<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 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)(4) 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
-------------------------------------------------------------------------
Notes:
<PAGE>
EFFICIENT NETWORKS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, APRIL 12, 2000
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
Wednesday, April 12, 2000 at 10:00 a.m., local time, at the Crowne Plaza Hotel,
14315 Midway Road, Addison, Texas 75001, for the following purposes:
1. To elect three Class I directors to serve for a term of three years and
until their successors are duly elected and qualified;
2. To ratify the appointment of KPMG LLP as independent auditors of the
Company for the fiscal year ending June 30, 2000; and
3. 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 February 25, 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
Mark A. Floyd
President, Chief Executive Officer and
Chairman of the Board
Dallas, Texas
March 8, 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.
1
<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") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held Wednesday, April 12, 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 Hotel, 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 March 8, 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: (i) to elect three Class I directors
to serve for a term of three years and until their successors are duly elected
and qualified; (ii) to ratify the appointment of KPMG LLP as independent
auditors of the Company for the fiscal year ending June 30, 2000; and (iii) 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 February 25, 2000 (the
"Record Date") are entitled to notice of, and to vote at the Annual Meeting. At
the Record Date, 48,226,757 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 last trading day immediately prior to
the Record Date was $138.00 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.
Voting and Solicitation
Each share of Common Stock outstanding on the Record Date will be entitled
to one vote on all matters. The three candidates for election as directors at
the Annual Meeting who receive the highest number of affirmative votes of the
shares of the Company's outstanding Common Stock present or represented at the
Annual Meeting will be elected. The ratification of the appointment of KPMG LLP
as independent auditors for the fiscal year ending June 30, 2000, will require
the affirmative vote of a majority of the shares of the Company's outstanding
Common Stock present or represented at the Annual Meeting.
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,
properly executed proxies will be voted: (i) FOR the election of each of the
Company's director nominees; and (ii) FOR ratification of the appointment of
KPMG LLP as the Company's independent auditors for the fiscal year ending June
30, 2000. No business other than that set forth in the accompanying Notice of
2
<PAGE>
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. 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.
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 and are also treated as
shares "represented and voting" at the Annual Meeting (the "Votes Cast") with
respect to such matter.
Under the General Corporation Law of the State of Delaware, an abstaining
vote and a broker non-vote are counted as present and entitled to vote and are,
therefore, included for purposes of determining whether a quorum of shares is
present at a meeting; however, such votes are not deemed to be Votes Cast. As a
result, abstentions and 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 and, therefore, do not have the effect of votes in
opposition in such tabulations. 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.
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 must be
received by the Company at its principal executive offices, no later than
November 8, 2000 in order to be considered for possible inclusion in the Proxy
Statement and form of Proxy relating to such meeting.
If a stockholder intends to submit a proposal at the next Annual Meeting of
stockholders, which is not eligible for inclusion in the proxy statement and
form of proxy relating to such meeting, the stockholder must do so no later
than January 22, 2001. If such a stockholder fails to comply with the foregoing
notice provision, the Company's proxy holders will be allowed to use their
discretionary voting authority when the proposal is raised at the next Annual
Meeting of stockholders without any mention of the specific proposal in the
proxy statement and form of proxy relating to such meeting.
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. Messrs. Maher, Martin and Hawk have been designated Class I
directors, and their terms expire at this Annual Meeting of stockholders.
Messrs. Floyd and Peterson have been designated Class II directors, and their
terms expire at the 2000 Annual Meeting of stockholders. Messrs. Brown, Gauer
and Hoff have been designated Class III directors, and their terms expire at
the 2001 Annual Meeting of stockholders.
3
<PAGE>
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 three 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 nominee who shall be designated by
the present Board of Directors to fill the vacancy. It is not expected that any
nominee 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 2002 Annual
Meeting of stockholders or until his successor has been duly elected and
qualified or until his earlier death, resignation or removal.
Information Regarding Nominee Directors
Three Class I directors are to be elected at the Annual Meeting for a three-
year term ending in 2002. The Board of Directors has nominated ANTHONY T.
MAHER, WILLIAM L. MARTIN III and ROBERT C. HAWK for re-election as Class I
directors. Set forth below is certain information as of the Record Date
regarding the nominees for Class I directors.
Nominees for Class I Directors for a Term Expiring in 2002
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Anthony T. Maher........................... 54 Director
William L. Martin III...................... 52 Director
Robert C. Hawk............................. 60 Director
</TABLE>
Anthony T. Maher has served as a director of Efficient since 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 holds an M.S. in Electrical Engineering and Solid State Physics from
the University of Illinois.
William L. Martin III has served as a director of Efficient since January
1997. Since November 1999, he has been Chief Executive Officer of 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.
Robert C. Hawk has served as a director of Efficient since 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,
4
<PAGE>
Mr. Hawk was director of Advanced Systems Development for AT&T/American Bell.
He currently serves on the boards of Com 21, Concord Communications, Covad
Communications Group, Inc. and PairGain Technologies, Inc.
Required Vote
The three 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 COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF
THE NOMINEES LISTED ABOVE.
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 II Directors Whose Terms Expire in 2000
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mark A. Floyd........... 44 President, Chief Executive Officer and Chairman of the Board
Thomas H. Peterson...... 43 Director
</TABLE>
Mark A. Floyd co-founded Efficient in June 1993 and has served as President,
Chief Executive Officer and a director 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.
Incumbent Class III Directors Whose Terms Expire in 2001
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Bruce W. Brown............................. 49 Director
James P. Gauer............................. 48 Director
Robert A. Hoff............................. 47 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
5
<PAGE>
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.
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 a total of 11 meetings during the
year ended June 30, 1999. Except for director Bruce Brown who attended 73% of
the aggregate of all meetings of the Board of Directors, all director nominees
and incumbent directors who served as a director during fiscal 1999 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 1999. 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.
Efficient Networks established an Audit Committee in April 1999. The Audit
Committee of the Board of Directors currently consists of Messrs. Martin and
Hoff. No meetings were held during the two months in which the Audit Committee
was in existence in fiscal 1999. The Audit Committee reviews the internal
accounting procedures of Efficient Networks and consults with and reviews the
services provided by Efficient Networks' independent accountants.
Efficient Networks established the Compensation Committee in April 1999. The
Compensation Committee of the Board of Directors currently consists of Messrs.
Brown and Gauer. No meetings were held during the two-month period in which the
Compensation Committee was in existence in fiscal 1999. 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 or the plan.
During fiscal 1999, the board granted to each of Messrs. Gauer, Hoff, Martin
and Peterson options to purchase 50,000 shares of common stock with an exercise
price of $1.50 per share. During May 1999, the board granted to Messrs. Maher
and Hawk options to purchase 15,000 and 150,000 shares of common stock,
respectively, at an exercise price of $10.50 per share.
6
<PAGE>
PROPOSAL NO. 2
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, 2000 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, 2000.
7
<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 the Record Date by (i) each
director of Efficient Networks, (ii) Efficient Networks' Chief Executive
Officer and each of the four other most highly compensated executive officers
of Efficient Networks' during fiscal 1999, (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. Applicable percentage ownership in the following table is based on
48,226,757 shares of common stock outstanding as of the Record Date.
<TABLE>
<CAPTION>
Number of Percentage of
Shares Beneficially Shares Beneficially
Name and Address Owned Owned
---------------- ------------------- -------------------
<S> <C> <C>
Cabletron Systems, Inc.(1)............ 5,176,099 10.73
35 Industrial Way
Rochester, NH 03867
Crosspoint Venture Partners(2)........ 4,829,958 10.02
18552 MacArthur Blvd., Suite 400
Irvine, CA 92612
Texas Instruments Incorporated........ 3,474,291 7.20
P.O. Box 660199, M.S. 8650
Dallas, TX 75266-0199
El Dorado Ventures(3)................. 3,782,562 7.84
2400 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Enterprise Partners(4)................ 2,776,952 5.76
7979 Ivanhoe Avenue, Suite 550
La Jolla, CA 92037
Siemens AG............................ 3,716,800 7.71
Hofmannstrasse 51
81359 Munchen, Germany
Mark A. Floyd(5)...................... 1,428,333 2.93
Bruce W. Brown(6)..................... 55,000 *
Robert A. Hoff(7)..................... 4,854,958 10.06
Thomas H. Peterson(8)................. 3,807,562 7.89
James P. Gauer(9)..................... 1,644,624 3.41
Anthony T. Maher(10).................. 3,723,050 7.72
William L. Martin III................. 0 --
Robert Hawk(11)....................... 150,000 *
David B. Stefan(12)................... 80,162 *
Patricia W. Hosek(13)................. 150,521 *
Gregory L. Langdon(14)................ 144,187 *
Paul E. Couturier(15)................. 111,459 *
All directors and officers as a group
(20 persons)(16)..................... 16,433,052 33.21
</TABLE>
8
<PAGE>
- --------
* Less than 1% of the outstanding shares of common stock.
(1) Excludes 6,300 shares of Series A non-voting convertible preferred stock
held by Cabletron. The preferred stock is convertible into an aggregate of
6,300,000 shares of common stock and is expected to be converted in 2000.
(2) Represents 3,063,207 shares held by Crosspoint Venture Partners 1993,
95,390 shares held by Crosspoint 1993 Entrepreneurs Fund and 1,671,061
shares held by Crosspoint Ventures LS 1997 L.P.
(3) Represents 2,967,151 shares held by El Dorado Ventures III, 54,953 shares
held by El Dorado C&L Fund, L.P., 92,333 shares held by El Dorado
Technology IV, L.P., 617,103 shares held by El Dorado Ventures IV, L.P.,
and 51,022 shares held by El Dorado Technology "98, L.P.
(4) Represents 2,545,553 shares held by Enterprise Partners II, L.P., and
231,399 shares held by Enterprise Partners Associates, L.P.
(5) Includes 533,333 shares issuable upon exercise of stock options
exercisable on or before April 25, 2000.
(6) Includes 55,000 shares issuable upon exercise of stock options exercisable
on or before April 25, 2000.
(7) Mr. Hoff is a general partner of Crosspoint Venture Partners. The shares
listed represent (a) 4,829,958 shares held by Crosspoint Venture Partners
and (b) 25,000 shares issuable upon exercise of stock options held by Mr.
Hoff and exercisable on or before April 25, 2000. Mr. Hoff disclaims
beneficial ownership of the shares held by Crosspoint Venture Partners,
except to the extent of his pecuniary interest therein.
(8) Mr. Peterson is a general partner of El Dorado Ventures. The shares listed
represent (a) 3,782,562 shares held by El Dorado Ventures and (b) 25,000
shares issuable upon exercise of stock options held by Mr. Petersen and
exercisable on or before April 25, 2000. Mr. Peterson disclaims beneficial
ownership of the shares held by El Dorado Ventures, except to the extent
of his pecuniary interest therein.
(9) Mr. Gauer is a general partner of Palomar Ventures and Ocean Park
Ventures, L.P. The shares listed represent (a) 668,965 shares held by
Palomar Ventures, (b) 925,659 shares held by Ocean Park Ventures and (c)
25,000 shares issuable upon exercise of stock options held by Mr. Gauer
and exercisable on or before April 25, 2000. Mr. Gauer disclaims
beneficial ownership of the shares held by Palomar Ventures and Ocean Park
Ventures, except to the extent of his pecuniary interest therein.
(10) Includes 3,716,800 shares beneficially owned by Siemens AG. Mr. Maher is
a member of the board of Siemens AG Information and Communication
Networks. Mr. Maher disclaims beneficial ownership of the shares held by
Siemens AG.
(11) Includes 150,000 shares issued upon exercise of a stock option. All of
such shares are currently subject to a right of repurchase by Efficient.
(12) Includes 80,105 shares issuable upon exercise of stock options
exercisable on or before April 25, 2000.
(13) Includes 112,521 shares issuable upon exercise of stock options
exercisable on or before April 25, 2000.
(14) Includes 126,687 shares issuable upon exercise of stock options
exercisable on or before April 25, 2000.
(15) Includes 96,459 shares issuable upon exercise of stock options
exercisable on or before April 25, 2000.
(16) Includes an aggregate of 1,249,011 shares issuable upon exercise of stock
options exercisable on or before April 25, 2000.
9
<PAGE>
Certain Relationships and Related Transactions
The following is a description of transactions during fiscal 1999 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.
During our fiscal year ended June 30, 1999, we issued redeemable convertible
preferred stock, subordinated promissory notes and warrants as follows:
. In January 1999, we issued an aggregate $7.0 million of 10% subordinated
promissory notes due January 2002, together with warrants to purchase
2,397,260 shares of Series H preferred stock in a private placement at
an exercise price of $2.92 per share;
. In March 1999, we sold 1,850,000 shares of Series G preferred stock in a
private placement at a purchase price of $2.92 per share;
. In April 1999, we issued an aggregate $2.0 million of 10% subordinated
promissory notes due January 2002, together with warrants to purchase
684,931 shares of Series H preferred stock in a private placement at an
exercise price of $2.92 per share; and
. On June 28, 1999, we issued a $5.0 million convertible promissory note
to Covad. The note bore interest at the rate of 8% per year, and was
payable on the fifth anniversary of issuance. Upon completion of our
initial public offering in July 1999, the principal amount plus interest
of the note converted into 497,663 shares of common stock. Mr. Hawk, a
director of Efficient Networks, also serves on the board of directors of
Covad.
. Each holder of a 10% subordinated promissory note due January 2002
entered into a note repayment and warrant exercise agreement with
Efficient. Pursuant to the terms of the agreement, immediately prior to
the closing of our initial public offering, the aggregate $9.0 million
principal amount of the notes was applied toward the aggregate exercise
price of the warrants to purchase 3,082,191 shares of Series H preferred
stock at an exercise price of $2.92 per share.
Our officers, directors and 5% stockholders participated in the foregoing
transactions as follows:
<TABLE>
<CAPTION>
Principal Number of
Amount of Series H
Name Of Purchaser 10% Notes Warrants
----------------- ---------- ---------
<S> <C> <C>
Crosspoint Venture Partners.......................... $5,000,000 1,712,329
Palomar Ventures..................................... $2,000,000 684,931
El Dorado Ventures................................... $2,000,000 684,931
</TABLE>
Mr. Hoff, a member of our board of directors, is affiliated with Crosspoint
Venture Partners. Mr. Peterson, a member of our board of directors, is
affiliated with El Dorado Ventures. Mr. Gauer, a member of our board of
directors, was formerly affiliated with Enterprise Partners and is presently
affiliated with Palomar Ventures.
Texas Instruments Incorporated, November 1997
In November 1997, Efficient and Texas Instruments Incorporated entered into
an agreement to develop a DSL network interface card and associated software.
In February 1998, Efficient and Texas Instruments amended the agreement to
provide that Efficient would focus a percentage of our resources on products,
product developments and marketing programs that support Texas Instruments ADSL
integrated circuits. In March 1999, Efficient and Texas Instruments amended the
agreement to provide Texas Instruments with the right to make and license a
certain Efficient ASIC.
10
<PAGE>
Director Option and Loan
In May 1999, Efficient effected the issuance of 150,000 shares of common
stock by granting Robert Hawk an immediately exercisable option to purchase
150,000 shares of common stock at an exercise price of $10.50 per share in
exchange for a $1,575,000 6.0% demand note. Mr. Hawk exercised this option in
May 1999. The note, together with accrued interest, was repaid in July 1999.
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. Such officers, directors, and 10%
shareholders are also required to furnish the Company with copies of all
Section 16(a) forms that they file.
The Company's officers, directors and 10% shareholders were not obligated to
file any reports pursuant to Section 16(a) for fiscal 1999.
Executive Compensation
Summary Compensation Table
The table below summarizes the compensation earned for services rendered to
Efficient Networks in all capacities for the fiscal years ended June 30, 1998
and 1999 by Efficient Networks' Chief Executive Officer and Efficient Networks'
next four most highly compensated executive officers who earned more than
$100,000 during fiscal 1999. These executives are referred to as the Named
Executive Officers elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual Compensation
-------------------- Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary Bonus Options (#) Compensation
--------------------------- ------ ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Mark A. Floyd............ 1999 $ 200,000 $ 80,000 350,000 $ --
President and Chief
Executive Officer 1998 178,127 20,000 350,000 16,667(1)
David B. Stefan.......... 1999 125,000 112,608 100,000 --
Vice President of Sales 1998 92,391 36,563 125,000 23,140(2)
Patricia W. Hosek........ 1999 117,000 51,479 225,000 --
Vice President of
Engineering 1998 107,625 21,313 50,000 --
Gregory L. Langdon....... 1999 117,000 50,716 200,000 --
Vice President of
Marketing 1998 103,290 21,051 50,000 --
Paul E. Couturier........ 1999 90,000 76,410 137,500 27,426(3)
Vice President of
International
Operations 1998 85,709 42,742 37,500 27,634(3)
</TABLE>
- --------
(1) Represents amount paid in lieu of accrued sabbatical benefit.
(2) Represents a moving allowance.
(3) Represents an annual car and vacation allowance.
11
<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 during fiscal 1999,
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.
During fiscal 1999, we granted options to purchase up to an aggregate of
2,638,500 shares to employees, directors and consultants. All options were
granted at exercise prices that the board of directors believed to be 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. All option shares vest
over four years, with 25% of the option shares vesting one year after the
option grant date and the remaining option shares vesting ratably on a monthly
basis over the succeeding 36 months.
Individual Grants
<TABLE>
<CAPTION>
Percent of
Number of Total Options Potential Realizable Value at Assumed
Securities Granted to Market Annual Rates of Stock Price Appreciation
Underlying Employees In Value at for Option Term
Options Last Fiscal Exercise Date of Expiration -----------------------------------------
Name Granted Year Price Grant (1) Date 0%(1) 5% 10%
---- ---------- ------------- -------- --------- ---------- --------------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark A. Floyd........... 250,000 9.48% $1.50 $2.63 8/27/08 $ 282,500 $ 695,998 $ 1,330,386
100,000 3.79% $2.50 $9.00 1/28/09 $ 650,000 $ 1,216,005 $ 2,084,368
David B. Stefan......... 100,000 3.79% $2.50 $9.00 1/28/09 $ 650,000 $ 1,216,005 $ 2,084,368
Patricia W. Hosek....... 225,000 8.53% $2.50 $9.00 1/28/09 $ 1,462,500 $ 2,736,012 $ 4,689,828
Gregory L. Langdon...... 200,000 7.58% $2.50 $9.00 1/28/09 $ 1,300,000 $ 2,432,010 $ 4,168,736
Paul E. Couturier....... 137,500 5.21% $2.50 $9.00 1/28/09 $ 893,750 $ 1,672,007 $ 2,866,006
</TABLE>
- --------
(1) Based upon a subsequent review of the fair value of our common stock at
the option grant dates, we determined the value of the common stock to be
as reflected in the "Market Value at Date of Grant" column. The amount
shown in the "0%" column reflects the difference between the exercise
price and the deemed fair market value as of the date of option grant.
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 the exercisable and unexercisable options held by
them as of June 30, 1999. None of the Named Executive Officers exercised
options during fiscal 1999. The "Value of Unexercised In-the-Money Options at
June 30, 1999" is based on a value of $12.00 per share, the fair market value
of our common stock as of June 30, 1999 as determined in a subsequent review of
fair market values, less the per share exercise price, multiplied by the number
of shares issuable upon exercise of the options.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- In-the-Money Options at
End Fiscal Year-End
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mark A. Floyd............... 272,917 577,083 $3,165,938 $6,386,563
David B. Stefan............. 45,313 179,688 $ 519,531 $1,862,969
Patricia W. Hosek........... 61,979 280,729 $ 724,033 $2,780,807
Gregory L. Langdon.......... 84,375 265,625 $ 989,792 $2,660,208
Paul E. Couturier........... 78,802 171,198 $ 927,047 $1,696,703
</TABLE>
12
<PAGE>
Compensation Committee Interlocks and Insider Participation
Prior to establishing the compensation committee, the board of directors as
a whole performed the functions delegated to the compensation committee. 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.
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 1999, salaries for executive
officers were increased by $5,000 to $30,000 depending on the executive
officer. The fiscal 1999 base salary for the Chief Executive Officer, Mark A.
Floyd, was set at $200,000.00.
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.
13
<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 1999, the Company did not match any employee
contributions under the 401(k) plan.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"Section"). The Section 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
14
<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.
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 which has been enclosed, at your
earliest convenience.
FOR THE BOARD OF DIRECTORS
Mark A. Floyd,
President, Chief Executive Officer
and Chairman of the Board
Dated: March 8, 2000
15
<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 Networks' 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 Wednesday April 12,
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 I Directors
Nominees: Anthony T. Maher, William L. Martin III and Robert C. Hawk
FOR WITHHELD
ALL FROM ALL
NOMINEES [ ] [ ] NOMINEES
MARK HERE FOR ADDRESS
CHANGE AND NOTE BELOW [ ]
[ ] ------------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Ratification of KPMG LLP as independent auditors [ ] [ ] [ ]
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:
---------------- ------ --------------- ------
DETACH HERE
- --------------------------------------------------------------------------------
