 Centre Road,
Wilmington, Delaware, 19805 as its agent in the State of Delaware as such
party's agent for acceptance of legal process in connection with any such action
or proceeding against such party with the same legal force and validity as if
served upon such party personally within the State of Delaware, (iv) waive any
objection to the laying of venue of any such action or proceeding in the
Delaware Court, and (v) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Delaware Court has been brought in
an improper or otherwise inconvenient forum.
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24. Miscellaneous. Use of the masculine pronoun shall be deemed to include
usage of the feminine pronoun where appropriate.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
<TABLE>
<S> <C>
ATTEST GEOWORKS CORPORATION
By: By:
Name: Name:
Title: Title:
INDEMNITEE
---------------------------------------------
Signature
---------------------------------------------
Print Name
Address:
---------------------------------------------
---------------------------------------------
---------------------------------------------
Facsimile: ()
</TABLE>
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<PAGE> 67
GEOWORKS
1994 STOCK PLAN
(As amended and restated May 27, 1997)
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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<PAGE> 68
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 2,900,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and Officers.
With respect to grants of Options or Performance Awards to Employees who are
officers or directors of the Company and Outside Directors, the Plan shall be
administered by (A) the Board if the Board may administer the Plan in compliance
with Rule 16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") with respect to a plan intended to qualify thereunder as a
discretionary plan, or (B) a Committee designated by the Board to administer the
Plan, which Committee shall be constituted in such a manner as to permit the
Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members
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<PAGE> 70
in substitution therefor, fill vacancies, however caused, and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options or Performance Awards to Employees
or Consultants who are neither directors nor officers of the Company, the Plan
shall be administered by (A) the Board or (B) a Committee designated by the
Board, which Committee shall be constituted in such a manner as to satisfy the
legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws and of the Code (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees to
whom Options or Performance Awards may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options or
Performance Awards are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder ;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any Option and/or
the shares of Common Stock relating thereto, based in each case on such factors
as the Administrator shall determine, in its sole discretion);
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<PAGE> 71
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral period); and
(ix) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options and Performance Awards may be granted
to Employees, Consultants and Outside Directors. Incentive Stock Options may be
granted only to Employees. An Employee, Consultant or Outside Director who has
been granted an Option or Performance Award may, if he is otherwise eligible, be
granted additional Options and Performance Awards.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as
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<PAGE> 72
described in Section 19 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be determined by the Board, but shall be
subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the
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<PAGE> 73
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (5) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, (6) by
delivering an irrevocable subscription agreement for the Shares which
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve months after the date of delivery of the subscription agreement, (7)
delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price; (8) any combination of the
foregoing methods of payment, (9) or such other consideration and method of
payment for the issuance of Shares to the extent permitted under Applicable
Laws. In making its determination as to the type of consideration to accept, the
Board shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company (Section 315(b) of the California corporation
law).
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment. In the event of termination of an
Optionee's Continuous Status as an Employee, Consultant or Outside Director,
such Optionee may, but only within thirty (30) days, or within such other period
of time as is determined by the Board, with
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<PAGE> 74
such determination in the case of an Incentive Stock Option being made at the
time of grant of the Option and such time period not exceeding ninety (90) days)
after the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
his Option to the extent that Optionee was entitled to exercise it at the date
of such termination. To the extent that Optionee was not entitled to exercise
the Option at the date of such termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee, Consultant or Outside Director as a result of his
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
while Optionee is an Employee, Consultant or Outside Director, the Option may be
exercised at any time within twelve (12) months following the date of death (but
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent the Optionee was entitled to exercise the Option at the date of
death. To the extent that Optionee was not entitled to exercise the Option at
the date of death, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options and Performance Awards. Options and
Performance Awards may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
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11. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option or Performance Award, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume the Option or to substitute an equivalent option, the Board
shall, in lieu of such assumption or substitution, provide for the Optionee to
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. If the Board
makes an Option fully exercisable in lieu of assumption or substitution in the
event of a merger, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of fifteen (15) days from the date of such
notice, and the Option will terminate upon the expiration of such period.
12. Limitation on Number of Option Shares. The following limitations
shall apply to grants of options to Employees hereunder:
(a) No Employee shall be granted, in any fiscal year of the Company,
options to purchase more than 250,000 shares of Common Stock.
(b) The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 11 hereof.
(c) If an option is canceled in the same fiscal year of the Company
in which it was granted (other than in connection with a transaction described
in Section 11), the canceled option will be counted against the limit set forth
in Section 12 (a) above. For this purpose, if the
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<PAGE> 76
exercise price of an option is reduced, the transaction will be treated as a
cancellation of the option and the grant of a new option.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. Performance Awards.
(a) Performance Awards are cash or stock bonus awards that may be
granted either alone, in addition to or in tandem with other awards granted
under the Plan and/or awards made outside of the Plan. Performance Awards shall
not require payment by the recipient of any consideration for the Performance
Award or for the shares of Common Stock covered by such award. The Board or a
committee created by the Board for the purpose of administering Performance
Awards (the "Performance Award Committee") in accordance with Section 4 shall
determine the performance and/or employment factors to be used in the
determination of the amount of Performance Awards and the extent to which such
Performance Awards have been earned. Shares issued pursuant to a Performance
Award may be made subject to various conditions, including vesting or forfeiture
provisions. Performance Awards may vary from participant to participant and
between groups of participants and shall be based upon the achievement of
Company and/or individual performance factors or upon such other criteria as the
Performance Award Committee may deem appropriate.
(b) Adjustment of Awards. The Performance Award Committee may, after
the grant of Performance Awards, adjust the performance factors applicable to
such Performance Awards to take into account changes in the law or in accounting
or tax rules and to make such adjustments as the Committee deems necessary or
appropriate to reflect the inclusion or exclusion of the impact of extraordinary
or unusual items, events or circumstances in order to avoid windfalls or
hardships.
The foregoing amendment shall become effective as of September 1,
1995, subject to shareholder approval at the Company's August 29, 1995 annual
meeting of shareholders.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
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Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
18. Agreements. Options and Performance Awards shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
19. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
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GEOWORKS
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
AUGUST 19, 1997
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 19, 1997, at 11:00 a.m.
local time, 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> 79
<TABLE>
[X] PLEASE MARK
YOUR CHOICES
LIKE THIS
- ----------------------- ----------------------------------
ACCOUNT NUMBER COMMON
<S> <C> <C> <C> <C> <C> <C>
WITHHELD
1. ELECTION FOR FOR ALL 2. REINCORPORATION OF FOR AGAINST ABSTAIN
OF DIRECTORS [ ] [ ] COMPANY INTO [ ] [ ] [ ]
DELAWARE
Nominees: Gordon E. Mayer 3. INCREASE IN AUTH- FOR AGAINST ABSTAIN
Bruce W. Dunlevie ORIZED SHARES OF COMMON [ ] [ ] [ ]
Reijo Paajanen STOCK
Eric E. Schmidt
Clive G. Smith
Instruction: To withhold authority 4. AMENDMENT OF 1994 STOCK FOR AGAINST ABSTAIN
to vote for any PLAN TO INCREASE THE [ ] [ ] [ ]
individual nominee, NUMBER OF SHARES OF
write that nominee's COMMON STOCK RESERVED
name on the space THEREUNDER
provided below:
</TABLE>
The Board of Directors recommends a vote FOR all nominees for election and FOR
Proposals 2, 3, 4 and 5.
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,
3, 4 and 5. 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.
<PAGE> 80
<TABLE>
<S> <C> <C> <C>
5. RATIFICATION OF SELECTION FOR AGAINST ABSTAIN
OF ERNST & YOUNG LLP AS [ ] [ ] [ ]
THE COMPANY'S INDEPENDENT
AUDITORS
</TABLE>
1. Dated: , 1997 _______________________
_____________________________________
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 shareholder 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.
