<PAGE>
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:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Efficient Networks, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(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 was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[_] 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: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
EFFICIENT NETWORKS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, DECEMBER 8, 2000
AT 10:00 A.M. CENTRAL TIME
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Efficient
Networks, Inc., a Delaware corporation (the "Company"), will be held on Friday,
December 8, 2000 at 10:00 a.m., local time, at the Crowne Plaza North
Dallas/Addison, 14315 Midway Road, Addison, Texas 75001, for the following
purposes:
1. To elect two Class II directors to serve for a term of three years and
until their successors are duly elected and qualified;
2. To vote on a proposal to immediately increase the number of shares
reserved for issuance under the Company's 1999 Stock Plan;
3. To vote on a proposal to amend the annual automatic replenishment
provision of the Company's 1999 Stock Plan, which replenishment, as
amended, would first occur on July 1, 2001;
4. To ratify the appointment of KPMG LLP as independent auditors of the
Company for the fiscal year ending June 30, 2001; and
5. To transact such other business as may properly come before the meeting
or at any and all continuation(s) or adjournment(s) 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 October 13, 2000 are
entitled to receive notice of, to attend and to vote at the meeting and any
adjournment thereof.
All stockholders are cordially invited to attend the meeting in person. Any
stockholder attending the meeting may vote in person even if such stockholder
returned a proxy.
FOR THE BOARD OF DIRECTORS
/s/ Mark A. Floyd
Mark A. Floyd
President, Chief Executive Officer
and Chairman of the Board
Dallas, Texas
October 23, 2000
IMPORTANT: WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED
BE AFFIXED IF MAILED IN THE UNITED STATES.
<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors of
Efficient Networks, Inc. (the "Company" or "Efficient Networks") for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held Friday,
December 8, 2000, at 10:00 a.m., local time, or at any and all continuation(s)
or adjournment(s) 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 Crowne Plaza North Dallas/Addison, 14315 Midway Road, Addison,
Texas 75001. The telephone number at that location is (972) 980-8877. The
Company's headquarters are located at 4849 Alpha Road, Dallas, Texas 75244, and
the telephone number is (972) 852-1000.
These proxy solicitation materials were mailed on or about October 23, 2000
to all stockholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
Purposes of the Annual Meeting
The purposes of the Annual Meeting are:
1. To elect two Class II directors to serve for a term of three years and
until their successors are duly elected and qualified;
2. To vote on a proposal to immediately increase the number of shares
reserved for issuance under the Company's 1999 Stock Plan;
3. To vote on a proposal to amend the annual automatic replenishment
provision of the Company's 1999 Stock Plan, which replenishment, as
amended, would first occur on July 1, 2001;
4. To ratify the appointment of KPMG LLP as independent auditors of the
Company for the fiscal year ending June 30, 2001; and
5. To transact such other business as may properly come before the meeting
or at any and all continuation(s) or adjournment(s) thereof.
Record Date and Shares Outstanding
Stockholders of record at the close of business on October 13, 2000 (the
"Record Date") are entitled to notice of, and to vote at the Annual Meeting. At
the Record Date, 58,509,284 shares of the Company's Common Stock were issued
and outstanding. For information regarding security ownership by management and
5% stockholders, see "OTHER INFORMATION--Security Ownership of Certain
Beneficial Owners and Management." The closing price of the Company's Common
Stock on The Nasdaq Stock Market on the Record Date was $44.938 per share.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person. Attending the
Annual Meeting in and of itself will not constitute a revocation of proxy.
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Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock outstanding on the Record Date. Shares
that are voted "FOR" or "AGAINST" a matter are treated as being present at the
Annual Meeting for purposes of establishing a quorum. Under the General
Corporation Law of the State of Delaware, abstentions and broker non-votes are
also included for purposes of determining whether a quorum of shares is present
at the meeting. A broker non-vote occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner.
Each share outstanding on the Record Date entitles its owner to one vote on
all matters. Shares that are voted "FOR" or "AGAINST" as well as abstentions
with respect to a matter are deemed to be the "Votes Cast." Directors are
elected by a plurality vote; therefore, the two nominees for director who
received the most votes "FOR" will be elected, regardless of the number of
votes "AGAINST" or abstentions. The other proposals described in this Proxy
Statement will be approved only if they receive an affirmative vote of a
majority of Votes Cast; in other words, each proposal must receive more votes
"FOR" than votes "AGAINST" or abstentions.
Therefore, other than with respect to the election of directors, abstentions
have the same effect as votes against each other proposal. However, since
broker non-votes are not included in the tabulation of the voting results on
the election of directors or issues requiring approval of a majority of the
Votes Cast, they have no effect with respect to the outcome of such votes.
Voting and Solicitation
Each share of Common Stock outstanding on the Record Date will be entitled
to one vote on all matters. The two candidates for election as directors at the
Annual Meeting who receive a plurality of the shares of the Company's
outstanding Common Stock present or represented at the Annual Meeting will be
elected. The ratification of the two proposed amendments to the 1999 Stock Plan
and the ratification of the appointment of KPMG LLP as independent auditors for
the fiscal year ending June 30, 2001, will require the affirmative vote of a
majority of the Votes Cast.
Shares of Common Stock represented by properly executed proxies will, unless
such proxies have been previously revoked, be voted in accordance with the
instructions indicated thereon. In the absence of specific instructions to the
contrary, properly executed proxies will be voted: (i) FOR the election of each
of the Company's director nominees; (ii) FOR ratification of the immediate
increase in the number of shares reserved for issuance under the Company's 1999
Stock Plan; (iii) FOR ratification of an amendment to the annual automatic
replenishment provision of the Company's 1999 Stock Plan; (iv) FOR ratification
of the appointment of KPMG LLP as the Company's independent auditors for the
fiscal year ending June 30, 2001. No business other than that set forth in the
accompanying Notice of Annual Meeting of Stockholders is expected to come
before the Annual Meeting. Should any other matter requiring a vote of
stockholders properly arise, the persons named in the enclosed form of proxy
will vote such proxy as the Board of Directors may recommend.
The cost of this solicitation will be borne by the Company. 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. The Company expects to engage a proxy solicitor in
connection with the Annual Meeting, and anticipates that the fees of such
solicitor will be between $5,000 and $10,000. Proxies may also be solicited by
certain of the Company's directors, officers and regular employees, without
additional compensation other than reimbursement of expenses, personally or by
telephone, telegram or letter.
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Deadline for Receipt of Stockholder Proposals
Proposals of the Company's stockholders that are intended to be presented by
such stockholders at the Company's next Annual Meeting of Stockholders (the
"2001 Annual Meeting") must be received by the Company at its principal
executive offices no later than 120 days prior to the anniversary of the date
of this year's mailing, or June 25, 2001, in order to be considered for
possible inclusion in the Proxy Statement and form of Proxy relating to the
2001 Annual Meeting.
If a stockholder intends to submit a proposal at the 2001 Annual Meeting
which is not eligible for inclusion in the proxy statement and form of proxy
relating to the meeting, the stockholder must do so no later than 60 days
before the date of the 2001 Annual Meeting.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Directors
Efficient Networks' Board of Directors is currently comprised of eight
members, divided into three classes with overlapping three-year terms. As a
result, a portion of Efficient Networks' Board of Directors will be elected
each year. Anthony T. Maher, William L. Martin III and Robert C. Hawk have been
designated Class I directors, and their terms expire at the 2002 Annual Meeting
of Stockholders. Mark A. Floyd and Thomas H. Peterson have been designated
Class II directors, and their terms expire at this Annual Meeting of
stockholders. Bruce W. Brown, James P. Gauer and Robert A. Hoff have been
designated Class III directors, and their terms expire at the 2001 Annual
Meeting of stockholders.
Any additional directorships resulting from an increase in the number of
directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of an equal number of directors.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's two nominees named below, both 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 nominee who shall be designated by
the present Board of Directors to fill the vacancy. 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 as will ensure the
election of as many of the nominees listed below as possible. The term of
office of each person elected as a director will continue until the 2003 Annual
Meeting of stockholders or until his successor has been duly elected and
qualified or until his earlier death, resignation or removal. It is not
expected that any nominee will be unable or will decline to serve as a
director.
Information Regarding Nominee Directors
Two Class II directors are to be elected at the Annual Meeting for a three-
year term ending in 2003. The Board of Directors has nominated MARK A. FLOYD
and THOMAS H. PETERSON for re-election as Class II directors. Set forth below
is certain information as of the Record Date regarding the nominees for Class
II directors.
Nominees for Class II Directors for a Term Expiring in 2003
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mark A. Floyd........... 44 Chairman of the Board, Chief Executive Officer and President
Thomas H. Peterson...... 44 Director
</TABLE>
Mark A. Floyd co-founded Efficient in June 1993 and has served as President,
Chief Executive Officer and a director of Efficient since its inception. Prior
to founding Efficient, from June 1991 to July 1993, Mr. Floyd was Chief
Operating Officer and a director of Networth, Inc., a provider of LAN products
including Ethernet hubs, switches and network interface cards. From May 1984 to
June 1991, Mr. Floyd held the positions of Executive Vice President, Chief
Financial Officer and director of Interphase Corporation, a provider of
enterprise server connectivity solutions for high-speed LAN, high capacity
storage and remote access applications. Mr. Floyd holds a B.B.A. in Finance
from the University of Texas at Austin.
Thomas H. Peterson has served as a director of Efficient since July 1993.
Since May 1991, Mr. Peterson has been a General Partner of El Dorado Ventures,
a venture capital firm and investor in Efficient. Mr. Peterson holds an M.B.A.
from the University of California, Los Angeles and a B.S. in Electrical
Engineering from Iowa State University.
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Required Vote
The two nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be
elected as directors. Votes withheld from any director are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business, but have no other legal effect in the election of directors under
Delaware law.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES
LISTED ABOVE.
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Information Regarding Other Directors
Set forth below is certain information as of the Record Date regarding each
other incumbent director of Efficient Networks whose term of office continues
after the Annual Meeting.
Incumbent Class III Directors Whose Term Expires in 2001
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Bruce W. Brown.............................................. 50 Director
James P. Gauer.............................................. 48 Director
Robert A. Hoff.............................................. 48 Director
</TABLE>
Bruce W. Brown has served as a director of Efficient since October 1995.
Since August 1995, he has served as President, Chief Executive Officer and a
director of Vertel Corp., a provider of telecommunications network management
software and services. From July 1993 to August 1995, Mr. Brown held the
positions of President and Chief Executive Officer of ADC Fibermax Corporation,
a supplier of fiber optic networking products. Mr. Brown holds an M.P.A. from
Drake University and a B.S. in Psychology from Iowa State University.
James P. Gauer has served as a director of Efficient since July 1993. Since
April 1999, he has been a General Partner of Palomar Ventures and Ocean Park
Ventures, and from December 1992 to November 1997, he was a General Partner of
Enterprise Partners, all of which are venture capital firms and investors in
Efficient. Mr. Gauer holds a B.A. in Mathematics from the University of
California, Los Angeles.
Robert A. Hoff has served as a director of Efficient since July 1993. Since
1983, he has been a General Partner of Crosspoint Venture Partners, a venture
capital firm and investor in Efficient. Mr. Hoff also serves as a director of
Com21, Inc., Onyx Acceptance Corp., PairGain Technologies, Inc., and U.S.
Web/CKS Corporation. Mr. Hoff holds an M.B.A. from Harvard University and a
B.S. in Business Administration from Bucknell University.
Incumbent Class I Directors Whose Term Expires in 2002
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Anthony T. Maher............................................ 55 Director
William L. Martin III....................................... 53 Director
Robert C. Hawk.............................................. 60 Director
</TABLE>
Anthony T. Maher was appointed to Efficient's Board of Directors in April
1999. Mr. Maher is a member of the Board of Siemens AG Information and
Communication Networks. Siemens, a network equipment vendor, is an investor in
Efficient. Since May 1978, Mr. Maher has held various positions with Siemens,
including the following positions within the Siemens Public Communication
Networks Group: October 1997 to September 1998, member of the Board of
Directors; October 1995 to September 1997, Executive Director; and January 1993
to September 1995, Executive Director of Worldwide Product Planning. Prior to
his positions within the Public Communication Networks Group, Mr. Maher was
manager and then deputy director of system engineering for EWSD architecture
and processor technology. Mr. Maher is also a director of Floware Wireless
Systems Ltd. and Accelerated Networks, Inc. Mr. Maher holds a M.S. in
Electrical Engineering and Solid State Physics from the University of Illinois.
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<PAGE>
William L. Martin III has served as a director of Efficient since January
1997. Since November 1999, he has been Chief Executive Officer of White Rock
Networks, Inc. (formerly Glassware Networks, Inc.), a developer of optical
networking systems. From September 1994 to November 1999, Mr. Martin served as
Senior Vice President of ADC Telecommunications, Inc. and President of the
Business Broadband Group of ADC Telecommunications, Inc., a provider of
communications networks systems and solutions and an investor in Efficient. Mr.
Martin holds an M.B.A. from Harvard University, an M.S. in Aerospace
Engineering and a B.S. in Engineering from the California Institute of
Technology. Mr. Martin is also a director of Quary Technologies, Inc.
Robert C. Hawk joined Efficient's Board of Directors in July 1999. Mr. Hawk
is President of Hawk Communications and recently retired as President and Chief
Executive Officer of US West Multimedia Communications, Inc., where he headed
the cable, data and telephony communications business from May 1996 to April
1997. He was president of the Carrier Division of US West Communications, a
regional telecommunications service provider, from September 1990 to May 1996.
Prior to that time, Mr. Hawk was Vice President of Marketing and Strategic
Planning for CXC Corporation. Prior to joining CXC Corporation, Mr. Hawk was
director of Advanced Systems Development for AT&T/American Bell. He currently
serves on the Boards of Covad Communications, an investor in Efficient
Networks, PairGain Technologies, Inc., Concord Communications, Radcom and
Com21.
There are no family relationships among any of the directors, officers or
key employees of Efficient Networks.
Board Meetings and Committees
The Board of Directors of the Company held 13 meetings during the fiscal
year ended June 30, 2000 (hereinafter "fiscal 2000"). All director nominees and
incumbent directors who served as a director during fiscal 2000 attended no
less than 75% of the aggregate of all meetings of the Board of Directors and
any committees of the Board on which such director served, if any, during
fiscal 2000. The Board of Directors has an Audit Committee and a Compensation
Committee, but does not have a nominating committee or a committee performing
the functions of a nominating committee.
The Audit Committee of the Board of Directors currently consists of Messrs.
Martin and Hoff. The Audit Committee held two meetings during fiscal 2000. The
Audit Committee reviews the internal accounting procedures of Efficient
Networks and consults with and reviews the services provided by Efficient
Networks' independent accountants.
The Compensation Committee of the Board of Directors currently consists of
Messrs. Brown and Gauer. The Compensation Committee held no meetings during
fiscal 2000. The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of employees of Efficient Networks.
Efficient Networks established the Employee Option Committee in October
1999. The Employee Option Committee of the Board of Directors currently
consists solely of Mr. Floyd. The Employee Option Committee determines stock
option grants for employees of Efficient Networks who are not executive
officers.
Director Compensation
Directors do not currently receive any cash compensation from Efficient
Networks for their service as members of the Board of Directors. Under
Efficient Networks' 1999 Stock Plan, directors are eligible to receive stock
option grants at the discretion of the Board of Directors or other
administrator of the Plan.
In January 2000, the Board granted to each of Messrs. Brown, Gauer, Hawk,
Hoff, Maher, Martin and Peterson options to purchase 15,000 shares of common
stock with an exercise price of $63.88 per share.
7
<PAGE>
PROPOSED AMENDMENTS TO THE COMPANY'S 1999 STOCK PLAN
The 1999 Stock Plan was adopted by the Stockholders in May 1999, to permit
the Board of Directors to create equity incentives to help the Company attract,
retain and motivate the best available talent for the successful conduct of the
Company's business. The Plan does so by authorizing the Board of Directors to
grant incentive and nonstatutory stock options to employees and service
providers. At the time of the Plan's adoption, 3,500,000 shares were reserved
for issuance thereunder, and 1,000,000 shares were automatically added on
July 1, 2000.
Since the Plan's adoption in May 1999, the pace of new hires has quickly
exceeded the current Plan's capacity. The number of persons employed by us
since May 1999 has quadrupled--from approximately 115 employees to more than
500 employees as of September 30, 2000. However, as of September 30, 2000,
there were only 199,813 shares remaining available for grant under the Plan.
On July 13, 2000, the Board of Directors approved two amendments to the
Company's 1999 Stock Plan, subject to the approval of the stockholders at the
Annual Meeting. The first amendment, which is submitted for approval as
proposal No. 2, would immediately increase the number of shares reserved for
issuance under the 1999 Plan by 2,000,000 shares. The Board believes that the
remaining shares under the Plan are insufficient to enable the Company to grant
equity incentives to attract new talent. In the Board's opinion, the one-time
addition of shares under this proposal is necessary to permit the Company to
continue to attract and retain employees in the immediate future.
The second amendment, which is submitted for approval as proposal No. 3,
would adjust the annual automatic replenishment provision of the Company's 1999
Stock Plan from the lesser of (a) 1,000,000 shares, (b) 3% of the outstanding
Common Stock of the Company, as determined on the first day of each fiscal
year, or (c) such lesser amount as is determined by the Board of Directors, to
the lesser of (a) 4,500,000 shares, (b) 3% of the outstanding Common Stock of
the Company, as determined on June 30 of each year, or (c) such lesser amount
as is determined by the Board of Directors. The Board believes that the current
automatic replenishment provision is insufficient to meet the Company's ability
to continue to grow over time, even if proposal No. 2 is adopted. Thus, the
Board believes that proposal No. 3 is necessary to permit the Company to
attract and retain employees over time.
For more detail on the terms of the 1999 Stock Plan, see pages 10-13.
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<PAGE>
PROPOSAL NO. 2
AMENDMENT TO THE 1999 STOCK PLAN
To amend the 1999 Stock Plan to immediately increase the number of shares
reserved for issuance thereunder by 2,000,000.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE 1999 STOCK PLAN AS DESCRIBED ABOVE.
PROPOSAL NO. 3
AMENDMENT TO THE 1999 STOCK PLAN
To amend the automatic replenishment provision of the 1999 Stock Plan from
the lesser of (a) 1,000,000 shares, (b) 3% of the outstanding Common Stock of
the Company, as determined on the first day of each fiscal year, or (c) such
lesser amount as is determined by the Board of Directors, to the lesser of (a)
4,500,000 shares, (b) 3% of the outstanding Common Stock of the Company, as
determined on June 30 of each year, or (c) such lesser amount as is determined
by the Board of Directors.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE 1999 STOCK PLAN AS DESCRIBED ABOVE.
9
<PAGE>
OVERVIEW OF 1999 STOCK PLAN
The Stock Plan was approved by the Board of Directors in April 1999 and by
our stockholders in May 1999. The 1999 Stock Plan provides for the granting to
employees of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and for the granting to employees
and consultants of nonstatutory stock options and stock purchase rights. Unless
terminated sooner, the stock plan will terminate automatically in 2009.
Purposes
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, Directors and Consultants, and to promote the success
of the Company's business. Options granted under the Plan may be Incentive
Stock Options or Nonstatutory Stock Options, as determined by the Administrator
at the time of grant. Stock Purchase Rights may also be granted under the Plan.
Administration
The stock plan may be administered by the Board of Directors or a committee
of the Board, so long as the committee is constituted so as to satisfy all
applicable laws. The Board or a committee of the Board will have the power to
determine the terms of the options granted, including the exercise price, the
number of shares subject to each option, the vesting provisions, the
exercisability thereof and the form of consideration payable upon such
exercise. In making those determinations, the Board or a committee of the Board
weighs a number of factors, including the services performed for the Company
and the Optionee's present and potential contribution to the Company's success.
Stock Subject to Plan
A total of 3,500,000 shares of our common stock was originally reserved for
issuance, plus automatic annual increases on the first day of each new fiscal
year equal to the lesser of:
1,000,000 shares;
3% of the outstanding Common Stock of the Company on such date; or
such lesser amount as is determined by the Board of Directors.
As of July 1, 2000, 4,500,000 shares were reserved for issuance under the
Plan. If options granted under the plan expire, lapse, or otherwise terminate
without being exercised, they again become available for issuance under the
plan. As of September 30, 2000, there were 199,813 shares remaining available
for grant under the Plan.
Eligibility
Nonstatutory Stock Options and Stock Purchase Rights may be granted to
Service Providers (which includes employees, directors and consultants).
Incentive Stock Options may be granted only to Employees (which includes
officers and directors, except that service as a director in itself does not
constitute "employment" by the Company). As of September 30, 2000,
approximately 535 employees, officers, consultants and directors were eligible
to receive grants under the Plan.
10
<PAGE>
The plan limits the number of shares that can be granted to any Service
Provider during any fiscal year to 250,000 shares, subject to adjustment as
provided in the plan. The plan also imposes a limit on the aggregate market
value of shares treated as incentive stock options that may be granted to an
Optionee during any calendar year.
Terms of Options
The term of each Option shall be stated in the Option Agreement. In the case
of an Incentive Stock Option, the term shall be ten (10) years from the date of
grant or such shorter term as may be provided in the Option Agreement. However,
in the case of an Incentive Stock Option granted to an Optionee who, at the
time the Incentive Stock Option is granted, owns stock representing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or any Parent or Subsidiary, the term of the Incentive Stock Option
shall be five (5) years from the date of grant or such shorter term as may be
provided in the Option Agreement.
Option Exercise Price and Consideration
Exercise Price. The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be determined by the Administrator,
subject to the following:
. In the case of an Incentive Stock Option granted to an Employee who, at
the time the Incentive Stock 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 per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on the
date of grant. In the case of an Incentive Stock Option granted to any
other, the per Share exercise price shall be no less than 100% of the
Fair Market Value per Share on the date of grant.
. In the case of a Nonstatutory Stock Option intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of
the Code, the per Share exercise price shall be no less than 100% of the
Fair Market Value per Share on the date of grant.
. Notwithstanding the foregoing, Options may be granted with a per Share
exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
Form of Consideration. The Administrator shall determine the acceptable form
of consideration for exercising an Option, including the method of payment.
Exercise of Option. The Plan Administrator determines when options may be
exercised. Customarily, options vest after four years, with no options vesting
until the end of the first year from the vesting start date.
Termination of Relationship as a Service Provider. Except as otherwise
provided by the Administrator, if an Optionee ceases to be a Service Provider,
other than upon the Optionee's death or Disability, the Optionee may exercise
his or her Option within three months, to the extent that the Option is vested
on the date of termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If the Optionee does not
exercise his or her Option within the applicable time, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
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<PAGE>
Disability of Optionee. Except as otherwise provided by the Administrator,
if an Optionee ceases to be a Service Provider as a result of the Optionee's
Disability, the Optionee may exercise his or her Option within twelve months,
to the extent the Option is vested on the date of termination. If, on the date
of termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If the Optionee does not exercise his or her Option within the applicable time,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
Death of Optionee. Except as otherwise provided by the Administrator, if an
Optionee dies while a Service Provider, the Option may be exercised within
twelve months after death by the Optionee's estate or by a person who acquires
the right to exercise the Option by bequest or inheritance, but only to the
extent that the Option is vested on the date of death. If, at the time of
death, the Optionee is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option shall immediately revert to the
Plan. The Option may be exercised by the executor or administrator of the
Optionee's estate or, if none, by the person(s) entitled to exercise the Option
under the Optionee's will or the laws of descent or distribution. If the Option
is not so exercised within the applicable time, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
Stock Purchase Rights
Rights to Purchase. Stock Purchase Rights may be issued either alone, in
addition to, or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan.
Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
service with the Company for any reason, including death or Disability. The
purchase price for Shares repurchased pursuant to the Restricted Stock Purchase
Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The
repurchase option shall lapse at a rate determined by the Administrator.
Other Provisions. The Restricted Stock Purchase Agreement shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator in its sole discretion.
Rights as a Shareholder. Once the Stock Purchase Right is exercised, the
purchaser shall have the rights equivalent to those of a shareholder, and shall
be a shareholder when his or her purchase is entered upon the records of the
duly authorized transfer agent of the Company. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 13 of the
Plan.
Non-Transferability of Options and Stock Purchase Rights
Unless determined otherwise by the Administrator, an Option or Stock
Purchase Right 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. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such additional
terms and conditions as the Administrator deems appropriate.
Effect of Merger Sale
The Plan provides that in the event of a merger of Efficient Networks with
or into another corporation, or the sale of substantially all of our assets,
each outstanding option or stock purchase right will be assumed or substituted
for by the successor corporation. In addition, if the options are not
substituted for in the merger, each outstanding option will vest and become
exercisable as to all unvested shares and each stock purchase right shall lapse
as to all the shares for a period of 15 days after receipt of notice from
Efficient Networks.
12
<PAGE>
Amendment and Termination
The Board may at any time amend, alter, suspend or terminate the Plan. The
Company shall obtain shareholder approval of any Plan amendment to the extent
necessary and desirable to comply with applicable laws. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of
any Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
and the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
Federal Income Tax Aspects of the Stock Plan
Options granted under the Stock Plan may be either "incentive stock
options," as defined in Section 422 of the Internal Revenue Code, or
nonstatutory stock options.
An incentive stock Optionee does not incur ordinary taxable income at the
time of grant or exercise of the option. However, the Optionee may incur
alternative minimum tax upon exercise of the option. The Company is not
entitled to a tax deduction at the time of exercise of an incentive stock
option regardless of the applicability of the alternative minimum tax. Upon the
sale or exchange of the shares at least one year after receipt of the shares by
the Optionee and two years after grant of the incentive stock option, any gain
is treated as long-term capital gain. If these holding periods are not
satisfied, the Optionee recognizes ordinary taxable income equal to the
difference between the exercise price, and the lower of the fair market value
of the stock at the date of the option exercise or the sale price of the stock.
In turn, the Company is entitled to a tax deduction for the amount of the
ordinary income recognized by the Optionee. Any gain to the Optionee in excess
of the ordinary income from a disposition which does not meet the statutory
holding period requirements, is long-term capital gain if the sale occurs more
than one year after exercise or short-term capital gain if the sale occurs
within one year after the exercise.
Options which do not qualify as incentive stock options are nonstatutory
stock options. An Optionee does not recognize taxable income at the time of
grant of a nonstatutory stock option. However, upon exercise, the Optionee does
recognize ordinary taxable income equal to the excess of the fair market value
of the shares at time of exercise over the exercise price. The Company is
entitled to a tax deduction for the amount of the ordinary income recognized by
the Optionee. The income recognized by an Optionee who is also an employee of
the Company is subject to income tax withholding. Upon resale of such shares by
the Optionee, any difference between the sale price and the Optionee's tax
basis (exercise price plus the income recognized upon exercise) is treated as
capital gain or loss.
13
<PAGE>
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG LLP, independent auditors, to
audit the consolidated financial statements of the Company for the fiscal year
ending June 30, 2001 and seeks ratification of such appointment. In the event
of a negative vote on such ratification, the Board of Directors will reconsider
its appointment.
Representatives of KPMG LLP are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT
OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
JUNE 30, 2001.
14
<PAGE>
OTHER INFORMATION
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of Efficient Networks' common stock as of September 30, 2000, by (i)
each director of Efficient Networks, (ii) Efficient Networks' Chief Executive
Officer and each of the five other most highly compensated executive officers
of Efficient Networks' during fiscal 2000, (iii) all directors and executive
officers of Efficient Networks as a group, and (iv) all those known by
Efficient Networks to be beneficial owners of more than five percent of
outstanding shares of Efficient Networks' common stock. This table is based on
information provided to Efficient Networks or filed with the Securities and
Exchange Commission by Efficient Networks' directors, executive officers and
principal stockholders. Unless otherwise indicated in the footnotes below, and
subject to community property laws where applicable, each of the named persons
has sole voting and investment power with respect to the shares shown as
beneficially owned. Unless otherwise indicated, the address for each
stockholder listed in the following table is c/o Efficient Networks, Inc., 4849
Alpha Road, Dallas, Texas 75244.
<TABLE>
<CAPTION>
Percentage of
Number of Shares Shares Beneficially
Name and Address Beneficially Owned Owned
---------------- ------------------ -------------------
<S> <C> <C>
Cabletron Systems, Inc................. 10,266,099 17.52%
35 Industrial Way
Rochester, NH 03867
Texas Instruments Incorporated......... 3,188,706 5.44%
P.O. Box 660199, M.S. 8650
Dallas, TX 75266-0199
El Dorado Ventures(1).................. 1,811,495 3.09%
2400 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Siemens AG............................. 3,716,800 6.34%
Hofmannstrasse 51
81359 Munchen, Germany
Mark A. Floyd(2)....................... 1,341,667 2.29%
Bruce W. Brown(3)...................... 55,000 *
Robert A. Hoff(4)...................... 2,120,207 3.62%
Thomas H. Peterson(5).................. 1,861,407 3.18%
James P. Gauer(6)...................... 86,595 *
Anthony T. Maher(7).................... 3,726,800 6.36%
William L. Martin III(8)............... 31,500 *
Robert Hawk............................ 75,529 *
David B. Stefan(9)..................... 95,162 *
Patricia W. Hosek(10).................. 157,554 *
Gregory L. Langdon(11)................. 149,167 *
Paul E. Couturier(12).................. 121,791 *
Jill S. Manning(13).................... 113,899 *
All directors and officers as a group
(13 persons)(14)...................... 9,936,278 16.95%
</TABLE>
15
<PAGE>
--------
* Less than 1% of the outstanding shares of common stock.
(1) Represents 1,737,794 shares held by El Dorado Ventures III, 32,185 shares
held by El Dorado C&L Fund, L.P., 7,126 shares held by El Dorado
Technology IV, L.P., and 34,390 shares held by El Dorado Technology "98,
L.P.
(2) Includes 691,667 shares issuable upon exercise of stock options
exercisable on or before November 30, 2000.
(3) Includes 55,000 shares issuable upon exercise of stock options exercisable
on or before November 30, 2000.
(4) Mr. Hoff is a general partner of Crosspoint Venture Partners. The shares
listed represent (a) 1,431,061 shares held by Crosspoint Ventures LS 1997,
L.P.; (b) 478,489 shares held by Crosspoint Venture Partners 1993, L.P.;
(c) 173,157 shares held by Mr. Hoff; and (d) 37,500 shares issuable upon
exercise of stock options held by Mr. Hoff and exercisable on or before
November 30, 2000. Mr. Hoff disclaims beneficial ownership of the shares
held by Crosspoint Ventures LS 1997, L.P., except to the extent of his
pecuniary interest therein.
(5) Mr. Peterson is a general partner of El Dorado Ventures. The shares listed
represent (a) 1,737,794 shares held by El Dorado Ventures, III; 32,185
shares held by El Dorado C&L Fund, L.P., 7,126 shares held by El Dorado
Technology IV, L.P.; and 34,390 shares held by El Dorado Technology 98,
L.P.; (b) 12,412 shares held by Mr. Peterson; and (c) 37,500 shares
issuable upon exercise of stock options held by Mr. Petersen and
exercisable on or before November 30, 2000. Mr. Peterson disclaims
beneficial ownership of the shares held by El Dorado Ventures, except to
the extent of his pecuniary interest therein.
(6) The shares listed represent (a) 74,095 shares held by Mr. Gauer, and (b)
12,500 shares issuable upon exercise of stock options held by Mr. Gauer
and exercisable on or before November 30, 2000.
(7) Mr. Maher is a member of the Board of Siemens AG Information and
Communication Networks. The shares listed represent (a) 3,716,800 shares
held by Siemens AG, and (b) 10,000 shares held by Mr. Maher. Mr. Maher
disclaims beneficial ownership of the shares held by Siemens AG.
(8) Includes 12,500 shares issuable upon exercise of stock options held by Mr.
Martin and exercisable on or before November 30, 2000.
(9) Includes 24,330 shares issuable upon exercise of stock options exercisable
on or before November 30, 2000.
(10) Includes 119,188 shares issuable upon exercise of stock options
exercisable on or before November 30, 2000.
(11) Includes 102,500 shares issuable upon exercise of stock options
exercisable on or before November 30, 2000.
(12) Includes 119,791 shares issuable upon exercise of stock options
exercisable on or before November 30, 2000.
(13) Includes 93,751 shares issuable upon exercise of stock options exercisable
on or before November 30, 2000.
(14) Includes an aggregate of 1,306,227 shares issuable upon exercise of stock
options exercisable on or before November 30, 2000.
16
<PAGE>
Certain Relationships and Related Transactions
The following is a description of transactions during fiscal 2000 to which
we have been a party, in which the amount involved in the transaction exceeds
$60,000 and in which any director, executive officer or holder of more than 5%
of our capital stock had or will have a direct or indirect material interest
other than compensation arrangements that are otherwise required to be
described:
Siemens AG. Anthony T. Maher, a member of our Board of Directors, is
affiliated with Siemens. Efficient Networks and Siemens are party to an
original equipment manufacture purchase agreement which provides for the
purchase by Siemens of certain of our products, software and customization
services, in the ordinary course of business. During fiscal 2000 we generated
$8.0 million in revenues from sales made to Siemens. These sales accounted for
3.9% of our total sales revenues in fiscal 2000.
Cabletron Systems, Inc. Cabletron is a greater than 5% stockholder of
Efficient Networks . In connection with our acquisition of Cabletron's
subsidiary, FlowPoint Corp., we entered into a reseller agreement with
Cabletron pursuant to which Cabletron purchases certain of our products in the
ordinary course of business. During fiscal 2000 we generated $11.6 million in
revenues from sales made to Cabletron. These sales accounted for 5.7% of our
total sales revenues in fiscal 2000.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file certain
reports regarding ownership of, and transactions in, the Company's securities
with the Securities and Exchange Commission and with The Nasdaq Stock Market.
Such officers, directors, and 10% shareholders are also required to furnish the
Company with copies of all Section 16(a) forms that they file.
Based solely on our review of copies of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e), we believe that, since the
fiscal year ended June 30, 1999, all Section 16(a) filing requirements
applicable to our officers and directors were complied with, except that
reports on Form 3 were filed late by each of Peter R. Bourne, James A.
Hamilton, James R. Nadeau, Brian M. Ronald, Kenneth M. Siegel, Charles H.
Waggoner and Dano R. Ybarra, officers of the Company, regarding their
respective security holdings. One report on Form 4 was filed late by James R.
Nadeau, and reports on Form 4 were filed late by each of James P. Gauer (two),
Robert C. Hawk (one), Robert A. Hoff (one), Anthony T. Maher (one), William L.
Martin III (one) and Thomas H. Peterson (one), directors of the Company,
regarding their respective security holdings.
17
<PAGE>
Executive Compensation
Summary Compensation Table
The table below sets forth the compensation earned for services rendered to
the Company in all capacities for the fiscal years ended June 30, 1998, 1999
and 2000 by our Chief Executive Officer and our next five most highly
compensated executive officers who earned more than $100,000 during fiscal
2000. These executives are referred to as the "named executive officers"
elsewhere in this proxy statement.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
----------------- ------------
Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary Bonus Options (#) Compensation
--------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Mark A. Floyd............... 2000 $250,000 $250,000 400,000 $48,077(1)
President and Chief 1999 200,000 80,000 350,000 --
Executive Officer 1998 178,127 20,000 350,000 16,667(2)
David B. Stefan............. 2000 125,000 225,000 100,000 7,997(1)
Vice President of Sales 1999 125,000 112,608 100,000 --
1998 92,391 32,563 125,000 23,140(3)
Patricia W. Hosek........... 2000 130,000 100,000 100,000 11,487(1)
Vice President of 1999 117,000 51,479 225,000 --
Engineering 1998 107,625 21,313 50,000 --
Gregory L. Langdon.......... 2000 130,000 100,000 100,000 12,993(1)
Vice President of Marketing 1999 117,000 50,716 200,000 --
1998 103,290 21,051 50,000 --
Paul E. Couturier........... 2000 125,000 225,000 75,000 24,344(4)
Vice President of 1999 90,000 76,410 137,500 27,426(4)
International Operations 1998 85,709 42,742 37,500 27,634(4)
Jill S. Manning............. 2000 130,000 100,000 100,000 27,453(5)
Vice President of Finance, 1999 100,000 30,000 75,000 --
CFO 1998 100,000 10,000 55,000 --
</TABLE>
--------
(1) Represents payment in lieu of accrued vacation.
(2) Represents amount paid in lieu of accrued sabbatical benefit.
(3) Represents a moving allowance.
(4) Represents an annual car and vacation allowance.
(5) Includes $10,833 paid in lieu of accrued sabbatical benefit, and $16,620
paid for accrued vacation.
18
<PAGE>
Option Grants During Last Fiscal Year
The following table sets forth certain information with respect to stock
options granted to each of the named executive officers in fiscal 2000,
including the potential realizable value over the ten-year term of the options,
based on assumed, annually compounded rates of stock value appreciation. These
assumed rates of appreciation comply with the rules of the Securities and
Exchange Commission and do not represent our estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of our common stock.
In fiscal 2000, we granted options to purchase up to an aggregate of
6,741,700 shares to employees and directors. All options were granted at
exercise prices equal to the fair market value of our common stock on the date
of grant. All options have a term of ten years. Optionees may pay the exercise
price by cash, check or delivery of already-owned shares of our common stock.
Options generally vest over four years, with 25% of the shares vesting one year
after the option vesting start date and the remaining option shares vesting
ratably on a monthly basis over the succeeding 36 months.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------
Potential Realizable
Percent of Value at Assumed Annual
Number of Total Options Rates of Stock Price
Securities Granted to Market Appreciation for Option
Underlying Employees in Value at Term
Options Last Fiscal Exercise Date of Expiration -----------------------
Name Granted Year Price Grant Date 5% 10%
---- ---------- ------------- -------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark A. Floyd........... 400,000 5.93% $60.25 $60.25 1/6/10 $15,156,361 $38,409,193
David B. Stefan......... 100,000 3.79% $60.25 $60.25 1/6/10 $ 3,789,090 $ 9,602,298
Patricia W. Hosek....... 100,000 3.79% $60.25 $60.25 1/6/10 $ 3,789,090 $ 9,602,298
Gregory L. Langdon...... 100,000 3.79% $60.25 $60.25 1/6/10 $ 3,789,090 $ 9,602,298
Paul E. Courturier...... 75,000 2.84% $60.25 $60.25 1/6/10 $ 2,841,818 $ 7,201,724
Jill S. Manning......... 100,000 3.79% $60.25 $60.25 1/6/10 $ 3,789,090 $ 9,602,298
</TABLE>
Aggregate Option Exercises During Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth information with respect to the named
executive officers concerning options exercised by them during fiscal 2000 and
the exercisable and unexercisable options held by them as of June 30, 2000. The
"Value Realized" is based on the fair market value of our common stock as
quoted on the Nasdaq National Market on the date of exercise, less the per
share exercise price, multiplied by the number of shares issued. The "Value of
Unexercised In-the-Money Options at June 30, 2000" is based on the closing
price of $73.5625 per share of our common stock as quoted on the Nasdaq
National Market on June 30, 2000, less the per share exercise price, multiplied
by the number of shares issuable upon exercise of the options.
<TABLE>
<CAPTION>
Value of Unexercised In-
Number of Securities the-Money Options at
Underlying Options Fiscal Year-End
Shares Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Floyd........... -- $ -- 572,917 777,083 $41,706,170 $32,602,330
David B. Stefan......... 22,500 $2,306,250 89,480 213,020 $ 6,463,762 $ 9,456,888
Patricia W. Hosek....... 43,208 $4,422,923 126,063 273,437 $ 9,052,537 $13,711,058
Gregory L. Langdon...... 81,667 $7,343,815 110,000 258,333 $ 7,903,994 $12,640,112
Paul E. Couturier....... 50,000 $3,056,500 94,792 180,208 $ 6,833,576 $ 8,507,924
Jill S. Manning......... 19,000 $1,729,120 110,376 175,624 $ 8,024,170 $ 6,757,590
</TABLE>
Compensation Committee Interlocks and Insider Participation
No member of the Board of Directors or the Compensation Committee serves as
a member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our Board of
Directors or Compensation Committee.
19
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") is comprised of Bruce W. Brown
and James P. Gauer, each of whom is a non-employee director. The Committee
sets, reviews and administers the Company's executive compensation program. The
role of the Committee is to establish and recommend salaries and other
compensation paid to executive officers of the Company and to administer the
Company's stock plans. The Committee approves all stock option grants to
executive officers, all executive officer base salaries and any cash bonus
payments to executive officers and reviews all stock option grants to
employees.
The Company's executive pay programs are designed to attract and retain
executives who will contribute to the Company's long-term success, to mesh
executive and stockholder interest through stock option based plans and to
provide a compensation package that recognizes individual contributions and
Company performance.
At this time in the Company's growth, the Committee has determined that the
most effective means of compensation are base salaries, annual incentive
bonuses and long-term incentives through the Company's stock programs.
Base Salary
The base salaries of executive officers are initially determined by
evaluating the responsibilities of the position held and the experience and
performance of the individual, with reference to the competitive marketplace
for executive talent, including a comparison to base salaries for comparable
positions in high growth, technology-based companies of reasonably similar
size. The Committee reviews executive salaries annually and adjusts them as
appropriate to reflect changes in the market conditions and individual
performance and responsibility. During fiscal 2000, salaries for executive
officers were increased by $13,000 to $50,000, depending on the executive
officer. The base salary for the Chief Executive Officer, Mark A. Floyd, was
set at $250,000 for fiscal 2000.
Bonus
The bonuses awarded to executive officers are determined based on
achievement of individual and company performance goals.
Stock Options
Under the Company's 1999 Stock Plan, stock options may be granted to
executive officers and other employees of the Company. Upon joining the
Company, an individual's initial option grant is based on the individual's
responsibilities and position. The sizes of stock option awards are based
primarily on an individual's performance and responsibilities. Because of the
competitive nature of the technology industry in which the Company competes,
the Committee believes stock option grants are an effective method of
incentivising executives to take a longer term view of the Company's
performance and to ensure that the executive's and the stockholder's interests
are aligned.
20
<PAGE>
Other
Other elements of executive compensation include Company-wide medical and
life insurance benefits and the ability to defer compensation pursuant to a
401(k) plan. During fiscal 2000, the Company began matching employee
contributions under the 401(k) plan. The Company matches 50% of contributions
by an employee, up to 12% of that employee's annual compensation.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder.
Section 162(m) disallows a tax deduction for any publicly held corporation for
individual compensation exceeding $1 million in any taxable year for any of the
Named Executive Officers, unless such compensation is performance-based. Since
the 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
Stock Plan will meet the requirements of being performance-based, the Committee
believes that the Section will not reduce the tax deduction available to the
Company. The Company's policy is to qualify, to the extent reasonable, its
executive officers compensation for deductibility under applicable tax laws.
However, the Committee believes that its primary responsibility is to provide a
compensation program that will attract, retain and reward the executive talent
necessary to the Company's success. Consequently, the Committee recognizes that
the loss of a tax deduction could be necessary in some circumstances.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Bruce W. Brown
James P. Gauer
21
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
return, calculated on a dividend reinvested basis, from the effective date of
the initial public offering of the Company's Common Stock (July 14, 1999)
through June 30, 2000, with the NASDAQ Composite Index and the NASDAQ
Telecommunications Index. The graph assumes that $100 was invested in the
Company's Common Stock (at the initial public offering price of $15.00 per
share), and in the above indices on July 14, 1999. Note that historic stock
price performance is not necessarily indicative of future stock price
performance.
Comparison of Cumulative Total Return
Among Efficient Networks, Inc.,
Nasdaq Composite Index And Nasdaq Telecommunications Index
[PERFORMANCE GRAPH APPEARS HERE]
Assumes $100 Invested On July 15, 1999
Assumes Dividend Reinvested
Fiscal Year Ending June 30, 2000
<TABLE>
<CAPTION>
Cumulative
Total Return
---------------
7/15/99 6/30/00
------- -------
<S> <C> <C>
Efficient Networks, Inc......................................... 100.00 390.42
Nasdaq Composite Index.......................................... 100.00 140.74
Nasdaq Telecommunications Index................................. 100.00 125.31
</TABLE>
22
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Gina Eyermann at Efficient
Networks, Inc., 4849 Alpha Road, Dallas, Texas 75244. The telephone number at
that location is (972) 852-1000. To provide the Company sufficient time to
arrange for reasonable assistance or accommodation, please submit all such
requests by November 15, 2000.
It is important that your shares be represented at the meeting, regardless
of the number of shares that you hold. You are, therefore, urged to execute and
return the accompanying proxy in the envelope that has been enclosed, at your
earliest convenience.
FOR THE BOARD OF DIRECTORS
/s/ Mark A. Floyd
Mark A. Floyd
President, Chief Executive Officer
and Chairman of the Board
Dated: October 23, 2000
23
<PAGE>
PROXY
EFFICIENT NETWORKS, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF EFFICIENT NETWORKS, INC. ("EFFICIENT NETWORKS")
The undersigned hereby appoints Mark A. Floyd and Kenneth M. Siegel, and
each of them, as attorneys-in-fact and proxies of the undersigned, with full
power of substitution, to vote all of the shares of Efficient's common stock
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of Efficient Networks to be held at the Crowne Plaza North
Dallas/Addison, 14315 Midway Road, Addison, Texas 75001, on Friday, December 8,
2000 at 10:00 a.m. local time, and at any and all adjournments or postponements
thereof, with all of the powers the undersigned would possess if personally
present, upon and in respect of the following proposals and in accordance with
the following instructions. The proposals referred to herein are described in
detail in the accompanying proxy statement.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
PROPOSALS SPECIFIED ON THE REVERSE SIDE. IF A SPECIFIC DIRECTION IS INDICATED,
THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
------------------ ------------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
------------------ ------------------
<PAGE>
DETACH HERE
--------------------------------------------------------------------------------
[X] Please mark votes as in this example.
1. Election of Class II Directors: Nominees
Mark A. Floyd and Thomas H. Peterson
FOR WITHHOLD FOR ALL
ALL [_] [_] ALL [_] EXCEPT*
For all nominees except as follows:
__________________________________
FOR AGAINST ABSTAIN
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2. To vote on a proposal to immediately [_] [_] [_]
increase the number of shares reserved
for issuance under the Company's 1999
Stock Plan by 2,000,000
3. To vote on a proposal to amend the annual [_] [_] [_]
automatic replenishment provision of the
Company's 1999 Stock Plan
4. To vote for the ratification of KPMG LLP as [_] [_] [_]
independent auditors
MARK HERE FOR ADDRESS [_]
CHANGE AND NOTE AT LEFT
Please sign exactly as your name appears hereon. If the stock is registered
in the names of two or more persons each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If the signer
is a corporation, please give the full corporate name and have a duly authorized
officer sign stating such officers' title. If the signer is a partnership,
please sign in the partnership name by an authorized person.
Signature: ______________ Date: _____ Signature: _______________ Date: _____
Address: Address:
DETACH HERE
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