Business Collaboration Agreement

EXHIBIT 10.27 SONY AND PALMSOURCE CONFIDENTIAL

BUSINESS COLLABORATION AGREEMENT

This Business Collaboration Agreement (" Agreement") is entered into as of October 7, 2002 (" Effective Date") by and between PalmSource, Inc., a Delaware corporation with a principal place of business at 5470 Great America Parkway, Santa Clara, California 95052-8145, U.S.A. (" PalmSource") and Sony Corporation, a Japanese corporation with its principal place of business at 6-7-35 Kitashinagawa, Shinagawa-ku, Tokyo 141-0001, Japan (" Sony").


RECITALS:


A. Sony is in the business of designing, developing, manufacturing and marketing handheld computing devices.

B. PalmSource is in the business of designing, developing, manufacturing and marketing operating systems for handheld and/or mobile computing devices; and


C. Effective as of November 12, 1999, Palm, Inc. (predecessor to PalmSource) and Sony entered into a Software License Agreement, as amended (" License Agreement", as further defined below) with regard to Sony's developing, manufacturing and marketing handheld computing products incorporating specified PalmSource software and technology related to the Palm Operating system platform.

D. Concurrently with the signing of this Agreement, the parties are also entering into that certain Amendment No. 6 to the Software License Agreement, establishing terms and conditions under which Sony may examine and modify certain Palm Source Code (as defined therein).

E. Concurrently with the signing of this Agreement, Sony through its wholly-owned subsidiary Sony Corporation of America and PalmSource are also entering into that certain Stock Purchase Agreement under which Sony Corporation of America is purchasing certain number of shares of Series A Preferred Stock of PalmSource.


F. The parties desire to enter into certain business collaborations as set forth in this Agreement.

NOW, THEREFORE, the parties agree as follows:

AGREEMENT: I. Definitions . As used herein, the following capitalized terms shall have the meanings set forth below. Except as otherwise set forth in this Agreement, capitalized terms used in this Agreement shall have the same definitions as set forth in the License Agreement.

1. " Affiliate" means, with respect to a given subject, an entity which controls, is controlled by or is under common control with the subject. Such entity shall be considered an Affiliate only so long as such control exists. For the purposes of this definition, "control" means beneficial ownership of more than fifty percent (50%) of the shares entitled to vote in the election of directors or other managing authority or, where there are no such


SONY AND PALMSOURCE CONFIDENTIAL

shares, more than fifty percent (50%) of ownership interest representing the right to make decisions. 2. " Applicable Business Area" means (i) with respect to PalmSource, PalmSource's OS products and extensions thereof which it licenses or will license generally to its licensees, and (ii) with respect to Sony, Sony's handheld computing and Smartphones developed or sold by or for (x) Sony's Handheld Computing Company of Mobile Network Company, (y) any successor group or division thereof within Sony or any of its Affiliates, and (z) any other business area of Sony or any of its Affiliates that develops Licensee Products using the Palm Software or modifies or has access to any Palm Source Code or Palm Source Code Documentation. 3. " Development Partner" means a PalmSource Licensee with whom PalmSource enters into a definitive written joint development agreement during the term of this Agreement, under which such PalmSource Licensee will participate in a co-development program with PalmSource for New Versions where such PalmSource Licensee develops material portions of the Palm Source Code for the New Versions and has the right to access and modify all or substantially all of the Palm Source Code for the execution of such co-development program (" Development Partner Agreement"). A Development Partner and its Affiliates shall together be considered only a single Development Partner, for purposes of this Agreement. 4. " Development Period" means a period of [**] from the Effective Date or such longer period as the parties may mutually agree to conduct co-development projects under Article III below. 5. " License Agreement" means the Software License Agreement between the parties dated November 12, 1999, as amended, including without limitation as amended by that certain Amendment No. 6 to the Software License Agreement entered into concurrently herewith. 6. " New Version" means, any Updates of the latest version of Palm OS as of the Effective Date which is Palm OS 5.1. 7. " PalmSource Licensee" means a third party who enters into a definitive written license agreement with PalmSource on terms similar to the License Agreement, under which such third party develops its own handheld computing products and/or Smartphones using the Palm Software as the primary operating system embedded therein and pays per unit royalties to PalmSource for distribution of such products. PalmSource's Affiliates (other than Palm, Inc.) shall not be considered a "PalmSource Licensee" for purposes of this Agreement.


[**] Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.


-2-

SONY AND PALMSOURCE CONFIDENTIAL 8. " Smartphone" means digital cellular telephones having at least PIM capability and voice communications capability. II. Information Rights .

1. Applicable Business Area . The rights and obligations set forth in Section II of this Agreement apply only with respect to the Applicable Business Area of each party.

2. Coordination Meetings . The parties will hold periodic meetings at least once every [**] to review and update the status of on-going product development activities of the parties concerning the respective Applicable Business Areas and discuss additional areas for cooperation between the parties.

3. Road Maps . At least once every [**], and upon either parties' reasonable request from time to time, each party will provide the other with its current product and research and development roadmap for its respective Applicable Business Area.

4. Other Coordination . Each party will reasonably notify the other party of (i) agreements and other transactions with third parties which such party believes in good faith would materially conflict with, and/or materially adversely impact, the performance of its obligations and the relationship with the other party established under this Agreement; (ii) agreements and other transactions with third parties which such party believes in good faith would materially conflict with, and/or materially adversely impact, the compatibility or interoperability of the Palm Software; (iii) with respect to PalmSource, materially adversely altering its policy for licensing the Palm OS, (iv) with respect to Sony, using any competing OS software for products in its Applicable Business Area or materially adversely altering any of Sony's plans to use PalmSource's operating system products; and (v) any material adverse change implemented by such party in the overall conduct of its Applicable Business Area. The above notification will be based upon the good faith belief of the notifying party regarding the above events. Such notification may be made by disclosure at the periodic meetings to be held pursuant to Section II(2) or other appropriate manner.

5. Suggestions . In the event that either party provides the other with any opinion, suggestion or proposal for the other party's products or Applicable Business Area in response to the information provided in Sections II(2), II(3) or II(4) above, the receiving party will consider such opinion, suggestion or proposal in good faith, but will not be required to delay any of its plans or schedules to do so. The receiving party will have the right, but not the obligation, to use such opinion, suggestion or proposal for its applicable products and Applicable Business Area in its sole discretion, subject to any conditions or restrictions mutually agreed prior to disclosure and subject to continued compliance with all of the terms and conditions of this Agreement and the License Agreement. This


[**] Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.


-3-

SONY AND PALMSOURCE CONFIDENTIAL

paragraph shall not be construed as granting any right or license to the receiving party under any patent or copyright of the other party.

6. Scope of Information Rights . Notwithstanding anything to the contrary, all of the obligations to disclose information and provide notices set forth in this Agreement are subject to each party's confidentiality and other obligations and duties to third parties and compliance with applicable laws and regulations. In no event shall either party be required to disclose any information or provide any notices which such party believes in good faith may (i) breach such party's confidentiality or other obligations or duties to any third party, (ii) violate any law or regulation, or (iii) trigger disclosure requirements or other adverse consequences under securities or other laws or regulations or duties to third parties. All information will be provided on a confidential basis (subject to Section IV below) for purposes of general coordination in support of both parties' Applicable Business Areas. Neither party will be bound by the road maps and other information it provides and each retains the right to change its plans as it deems appropriate in its sole discretion. III. Co-Development .

1. [**]

2. [**]

3. [**]

4. No Restrictions on PalmSource's Ordinary Course Activities . Notwithstanding the foregoing, nothing in this Agreement shall be construed as restricting or limiting PalmSource from conducting development and other activities in the ordinary course of its business as of the Effective Date and as similar activities thereto that may be conducted in the future, including, without limitation: (i) at any time soliciting, receiving or implementing any suggestions, error corrections, requests, features or technology from any PalmSource Licensee or any other third party, (ii) working with, and permitting access to and modification of source code by, contractors, testing labs, application developers, suppliers and licensors or participating in standards bodies or other committees or organizations for developing or promoting software, interfaces or other technology, (iii) providing and permitting modifications of source code in connection with any escrow account, customer support or maintenance obligations or the like, (iv) providing and permitting modifications of source code for selected portions and modules of the Palm Software to PalmSource Licensees, developers and other third parties or receiving, using, and/or obtaining ownership or licenses to such modifications, (v) working with PalmSource Licensees and other third parties to evaluate, test and modify APIs and compatibility requirements, (vi) complying with its existing agreements

[**] Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.


-4-

SONY AND PALMSOURCE CONFIDENTIAL


and all legal and regulatory requirements, and (vii) permitting the management and control of PalmSource by, and the exercise of all other rights and privileges of, the Affiliates and shareholders of PalmSource, whether or not such entities are PalmSource Licensees. PalmSource's aforementioned activities shall be subject to its obligation of notification provided in Section II(4) above if such activities meet the requirements for notification ...