<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GEOWORKS CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it is determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
GEOWORKS CORPORATION
960 ATLANTIC AVENUE
ALAMEDA, CALIFORNIA 94501
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 12, 2000
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Geoworks Corporation, a Delaware Corporation (the "Company"), will
be held on Tuesday, September 12, 2000 at 11:00 a.m. local time at the Company's
principal executive offices, located at 960 Atlantic Avenue, Alameda,
California, for the following purposes:
1. To elect six (6) directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected.
2. To approve an increase in the number of authorized shares of Common
Stock issuable by the Company from 40,000,000 to 80,000,000.
3. 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
2,000,000 shares.
4. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ended March 31, 2001.
5. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on July 21, 2000 are
entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof.
All stockholders 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
stockholder attending the Annual Meeting may vote in person even if such
stockholder has returned a proxy.
BY ORDER OF THE BOARD OF DIRECTORS
TIMOTHY J. TOPPIN
Secretary
Alameda, California
August 7, 2000
<PAGE> 3
GEOWORKS CORPORATION
960 ATLANTIC AVENUE
ALAMEDA, CALIFORNIA 94501
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PROXY STATEMENT
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Geoworks Corporation, a Delaware corporation ("Geoworks" or the "Company"), for
use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Tuesday, September 12, 2000 at 11:00 a.m., local time, or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Stockholders. 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 July
21, 2000 (the "Record Date") will be entitled to vote at the Annual Meeting. At
the close of business on July 21, 2000, the Company had 18,625,501 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 proposals set forth in the accompanying Notice of Annual Meeting of
Stockholders and this Proxy Statement.
These proxy solicitation materials and the Company's Annual Report to
Stockholders for the year ended March 31, 2000, including financial statements,
were first mailed on or about August 7, 2000, to all stockholders 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 (i) by a writing
delivered to the Company (Attention: Timothy J. Toppin, Secretary) stating that
the proxy is revoked, (ii) by a subsequent proxy that is signed by the person
who signed the earlier proxy and is presented at the Annual Meeting or (iii) by
attendance at the Annual Meeting and voting in person. Please note, however,
that if a stockholder's shares are held of record by a broker, bank or other
nominee and that stockholder wishes to vote at the Annual Meeting, the
stockholder must bring to the Annual Meeting a letter from the broker, bank or
other nominee confirming that stockholder's beneficial ownership of the shares.
VOTING RIGHTS
Holders of the Company's Common Stock are entitled to one vote for each
share held as of the above Record Date. Shares of Common Stock may not be voted
cumulatively.
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 Delaware law.
Proposal No. 2 requires for approval the affirmative vote of the majority
of shares of Common Stock outstanding as of the Record Date. With respect to
Proposal No. 2, abstentions and broker non-votes will be counted towards a
quorum and have the same effect as a negative votes with regard to the proposal.
Proposals Nos. 3 and 4 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. 3
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and 4, 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. 3 and 4, 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, electronic means 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 $10,000.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received by
the Company no later than April 4, 2001 in order that they could be included in
the proxy statement and form of proxy relating to that meeting. Stockholders
wishing to bring a proposal before the 2001 Annual Meeting (but not include it
in the Company's proxy material) must provide written notice of such proposal by
July 12, 2001.
PROPOSAL 1 -- ELECTION OF DIRECTORS
DIRECTORS/NOMINEES
The Board of Directors is presently comprised of six (6) directors as
provided by the Company's Bylaws. Unless otherwise instructed, the proxy holders
will vote the proxies received by them for the six (6) 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. The term of office of each person elected as a director will
continue until the next Annual Meeting or until his successor has been elected
and qualified.
The names of the nominees, and certain information about them are set forth
below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
David Neylon(1)(2)................... 52 Chairman of the Board of the Company 2000
John B. Balousek(1)(2)............... 55 Retired Executive Vice President and Founder 1998
of PhotoAlley.com
Kevin P. Fitzgerald(2)............... 43 Chairman of the Board of Latin Broadband 1999
Group
Andrew Cole.......................... 33 Vice President, Global Wireless Practice of 2000
Renaissance Strategy
David L. Grannan..................... 36 Chief Executive Officer, President of the 1999
Company
Stephen T. Baker..................... 42 Chief Financial Officer, Vice President of 1999
the Company
</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.
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Mr. Neylon joined the Board of Directors in January 2000. He was appointed
Chairman of the Board of Directors in April 2000. Mr. Neylon was previously with
LookSmart, Ltd., a leading Internet search and directory company, where he
served as Chief Operating Officer from November 1998 to September 1999. Mr.
Neylon was Senior Vice President of WorldPlay Entertainment from 1995 to 1998.
Mr. Neylon was with AT&T from 1987 to 1995. He was Vice President of ImagiNation
Network, a subsidiary of AT&T and the predecessor of WorldPlay Entertainment
from 1993 to 1995. Mr. Neylon held a variety of other positions with AT&T,
including product management assignments at AT&T's Computer Systems Division,
strategic planning for AT&T's Consumer Products Division, and in emerging
technology ventures for AT&T's Easylink Systems. Mr. Neylon holds a BA degree
from Drew University and a MBA from Rutgers.
Mr. Balousek joined the Board of Directors in December 1998. Mr. Balousek
was Executive Vice President and a Founder of PhotoAlley.com, a San
Francisco-based start-up company providing electronic commerce services from
1998 through 1999. In 1996 Mr. Balousek was named Chairman and Chief Executive
Officer of True North Technologies, the digital and interactive services company
of Foote, Cone & Belding Communications (FCB), an agency network of parent
company True North Communications. Mr. Balousek joined the San Francisco office
of FCB, one of the nation's leading advertising agencies, in 1979 and was named
general manager of the office in 1986. Mr. Balousek was named President of FCB
West and a director of the firm in 1989, and was named President and Chief
Operating Officer of the $5 billion agency in 1991. Prior to joining FCB, Mr.
Balousek was in brand management at Procter & Gamble. In addition to Geoworks,
he currently serves as a Director of FreeShop.com, Pets.com, and Micron
Electronics Corp., all publicly-held companies, and Encirq Corp., Magnifi.com,
and EyeShop.com, all privately held companies. Mr. Balousek serves as Chairman
of the Board of Encirq Corp. Mr. Balousek holds a BA degree from Creighton
University and a Master's degree from Northwestern University.
Mr. Fitzgerald joined the Board of Directors in December 1999. Mr.
Fitzgerald is the Chairman of the Board of Latin Broadband Group, a South
American wireless broadband and paging services provider. From May 1995 to June
2000, Mr. Fitzgerald served as President, Chief Executive Officer, and director
of Neff Corporation, one of the largest equipment rental companies in the United
States. Prior to May 1995, Mr. Fitzgerald was a senior vice president of
Houlihan Lokey, Howard & Zukin, an investment banking firm. Mr. Fitzgerald
currently serves as a director of TeleServices Group, a privately held company.
Mr. Fitzgerald holds an BS in Electrical Engineering from Carnegie Mellon
University, and a MBA from Fordham University.
Mr. Cole joined the Board of Directors in April 2000. Mr. Cole is a Vice
President and is in charge of the Global Wireless Practice of Renaissance
Strategy, a leading international consulting firm specializing in wireless and
telecommunications markets. Mr. Cole has been with Renaissance since 1995. Mr.
Cole was the Director of Wireless Consulting Services at EMI Strategic, a Boston
based strategic marketing firm from 1993 to 1995. From 1991 to 1993, Mr. Cole
held cross continental positions at the LEK Partnership, a strategy consulting
firm based in the United Kingdom. Mr. Cole holds a Masters Degree in Business
from Oxford University and an Undergraduate Degree in Geography, Economics and
Statistics from Bristol University in England.
Mr. Grannan joined the Company in March 1998 as Vice President, Marketing.
The Board of Directors appointed Mr. Grannan as President, Chief Executive
Officer, and a Director in January 1999. Prior to joining the Company, Mr.
Grannan was an Area Vice President at Sprint PCS from June 1997 to March 1998.
Prior to his position at Sprint PCS, Mr. Grannan worked at Andersen Consulting
in the Communications Industry Group from May 1994 to June 1997, where he
provided strategic services for many organizations. Mr. Grannan began his career
as a Data Communications Officer in the United States Marine Corps. He holds a
BA from Indiana University and received his MBA from the University of
California, Berkeley.
Mr. Baker joined the Company in October 1998 as Vice President and Chief
Financial Officer. He was appointed to the Board of Directors in October 1999.
From August 1996 to October 1998, he was Vice President, Finance and Controller,
for the Service Provider Messaging Group at Lucent Technologies having started
with Octel Communications prior to its acquisition by Lucent. From July 1995 to
August 1996, Mr. Baker was the CFO for the Software Systems Group of Bell
Communications Research. From June 1993
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to July 1995 he was Controller at Novell after the acquisition of Unix System
Laboratories (USL). At Unix System Laboratories, a worldwide software company,
Mr. Baker was CFO from February 1989 to June 1993. Mr. Baker has also held a
number of financial management positions with AT&T Corporation from August 1981
through February 1989. He holds a BA from the University of Pennsylvania and an
MBA from the Columbia University Graduate School of Business.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eight (8) meetings
during the fiscal year ended March 31, 2000. No director attended fewer than 75%
of the meetings of the Board of Directors and its committees upon which such
director served. The Board of Directors has an Audit Committee and a
Compensation Committee. The Board of Directors has no nominating committee or
any committee performing similar functions.
At the fiscal year ended March 31, 2000, the Audit Committee of the Board
of Directors consisted of Mr. Neylon, Mr. Balousek and Mr. Fitzgerald. The Audit
Committee held four (4) meetings during fiscal 2000. 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.
At the fiscal year ended March 31, 2000, the Compensation Committee of the
Board of Directors consisted of Mr. Balousek and Mr. Neylon. The Compensation
Committee held twelve (12) meetings during fiscal 2000. The Compensation
Committee reviews and approves the Company's executive compensation policy,
including the salaries and bonuses of the Company's executive officers, and
administers the Company's incentive stock plans.
DIRECTOR COMPENSATION
The Company does not compensate its directors for services as such, except
pursuant to the discretionary grant provisions of its 1994 Stock Plan. During
fiscal 2000, pursuant to such provisions, Mr. Balousek was granted an option to
purchase 5,000 shares at $2.063 per share in August 1999; Mr. Fitzgerald was
granted an option to purchase 50,000 shares at $6.250 per share in December
1999; Mr. Neylon was granted an option to purchase 50,000 shares at $14.875 per
share in January 2000. During fiscal 2001, Mr. Cole and Mr. Neylon were each
granted options to purchase 50,000 shares at $15.625 per share in April 2000.
These exercise prices were equal to the closing market price of Geoworks
Corporation Common Stock on the dates the options were granted.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE
NOMINEES SET FORTH HEREIN.
PROPOSAL NO. 2 -- 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
40,000,000 shares to 80,000,000 shares. The Company's Common Stock and Preferred
Stock each have a par value of $0.001 per share.
On July 21, 2000, 18,625,501 shares of Common Stock were issued and
outstanding, 3,503,042 shares were reserved for issuance upon exercise of
outstanding options and 454,080 shares were reserved for issuance through the
Company's Employee Stock Purchase Plan. Thus, as of that date, the Company had
approximately 17,061,041 shares of Common Stock available for issuance, of which
810,416 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 40,000,000 to 80,000,000 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
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stock or securities convertible into stock and issuances pursuant to stock
options or other employee benefit plans). Other than the July 24, 2000
acquisition of the assets of the AirBoss Systems Group from Telcordia
Technologies, Inc., which required 3,017,881 shares for the purchase price and
628,000 shares for option grants to employees of the Company who were previously
employed in the AirBoss Systems Group, the Company currently has no specific
plans, arrangements or understandings with respect to the issuance of these
additional shares. The acquisition shares were issued on July 24, 2000 and the
option grants were issued on July 25, 2000. The closing market price per share
of Geoworks Corporation Common Stock was $14.063 and $13.875 on July 24 and July
25, 2000, respectively. 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 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 an Amendment to its Certificate of Incorporation with the
Secretary of the State of Delaware reflecting the increase in authorized shares.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE
INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
PROPOSAL 3 -- APPROVAL OF AMENDMENT TO INCREASE THE NUMBER OF
SHARES RESERVED FOR ISSUANCE UNDER THE 1994 STOCK PLAN
The 1994 Stock Plan (the "1994 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 1994 Option Plan was again amended by the Board of
Directors in June 1996 to increase the number of shares reserved for issuance
under the 1994 Option Plan from 1,500,000 to 2,150,000. The Shareholders
approved this increase in August 1996. The 1994 Option Plan was again amended in
May 1997 to increase the number of shares reserved for issuances under the 1994
Option Plan from 2,150,000 to 2,900,000. The stockholders approved this increase
in August 1997. In addition, the 1994 Option Plan was amended in April 1998 to
increase the number of shares reserved for issuances under the 1994 Option Plan
from 2,900,000 to 3,685,000. The stockholders approved this increase in
September 1998.
As a result of the acquisition of the AirBoss Systems Group from Telcordia
Technologies, Inc., the Company has identified a need for over 600,000 option
shares. Although the Company currently has no specific plans to do additional
acquisitions, such a strategy is common for companies in this stage and such
transactions would require additional option grants. 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 intends to continue recruiting aggressively in
order to execute its business plan. The Company competes directly with a
multitude of 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.
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PROPOSED AMENDMENT TO THE OPTION PLAN
The Company is seeking shareholder approval for an amendment to the 1994
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 3,685,000 shares to 5,685,000 shares (an increase of
2,000,000 shares) or 11% of the Company's total shares outstanding as of July
21, 2000. The Board approved the proposed amendment on July 20, 2000, to be
effective upon shareholder approval.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE
AMENDMENT TO THE 1994 OPTION PLAN.
The essential provisions of the 1994 Option Plan are set forth below:
GENERAL
The 1994 Option Plan provides for the grant of options to employees,
consultants and outside directors of the Company.
Options granted under the 1994 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 1994 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.
ADMINISTRATION
Grants to Officers and Directors. With respect to grants of options to
officers and directors of the Company, the 1994 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 company 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 1994 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 Delaware corporate and securities laws and of the Code.
The interpretation and construction of any provision of the 1994 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 1994 Option Plan.
ELIGIBILITY
The Company has various option plans, including the 1994 Stock Option Plan,
the 1996 Supplemental Stock Option Plan and the 1997 Supplemental Stock Option
Plan (for UK employees) of which various employees are eligible to participate.
As of July 21, 2000 there were 3,503,042 shares subject to outstanding options
in these plans and 356,336 shares were available for future grant under these
Plans. The 1994 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 1994 Option Plan.
The 1994 Option Plan places a limit on the aggregate market
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value of shares subject to incentive stock options which become exercisable for
the first time in any one calendar year. As of July 21, 2000 there were
approximately 95 employees eligible to participate in the 1994 Option Plan,
2,748,349 shares were subject to outstanding options and 13,716 shares were
available for future grant under the 1994 Option Plan. Over the term of the 1994
Option Plan, the following Named Executive Officers (defined below) have been
granted options to purchase Common Stock as follows: Gordon E. Mayer, 164,500
shares; David L. Grannan, 450,000 shares; Stephen T. Baker, 385,000 shares; Adam
de Boor, 261,100 shares; Lars Stenstedt, 213,775 shares and Rhonda Jobe, 205,000
shares. Currently, there are six directors eligible to participate in the 1994
Option Plan, including four outside directors. The six directors, including Mr.
Grannan and Mr. Baker, hold outstanding options for 1,090,000 shares of Common
Stock under the 1994 Option Plan. Currently, there are consultants participating
in the 1994 Option Plan.
TERMS OF OPTIONS
The terms of options granted under the 1994 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 1994 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
1994 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 market value on the date of grant.
The Board of Directors of the Company or its committee determines such fair
market value based upon the closing sales price (or the closing bid if no
sales are 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 1994 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 1994 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
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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 1994 Option Plan
as may be determined by the Board of Directors or its committee.
PERFORMANCE-BASED COMPENSATION LIMITATION
The number of shares an employee shall be granted in any fiscal year is
limited. This limitation, 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.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may amend the 1994 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 1994 Option Plan without the consent of the optionee. In any
event, the 1994 Option Plan will terminate in 2004.
The 1994 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 1994 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 1994 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.
8
<PAGE> 11
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 1994 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.
PROPOSAL 4 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the financial statements of the Company for the year ending
March 31, 2001, and recommends that the stockholders 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 LLP has audited
the Company's financial statements since the six month period ended March 31,
1990. Representatives of Ernst & Young LLP 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 stockholders.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2001.
9
<PAGE> 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock as of July 21,
2000 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>
Citigroup Travelers Inc.(1)................................. 1,919,399 10.31%
Amazon.com, Inc.(2)......................................... 1,219,512 6.55%
Integral Capital Management IV, LLC(3)...................... 1,085,000 5.83%
Nokia Mobile Phones Ltd.(4)................................. 1,000,000 5.37%
David L. Grannan(5)......................................... 191,591 1.00%
Stephen T. Baker(5)......................................... 152,501 *
Adam de Boor(5)............................................. 144,558 *
Rhonda Jobe(5).............................................. 65,879 *
Lars Stenstedt(5)........................................... 22,433 *
David Neylon(5)............................................. 20,000 *
Kevin P. Fitzgerald(5)...................................... 10,000 *
Andrew Cole(5).............................................. 10,000 *
John B. Balousek(5)......................................... 4,500 *
All directors and executive officers as a group (9
persons)(6)............................................... 621,462 3.25%
</TABLE>
---------------
* Less than one percent of the outstanding shares of Common Stock.
(1) Based on the Schedule 13G/A filed by Citigroup, Inc. ("Citigroup") dated
January 28, 2000, on behalf of itself, and Salomon Smith Barney Holdings
Inc. The address of Citigroup is 153 East 53rd Street, New York, New York
10043.
(2) Based on the Schedule 13D filed by Amazon.com, Inc. ("Amazon") dated
February 18, 1999. The address of Amazon is 1516 Second Ave. 4th Floor,
Seattle, Washington 98101.
(3) Based on the Schedule 13G filed by Integral Capital Management IV, LLC
("ICM4") dated July 7, 2000, on behalf of itself, and Integral Capital
Partners NBT, LLC ("Integral NBT"), Integral Capital Management V, LLC
("ICM5"), ICP Management V, LLC ("ICP Management 5"), Integral Capital
Partners IV, L.P. ("ICP4"), Integral Capital Partners IV MS Side Fund, L.P.
("Side Fund"), Integral Capital Partners V, L.P. ("ICP5"), and Integral
Capital Partners V Side Fund, L.P. ("ICP5 Side Fund"). The address of
Integral Capital Management IV is 2750 Sand Hill Road, Menlo Park,
California, 94025.
(4) 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.
(5) Includes shares issuable pursuant to options exercisable within 60 days of
July 21, 2000.
(6) Includes 514,871 shares issuable pursuant to options exercisable within 60
days of July 21, 2000.
10
<PAGE> 13
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, 2000, by (i) the Company's current Chief Executive Officer, and (ii)
the four other most highly compensated executive officers who were serving as
executive officers at the end of fiscal 2000 (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------------------- SECURITIES
OTHER UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS/SARS
--------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
David L. Grannan(2)........................ 2000 $183,900 $56,767 -- --
Chief Executive Officer and President 1999 $164,737 $39,977 -- 350,000(6)
1998 $ 3,076 -- -- --
Adam de Boor............................... 2000 $157,414 $34,406 -- 50,000
Vice President and Chief Technology 1999 $148,875 $22,969 -- 197,800
Officer 1998(3) $101,190 $ 3,640 -- --
Rhonda Jobe(4)............................. 2000 $132,565 $23,566 -- 80,000
Vice President, Marketing 1999 $102,635 $13,725 -- 73,000
1998 $ 20,323 -- -- 12,000
Stephen T. Baker(5)........................ 2000 $155,415 $39,000 -- 25,000
Vice President, Chief Financial Officer 1999 $ 65,000 $25,656 -- 260,000
and Assistant Secretary
Lars Stenstedt............................. 2000 $130,097 $24,852 -- --
Vice President, Sales and Business 1999 $124,582 $41,063 -- 175,700
Development 1998(3) $108,668 $14,856 -- 8,000(6)
</TABLE>
---------------
(1) Includes cash profit sharing, cash bonuses and recurring commissions earned
for the fiscal year, whether accrued or paid.
(2) In January 1999, Mr. Grannan was appointed Chief Executive Officer and
President. He joined the Company as Vice President, Marketing, in March
1998.
(3) Prior non-executive position.
(4) Ms. Jobe joined the Company in January 1998.
(5) Mr. Baker joined the Company in October 1998.
(6) During Fiscal 1999, a portion of these options were subject to re-pricing
and overall reduction on a 4-for-5 basis.
11
<PAGE> 14
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, 2000. 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
and rounded to the nearest dollar. 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 2000
<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 2000 SHARE DATE 5% 10%
---- ---------- -------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
David L. Grannan............... -- -- -- -- -- --
Adam de Boor................... 50,000 4.292% $2.3750 10/21/09 $ 74,681 $189,257
Rhonda Jobe.................... 80,000 6.867% $2.8130 04/20/09 $141,575 $358,808
Stephen T. Baker............... 25,000 2.146% $2.3750 10/21/09 $ 37,341 $ 94,628
Lars Stenstedt................. -- -- -- -- -- --
</TABLE>
---------------
(1) All options have a ten-year term and vest ratably during employment,
generally at 1/48 per month. The terms and conditions governing each stock
option grant, including term, termination, acceleration upon change of
control, exercise price, type, and commencement date, are determined by the
Compensation Committee and approved by the Board of Directors.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to option exercises
in fiscal 2000 by the Named Executive Officers and the value of such officers'
unexercised options at March 31, 2000:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David L. Grannan...... 15,800 $ 504,431 148,784 185,416 $4,791,023 $5,976,202
Adam de Boor.......... 9,750 $ 19,338 108,811 171,039 $3,535,413 $5,647,881
Rhonda Jobe........... 4,083 $ 144,691 41,667 119,250 $1,342,337 $3,853,659
Stephen T. Baker...... 51,563 $1,916,620 36,875 196,562 $1,193,385 $6,505,270
Lars Stenstedt........ 7,000 $ 200,706 76,688 119,037 $2,364,207 $3,814,778
</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 $35.6250 per share on March 31, 2000 (the last
trading day for fiscal 2000), minus the exercise price of in-the-money
options.
CERTAIN TRANSACTIONS
In February 1995, the Company sold 1,000,000 unregistered shares of its
Common Stock to Nokia Mobile Phones Ltd. ("Nokia"), then a greater than 5%
stockholder of the Company at an aggregate purchase price of $7,500,000. The
Company also granted Nokia registration rights with respect to the shares
purchased.
12
<PAGE> 15
In December 1994, the Company and Nokia entered into an Agreement for the
Terms and Conditions Regarding Software Development and Licensing. Under the
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 2000, the Company recognized $2,649,000 of license revenue from Nokia and
also received from Nokia professional services fees of $1,067,000.
During fiscal 2000, the Company agreed to lend $94,000 to Stephen T. Baker,
Vice President, Chief Financial Officer, Director of the Company, for the
purchase of 52,000 shares of the Company's Common Stock under a promissory note
bearing interest at 6% per annum, compounded annually. The loan was secured by a
pledge of Mr. Baker's shares of the Company's Common Stock and his principal
residence. The note matures in February 2005. As of March 31, 2000,
approximately $94,000 of principal and approximately $800 of accrued interest
were outstanding under the note.
During fiscal 1999, the Company agreed to lend $220,000 to Gordon E. Mayer,
the Chairman of the Board of Directors of the Company, 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 matured in October 1999. Mr. Mayer paid the outstanding
balances in cash, in fiscal 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consisted of directors Neylon and
Balousek as of March 31, 2000. Neither Mr. Neylon or Mr. Balousek has ever been
an officer of the Company. 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.
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%
stockholders 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, 2000, all Section 16(a) filing requirements applicable
to its executive officers and directors were met.
13
<PAGE> 16
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 reference and shall
not otherwise be deemed soliciting material or filed under such Acts.
The following graph shows a comparison of cumulative total stockholder
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, 2000. Note that historic stock price performance is not
necessarily indicative of future stock price performance.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
CHASE H&Q SOFTWARE
GEOWORKS SECTOR INDEX NASDAQ STOCK MARKET -U.S.
-------- ------------------ -------------------------
<S> <C> <C> <C>
Mar-95 100.00 100.00 100.00
Jun-95 153.85 115.64 114.38
Sep-95 236.92 125.73 128.16
Dec-95 233.85 125.37 129.72
Mar-96 369.23 136.82 135.80
Jun-96 436.92 149.18 146.86
Sep-96 320.00 153.45 152.11
Dec-96 301.54 152.40 159.61
Mar-97 81.54 139.07 150.95
Jun-97 71.54 165.18 178.61
Sep-97 201.54 198.06 208.82
Dec-97 118.46 184.27 195.56
Mar-98 91.54 239.20 228.88
Jun-98 43.08 247.95 235.15
Sep-98 16.54 206.82 212.20
Dec-98 44.62 240.73 275.75
Mar-99 38.85 240.61 309.19
Jun-99 36.92 274.64 338.33
Sep-99 37.69 305.04 346.46
Dec-99 206.15 547.71 511.15
Mar-00 438.46 577.65 574.04
</TABLE>
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 non-employee directors. It is responsible for reviewing and
recommending for approval by the Board of Directors 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.
14
<PAGE> 17
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 stockholders 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, as a general rule, all regular employees with three (3) 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 comparable
industries. In general, salary increases are made based on median increases in
salaries for similar executives of similar sized companies in the high
technology and wireless communications industries. The Committee's approach to
base compensation is to offer competitive salaries in comparison with market
practices. However, commencing with fiscal 1996, base salary has become a
relatively smaller element in the total executive officer compensation package,
as the Company has introduced greater pay-for-performance programs.
Bonuses: The Company has an incentive program pursuant to which executive
officers and a limited number of key employees may receive periodic cash bonuses
beyond their base salary. The Committee has established for each officer,
including the Chief Executive Officer, a set of performance objectives for the
fiscal year 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. These financial objectives are generally based
on the achievement of sales, revenue, net income or gross margin goals.
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 and mobile e-commerce companies, stock options are a key component of
each employee's total compensation package.
15
<PAGE> 18
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.
Competition for key employees in the high technology and mobile
communications industries is intense and the use of significant stock options
for retention and motivation of such personnel is pervasive in order to remain
competitive. The Company believes that stock options are a critical component of
the compensation offered by the Company to promote long-term retention of key
employees, motivate high levels of performance and recognize employee
contributions to the success of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee uses the factors and criteria described above for
compensation decisions regarding the Chief Executive Officer. During fiscal year
2000, Mr. Grannan's compensation was largely structured on the Company's future
attainment of strategic objectives.
On January 10, 1999, Mr. Grannan was appointed President and Chief
Executive Officer of the Company following the resignation of David A. Thatcher.
In December 1999, based on the performance of Mr. Grannan and the Company
against strategic and financial objectives since his appointment, the Committee
increased Mr. Grannan's annual salary to $210,000 from $175,000. Mr. Grannan's
salary and bonus for the past fiscal year are reflected in the Executive
Compensation table set forth in this Proxy. Mr. Grannan is eligible to receive
quarterly bonuses in accordance with the financial objectives relating to
bonuses set forth above in this Compensation Committee Report.
The Committee believes that Mr. Grannan's compensation is modest relative
to that of other chief executive officers of publicly-held technology and
wireless communication companies, but is appropriate in light of the Company's
life stage and continued investment in emerging markets.
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
regulations under the Section, the Committee believes that the Section will not
reduce any tax deduction available to the Company.
16
<PAGE> 19
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
DAVID NEYLON
JOHN B. BALOUSEK
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual
Meeting. If any other matters properly come before the Annual 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.
By Order of the Board of Directors
TIMOTHY J. TOPPIN
Secretary
Dated: August 7, 2000
17
<PAGE> 20
GEOWORKS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 12, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned hereby appoints Timothy J. Toppin with power of substitution, to
represent the undersigned at the Annual Meeting of Stockholders of Geoworks
Corporation (the "Company") to be held at 960 Atlantic Avenue, Alameda,
California 94501 on September 12, 2000, at 11:00 a.m., local time, and any
adjournment or postponement 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> 21
<TABLE>
<CAPTION>
[X] PLEASE MARK YOU CHOICE LIKE THIS
ACCOUNT NUMBER COMMON
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
WITHHELD
FOR FOR ALL
1. ELECTION OF DIRECTORS [ ] [ ] 4. RATIFICATION OF SELECTION OF ERNST & YOUNG LLP
Nominees: David Neylon AS THE COMPANY'S INDEPENDENT AUDITORS.
John B. Balousek
Kevin P. Fitzgerald
Andrew Cole FOR AGAINST ABSTAIN
David L. Grannan [ ] [ ] [ ]
Stephen T. Baker
Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below:
------------------------------------------------------------------------------------------------------------------------------------
2. TO APPROVE AN INCREASE IN THE NUMBER OF FOR AGAINST ABSTAIN The Board of Directors recommends a vote FOR all
AUTHORIZED SHARES OF COMMON STOCK [ ] [ ] [ ] nominees for election and FOR Proposals 2, 3 and 4.
ISSUABLE BY THE COMPANY FROM 40,000,000
TO 80,000,000.
THIS PROXY WILL BE VOTED AS DIRECTED. IN THE
ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED FOR
THE COMPANY'S NOMINEES FOR ELECTION AND FOR
PROPOSALS 2, 3 and 4.
In their discretion, the proxies are authorized to
vote upon such other business as may properly come
before the meeting or any adjournment or
postponement 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.
--------------------------------------------------------------------------------Dated: August 7, 2000
3. TO APPROVE AN AMENDMENT TO THE FOR AGAINST ABSTAIN
COMPANY'S 1994 STOCK PLAN TO [ ] [ ] [ ] Timothy J. Toppin, Secretary
INCREASE THE NUMBER OF SHARES OF ------------------------------------------
COMMON STOCK RESERVED FOR ISSUANCE Signature(s) Date
THEREUNDER BY 2,000,000 SHARES.
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 may be
executed by an officer, agent or proxyholder as
the bylaws of the corporation may prescribe, or in
the absence of that determination, by the
Chairman, president or any vice president.
Executors, administrators or other fiduciaries who
execute the above proxy for a deceased stockholder
should give their full title. Please date the
proxy.
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.
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