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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
[ ] 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
AETHER SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[AETHER LOGO]
March 31, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Aether Systems, Inc. We will be holding the Annual Meeting on April 28, 2000 at
the BWI Airport Marriott Hotel, 1743 West Nursery Road, Baltimore, Maryland
21240 at 10:00 a.m., local time.
At the 2000 Annual Meeting, we will ask you to:
- Elect twelve members to the Board of Directors;
- Approve an amendment to the Company's Amended and Restated Certificate of
Incorporation to increase the authorized number of shares of Common Stock
from 75,000,000 to 1,000,000,000 shares;
- Ratify the selection of KPMG LLP as independent accountants for the
fiscal year ending December 31, 2000;
- Approve Aether Systems, Inc. 2000 Employee Stock Purchase Plan; and
- Transact such other business as properly comes before the meeting.
Enclosed with this letter is a Notice of the Annual Meeting of
Stockholders, a Proxy Statement, a proxy card and a return envelope. Also
enclosed with this letter is Aether Systems, Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.
The Board of Directors of Aether recommends that stockholders vote for
election of the board's nominees for director and for approval of each of the
other proposals.
Your vote on these matters is very important. We urge you to review
carefully the enclosed materials and to return your proxy promptly.
Whether or not you plan to attend the Annual Meeting, please sign and
promptly return your proxy card in the enclosed postage paid envelope. If you
attend the meeting, you may vote in person if you wish, even though you have
previously returned your proxy.
Sincerely,
/s/ David S. Oros
David S. Oros
Chairman of the Board
and Chief Executive Officer
YOUR VOTE IS IMPORTANT -- PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY
PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE AETHER SYSTEMS, INC. ANNUAL
MEETING.
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AETHER SYSTEMS
11460 CRONRIDGE DRIVE
OWINGS MILLS, MARYLAND 21117
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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<TABLE>
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DATE: Friday, April 28, 2000
TIME: 10:00 a.m. local time
PLACE: BWI Airport Marriott
1743 West Nursery Road,
Baltimore, Maryland 21240
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YOUR VOTE AT THE ANNUAL MEETING IS VERY IMPORTANT TO US.
Dear Stockholder:
At the 2000 Annual Meeting, we will ask you to:
1. Elect twelve directors, each for a one-year term.
2. Approve an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock
from 75,000,000 to 1,000,000,000 shares.
3. Ratify the appointment by the Board of Directors of the firm of KPMG LLP
as independent public accountants of Aether for the fiscal year ending
December 31, 2000.
4. Approve the Aether Systems, Inc. 2000 Employee Stock Purchase Plan.
5. Transact such other business as may properly come before the Annual
Meeting.
Accompanying this notice is a Proxy Statement and a Proxy Card. Whether or
not you expect to be present at the Annual Meeting, please sign and date the
Proxy Card and return it in the enclosed envelope before the date of the Annual
Meeting. You may revoke your proxy any time before it is voted at the Annual
Meeting. You will be able to vote your shares at the Annual Meeting if you were
a stockholder of record at the close of business on March 22, 2000.
You are cordially invited to attend the Annual Meeting, and you may vote in
person even though you have returned your card.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ David C. Reymann
David C. Reymann, Secretary
Owings Mills, Maryland
March 31, 2000
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TABLE OF CONTENTS
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PAGE
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Information About the 2000 Annual Meeting and Voting........ 2
Proposals to be Presented at the Annual Meeting
Proposal 1: Election of Directors...................... 4
Proposal 2: Amend Certificate of Incorporation to
Increase Number of Shares of Authorized Common
Stock................................................. 5
Proposal 3: Ratification of Independent Auditors....... 6
Proposal 4: Approve Employee Stock Purchase Plan....... 7
Security Ownership of Certain Beneficial Owners and
Management................................................ 10
Directors and Executive Officers............................ 13
Compensation Committee Report on Executive Compensation..... 20
Stock Performance Chart..................................... 21
Certain Relationships and Related Transactions.............. 22
Stockholder Proposals....................................... 25
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AETHER SYSTEMS, INC.
11460 CRONRIDGE DRIVE
OWINGS MILLS, MARYLAND 21117
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 2000
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This Proxy Statement provides information that you should read before you
vote on the proposals that will be presented to you at the 2000 Annual Meeting
of Aether Systems, Inc. ("Aether" or the "Company"). The 2000 Annual Meeting
will be held on April 28, 2000 at the BWI Airport Marriott, 1743 West Nursery
Road, Baltimore, Maryland, 21240.
This Proxy Statement provides detailed information about the Annual
Meeting, the proposals you will be asked to vote on at the Annual Meeting, and
other relevant information. The Board of Directors of Aether is soliciting these
proxies.
At the Annual Meeting, you will be asked to vote on the following
proposals:
1. Elect twelve directors, each for a one-year term.
2. Approve an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock
from 75,000,000 to 1,000,000,000 shares.
3. Ratify the appointment by the Board of Directors of the firm of KPMG LLP
as independent public accountants of Aether for the fiscal year ending
December 31, 2000.
4. Approve the Aether Systems, Inc. 2000 Employee Stock Purchase Plan.
5. Such other matters as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR EACH OF
THESE PROPOSALS.
On March 31, 2000, we began mailing information to people who, according to
our records, owned common shares of beneficial interests in Aether as of the
close of business on March 22, 2000. We have mailed with that information a copy
of Aether's Annual Report on Form 10-K for the fiscal year ended December 31,
1999.
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INFORMATION ABOUT THE 2000 ANNUAL MEETING AND VOTING
THE ANNUAL MEETING
The Annual Meeting will be held on April 28, 2000 at the BWI Airport
Marriott, 1743 West Nursery Road, Baltimore, Maryland 21240 at 10:00 a.m. local
time.
THIS PROXY SOLICITATION
We are sending you this proxy statement because Aether's Board of Directors
is seeking a proxy to vote your shares at the Annual Meeting. This proxy
statement is intended to assist you in deciding how to vote your shares. On
March 31, 2000, we began mailing this proxy statement to all people who,
according to our stockholder records, owned shares at the close of business on
March 22, 2000.
Aether is paying the cost of requesting these proxies. Aether's directors,
officers and employees may request proxies in person or by telephone, mail,
telecopy or letter. Aether will reimburse brokers and other nominees their
reasonable out-of-pocket expenses for forwarding proxy materials to beneficial
owners of our shares.
VOTING YOUR SHARES
You may vote your shares at the Annual Meeting either in person or by
proxy. To vote in person, you must attend the Annual Meeting and obtain and
submit a ballot. Ballots for voting in person will be available at the Annual
Meeting. To vote by proxy, you must complete and return the enclosed proxy card
in time to be received by us by the Annual Meeting. By completing and returning
the proxy card, you will be directing the persons designated on the proxy card
to vote your shares at the Annual Meeting in accordance with the instructions
you give on the proxy card.
If you hold your shares with a broker and you do not tell your broker how
to vote, your broker has the authority to vote on all proposals.
IF YOU DECIDE TO VOTE BY PROXY, YOUR PROXY CARD WILL BE VALID ONLY IF YOU
SIGN, DATE AND RETURN IT BEFORE THE ANNUAL MEETING SCHEDULED TO BE HELD ON APRIL
28, 2000.
In the election of directors, the twelve nominees for director who receive
the most votes will be elected. So, if you do not vote for a particular nominee,
or you indicate "WITHHELD" on your proxy card, your vote will not count either
for or against the nominee. For the other proposals, you may vote "FOR,"
"AGAINST" or "ABSTAIN." If you "ABSTAIN" as to any proposal, it has the same
effect as a vote "AGAINST" that proposal.
Failure to return a proxy card or vote in person has the effect of a vote
"AGAINST" the proposal to amend our certificate of incorporation to increase the
number of authorized shares. On all other matters, failure to return a proxy or
vote in person will not affect the outcome of the proposal as long as a quorum
is achieved. If you sign your proxy card or broker voting instruction card with
no further instructions, your shares will be voted in accordance with the
recommendations of the Board ("FOR" all of the Company's nominees to the Board,
and "FOR" all other items described in this proxy statement and in the
discretion of the proxy holders on any other matters that properly come before
the meeting).
We have described in this proxy statement all the proposals that we expect
will be made at the Annual Meeting. If we or a stockholder properly present any
other proposal to the meeting, we will use your proxy to vote your shares on the
proposal in our best judgment.
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REVOKING YOUR PROXY
If you decide to change your vote, you may revoke your proxy at any time
before it is voted. You may revoke your proxy in one of three ways:
- You may notify the Secretary of Aether in writing that you wish to revoke
your proxy at the following address: Aether Systems, Inc., 11460
Cronridge Drive, Owings Mills, Maryland 21117, Attention: David C.
Reymann, Chief Financial Officer and Secretary. We must receive your
notice before the time of the Annual Meeting.
- You may submit a proxy dated later than your original proxy.
- You may attend the Annual Meeting and vote. Merely attending the Annual
Meeting will not by itself revoke a proxy; you must obtain a ballot and
vote your shares to revoke the proxy.
VOTE REQUIRED BY APPROVAL
SHARES ENTITLED TO VOTE. On March 22, 2000 (also referred to as the
"Record Date"), 37,877,750 shares of Common Stock were issued and outstanding,
each of which is entitled to one vote on each of the proposals.
QUORUM. The quorum requirement for holding the meeting and transacting
business is a majority of the outstanding shares present in person or
represented by proxy and entitled to be voted. A quorum will be present if
18,938,876 votes are represented at the Annual Meeting, either in person (by the
stockholders) or by proxy. If a quorum is not present, a vote cannot occur. Both
abstentions and broker non-votes are counted as present for the purposes of
determining the presence of a quorum.
VOTES REQUIRED. In the election of directors, the twelve persons receiving
the highest number of "FOR" votes will be elected. The proposal to amend our
certificate of incorporation requires a "FOR" vote of a majority of the
outstanding shares. All other proposals require the affirmative "FOR" vote of a
majority of those shares present and entitled to vote. If you are a beneficial
owner and do not provide the shareowner of record with voting instructions, your
shares may constitute broker non-votes. In tabulating the voting result for any
particular proposal, shares that constitute broker non-votes are not considered
entitled to vote on that proposal and will not be considered votes cast for the
foregoing purposes. Thus, broker non-votes will not affect the outcome of any of
the matters being voted upon at the meeting, other than the proposal to approve
the amendment to our certificate of incorporation, which requires majority
approval from all of the outstanding shares. Generally, broker non-votes occur
when shares held by a broker for a beneficial owner are not voted with respect
to a particular proposal because (1) the broker has not received voting
instructions from the beneficial owner, and (2) the broker lacks discretionary
voting power to vote such shares.
ADDITIONAL INFORMATION
We are mailing our Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, including consolidated financial statements, to all
shareholders entitled to vote at the Annual Meeting together with this proxy
statement. The Annual Report on Form 10-K does not constitute a part of the
proxy solicitation material. The Annual Report on Form 10-K tells you how to get
additional information about Aether.
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PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees for election to the Board of Directors are:
J. Carter Beese, Jr.
Frank A. Bonsal, Jr.
Mark D. Ein
E. Wayne Jackson III
David S. Oros
Rahul C. Prakash
Janice M. Roberts
Dr. Rajendra Singh
George P. Stamas
Robin T. Vasan
Devin N. Wenig
Thomas E. Wheeler
Each director will be elected to serve for a one-year term, unless he or
she resigns or is removed before his or her term expires, or until his or her
replacement is elected and qualified. Each of the twelve nominees is currently a
member of the Board of Directors and has consented to serve as a director if re-
elected. More detailed information about each of the nominees is available in
the section of this proxy statement titled "Directors and Executive Officers,"
which begins on page 13.
NexGen, Telcom-ATI Investors, L.L.C., Reuters and 3Com -- who together hold
approximately 49.6% of the shares of our common stock -- are parties to a
stockholders agreement that governs voting for our directors. The agreement
requires each party to vote all its shares for two directors named by NexGen,
two directors named by Telcom-ATI Investors, two directors named jointly by
NexGen and Telcom-ATI Investors and one director named by each of Reuters and
3Com. Messrs. Oros and Ein have been appointed by NexGen, Dr. Singh and Mr.
Prakash have been appointed by Telcom-ATI Investors, Mr. Wenig has been
appointed by Reuters and Ms. Roberts has been appointed by 3Com as directors
under the stockholder agreement. Messrs. Bonsal and Wheeler have been named
jointly by NexGen and Telcom ATI. In addition, in connection with our
acquisition of Riverbed, we agreed to nominate Messrs. Jackson and Vasan to the
Board of Directors at the 2000 Annual Meeting.
If any of the nominees cannot serve for any reason (which is not
anticipated), the Board of Directors may designate a substitute nominee or
nominees; however, if the nominee is a designee of a party to the stockholders
agreement, then the substitute nominee will be designated by the respective
entity who designated the vacating representative. If a substitute is nominated,
we will vote all valid proxies for the election of the substitute nominee or
nominees. Alternatively, the Board of Directors may also decide to leave the
board seat or seats open until a suitable candidate or candidates are located,
or it may decide to reduce the size of the Board.
The Board of Directors of the Company has established the size of the board
at twelve members. Proxies for the Annual Meeting may not be voted for more than
the twelve nominees named.
RECOMMENDATION
The Board of Directors recommends a vote "FOR" each of the nominees to the
Board of Directors.
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PROPOSAL 2:
APPROVE AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE
NUMBER OF SHARES OF AUTHORIZED COMMON STOCK TO 1,000,000,000.
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Certificate of Incorporation to increase the number
of authorized shares of capital stock of the Company to a total of one billion
one million (1,001,000,000) shares, consisting of one billion (1,000,000,000)
shares of common stock, $.01 par value per share ("Common Stock") and one
million (1,000,000) shares of preferred stock, $.01 par value ("Preferred
Stock"). The capital stock of the Company, prior to the approval of the
amendment, consists of seventy six million (76,000,000) shares, consisting of
seventy five million (75,000,000) shares of Common Stock and one million
(1,000,000) shares of Preferred Stock.
The proposed additional shares may be used in connection with possible
stock splits or dividends, management incentive and employee benefit plans,
investments, acquisitions, equity financings, and for other purposes. In
particular, the Board may consider a stock split at an appropriate time. At this
time, the Board has not decided whether or when to undertake a stock split, or
the number of shares it would issue with respect to each outstanding share if it
undertakes a split. The Company also has no present plans, understandings, or
agreements for the issuance or use of the proposed additional shares of Common
Stock in acquisitions or otherwise, but expects to explore potential
acquisitions from time to time as opportunities arise. The Board of Directors
believes that the proposed increase is desirable so that, as the need arises,
the Company will be able to issue the shares of Common Stock without the expense
and delay of a special stockholders' meeting.
Authorized but unissued shares of the Company's Common Stock may be issued
at such times, for such purposes and for such consideration as the Board of
Directors may determine to be appropriate without further authority from the
Company's stockholders, except as otherwise required by Delaware law or the
rules of The Nasdaq Stock Market.
If the proposal is adopted, it will become effective upon filing of a
Certificate of Amendment to the Company's Certificate of Incorporation.
The adoption of the proposed amendment of the Certificate of Incorporation
to increase the number of shares of authorized Common Stock from 75,000,000 to
1,000,000,000 will require the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock.
RECOMMENDATION
The Board of Directors unanimously recommends a vote "FOR" the adoption of
the proposed amendment to the Company's Certificate of Incorporation.
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PROPOSAL 3:
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG LLP, an international accounting
firm of independent certified public accountants, to act as independent
accountants for the Company and its consolidated subsidiaries for 2000. The
Board believes that KPMG's experience with and knowledge of Aether are important
and we would like to continue this relationship. KPMG has advised the Company
that the firm does not have any direct or indirect financial interest in the
Company or any of its subsidiaries, nor has such firm had any such interest in
connection with the Company since its inception in 1996 other than its capacity
as the Company's independent certified public accountants.
A representative of KPMG is expected to attend the Annual Meeting. The KPMG
representative will have the opportunity to make a statement if he or she
desires to do so and will be able to respond to appropriate questions from
stockholders.
RECOMMENDATION
The Board of Directors recommends a vote "FOR" ratification of the
appointment of KPMG.
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PROPOSAL NO. 4:
APPROVE THE AETHER SYSTEMS, INC. 2000 EMPLOYEE STOCK PURCHASE PLAN
On March 16, 2000, the Board of Directors adopted the Aether Systems, Inc.
2000 Employee Stock Purchase Plan (the "ESPP"), and reserved one million
(1,000,000) shares (increasing annually by 200,000 shares) for issuance under
the ESPP, subject to stockholder approval within 12 months of Board approval.
At the annual meeting, you are being asked to approve the ESPP and the
Board's reservation of shares under the ESPP for the purpose of qualifying such
shares for special tax treatment under Internal Revenue code section 423.
RECOMMENDATION
Our Board of Directors recommends a vote "FOR" the approval of the Aether
Systems, Inc. 2000 Employee Stock Purchase Plan and the reservation of shares
for issuance under that plan.
SUMMARY OF THE ESPP
The ESPP will provide employees of the Company with an opportunity to
become owners of the Company through a convenient arrangement for purchasing
shares of common stock. If approved by our stockholders, the ESPP will become
effective when the Board's Compensation Committee decides it should. The
following is a summary of the ESPP. For more detailed information, you should
read the full text of the ESPP, which is included as Appendix A at the end of
this booklet.
GENERAL
Purpose. The ESPP offers eligible employees the opportunity to purchase
shares of our common stock through after-tax payroll withholding. The ESPP is
intended to permit employees to acquire an equity interest in the Company
thereby providing them with an incentive to work for the growth and success of
the Company. We may use the funds we receive under the ESPP for any general
corporate purpose.
Eligibility. All employees of the Company and its eligible subsidiaries
are eligible to participate in the ESPP, except (1) employees who have not
satisfied whatever waiting period the Compensation Committee sets at the
beginning of the payroll deduction period and (2) employees who hold more than
5% of our common stock. (Eligible subsidiaries are corporations owned at least
50% by the Company, directly or indirectly, and single-member LLCS where the
Company is the member, directly or indirectly. The Board can choose to exclude
subsidiaries. Employees' benefits will vary depending upon their election as to
level of participation. No non-employee directors are eligible to participate in
the ESPP. As of December 31, 1999, there were approximately 106 employees who
would be eligible to participate in the ESPP if it had then been in effect, and
if the Compensation Committee did not require any waiting period.
Shares Available Under the ESPP. If approved, the ESPP would authorize
Aether to issue up to one million (1,000,000) shares of common stock from
authorized but unissued shares or from stock owned by the Company, including
stock purchased on the market. The number will automatically increase by 200,000
shares each December 31 beginning December 31, 2001. The number of shares we may
issue under the ESPP automatically adjusts for stock dividends, stock splits,
reclassifications and other changes affecting the common stock.
Administration. The Compensation Committee of our Board of Directors
administers the ESPP. The Compensation Committee may delegate this authority.
The Compensation Committee has the authority and discretion to specify the terms
and conditions of stock purchases by employees under the ESPP (within the
limitations of the ESPP) and to otherwise interpret and construe the terms of
the ESPP and any related agreements. Under the ESPP, the Compensation Committee
(or the Board of Directors) can lengthen or shorten the payroll deduction
periods, increase the purchase price for shares, or make other
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administrative adjustments. The ESPP also specifically provides for
indemnification of the Compensation Committee, other directors, and agents for
actions taken with respect to the ESPP.
OPTIONS GRANTED UNDER THE ESPP
How Options Are Granted. On the first day of each payroll deduction
period, a participating employee will automatically receive options to purchase
a number of shares of Aether common stock with money that is withheld from his
or her paycheck. The number of shares available to the participating employee
will be determined at the end of the payroll deduction period by dividing (1)
the total amount of money withheld during the payroll deduction period by (2)
the exercise price of the options (as described below). Options granted under
the ESPP to employees will be automatically exercised to purchase shares on the
last day of the payroll deduction period, unless the participating employee has,
at least thirty days earlier or by such other deadline as the Compensation
Committee sets, requested that his or her payroll contributions stop. The
Compensation Committee will determine the fractional treatment of fractional
shares. Any cash accumulated in an employee's account for a period in which an
employee elects not to participate will be distributed to the employee.
Exercise Price. The initial exercise price for options under the ESPP will
be 85% of the lesser of the fair market value of the common stock as of the
first day of the payroll deduction period and as of the last day of that period.
The Compensation Committee may increase the exercise price before a payroll
deduction period begins. No participant can purchase more than $25,000 worth of
Aether common stock in all payroll deduction periods ending during the same
calendar year. The closing price of a share of Aether common stock, as reported
on December 31, 1999 was $71.625.
Election to Participate. Participating employees must elect before the
beginning of a given payroll deduction period to participate, although a prior
election will carry over until revoked.
Termination of Service. If an employee's employment ends for any reason,
including death, any cash accumulated in the employee's account will be
distributed, and the employee will immediately cease to participate in the ESPP,
unless the Compensation Committee specifies some other treatment.
Other Information. All options granted under the ESPP will be evidenced by
participation agreements or other approved documentation. The Compensation
Committee has broad discretion to determine the timing, amount, exercisability,
and other terms and conditions of options granted to employees. No options
granted or funds accumulated under the ESPP are assignable or transferable other
than by will or in accordance with the laws of descent and distribution. The
Compensation Committee may impose restrictions on sale of the stock or require
the stock to be held at a particular broker.
AMENDMENT OR TERMINATION OF THE ESPP
The Board of Directors may amend or terminate the ESPP at any time and from
time to time. Stockholder approval is required for any changes if such approval
is required to preserve the ESPP's status as a plan under section 423 of the
Internal Revenue Code. Absent extension by the Board with stockholder approval,
no payroll deduction period will end after March 16, 2010.
TAX CONSEQUENCES
The following summarizes the material federal income tax consequences of
participation in the ESPP. It does not cover employment taxes except as
specified, nor does it cover other federal, state, local, or foreign tax
consequences, if any.
We designed the ESPP to qualify for the favorable federal income tax
treatment provided under Section 423 of the Internal Revenue Code.
A participant's withheld compensation will be post-tax. In other words, the
participant will be taxed on amounts withheld for the purchase of shares of
Aether common stock as if he or she had instead received his or her full salary
or wages. Other than this, no income will be taxable to a participant until
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disposition of the shares acquired, and the method of taxation will depend upon
how long the shares were held before disposition.
If the purchased shares of common stock are disposed of more than two years
after the beginning of the applicable payroll deduction period and more than one
year after the exercise date, or if the participant dies at any time while
holding the stock, then the lesser of (a) the excess of the fair market value of
the stock at the time of such disposition or death over the purchase price or
(b) the discount element (up to 15% of fair market value) of the stock as the
beginning of the applicable offering period will be treated as ordinary income.
Any further gain or any loss will be taxed as a long-term capital gain or loss.
Net long-term capital gains for individuals are currently subject to a maximum
marginal federal income tax rate that is less than the maximum marginal rate for
ordinary income.
If the participant sells or disposes of the stock before the expiration of
either of the holding periods described above (a "disqualifying disposition"),
then the excess of the fair market value of the stock on the exercise date over
the exercise price will be treated as ordinary income at the time of such
disposition. The Company may, in the future, be required to withhold income
taxes relating to such ordinary income from other payments made to the
participant. The balance of any gain on a sale will be treated as capital gain.
Even if the stock is sold for less than its fair market value on the exercise
date, the same amount of ordinary income is attributed to the participant, and a
capital loss is recognized equal to the difference between the sales price and
the fair market value of the stock on the exercise date. Any capital gain or
loss will be long- or short-term depending on whether the stock has been held
for more than one year.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the ESPP. Aether will, in general, be
entitled to a deduction to the extent amounts are taxed as ordinary income to a
participant by reason of a disqualifying disposition of the purchased shares of
stock, but will not be entitled to a deduction in respect of the ordinary income
realized by a participant upon later disposition, or realized upon death. The
Company's deduction may be limited under Internal Revenue Code Section 162(m)
and maybe subject to disallowance for failure to report the optionee's income
(which could arise if an optionee does not notify the Company of the sale of
stock in a disqualifying disposition).
INCORPORATION BY REFERENCE
The foregoing is only a summary of the ESPP and is qualified in its
entirety by reference to its full text, a copy of which is attached as Appendix
A.
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BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK
BY DIRECTORS, OFFICERS AND PRINCIPAL SHAREHOLDERS
For the purposes of calculating percentage ownership as of March 22, 2000,
37,852,750 shares were issued and outstanding and, for any individual who
beneficially owns shares represented by options exercisable on or before May 22,
2000, these shares are treated as if outstanding for that person, but not for
any other person. Unless otherwise indicated, the address of each of the
individuals and entities named below is: c/o Aether Systems, Inc., 11460
Cronridge Drive, Owings Mills, Maryland 21117.
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of March 22, 2000, as to:
- each person (or group of affiliated persons) known by us to own
beneficially more than 5% of our outstanding common stock;
- each of our directors and executive officers; and
- all our directors and executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF SHARES
------------------------
NAME AND ADDRESS NUMBER PERCENT
---------------- ---------- -------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
David S. Oros(1).............................. 7,324,584 18.9%
George M. Davis(2)............................ 110,000 *
Dale R. Shelton(3)............................ 90,000 *
David C. Reymann.............................. 14,583 *
Brian W. Keane................................ 16,667 *
Frank A. Bonsal, Jr.(4)....................... 42,250 *
1119 St. Paul Street
Baltimore, MD 21202
J. Carter Beese(5)............................ 77,500 *
Mark D. Ein(6)................................ 217,500 *
E. Wayne Jackson III(7)....................... 194,619 *
6608 Corine Court
Columbia, MD 21044
Rahul C. Prakash(8)........................... 2,000 *
c/o Telcom Venture, L.L.C.
211 N. Union St., Suite 300
Alexandria, VA 22314
Janice M. Roberts(9).......................... 0 *
c/o 3Com Corporation
5400 Bayfront Plaza
Santa Clara, CA 95952
Dr. Rajendra Singh(10)........................ 6,851,274 18.1%
c/o Telcom Ventures, L.L.C.
211 N. Union St., Suite 300
Alexandria, VA 22314
George P. Stamas(11).......................... 6,250 *
c/o Deutsche Banc Alex. Brown
One South Street
Baltimore, MD 21202
</TABLE>
10
<PAGE> 15
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF SHARES
------------------------
NAME AND ADDRESS NUMBER PERCENT
---------------- ---------- -------
<S> <C> <C>
Robin T. Vasan(12)............................ 0 *
c/o Mayfield Fund
2800 Sand Hill Road
Menlo Park, CA 94025
Devin N. Wenig................................ 0 *
c/o Reuters America, Inc.
1700 Broadway, 2nd Floor
New York, NY 10019
Thomas E. Wheeler(13)......................... 47,500 *
All directors and executive officers as a
group (17 persons)(14)...................... 14,994,727 39.1%
5% STOCKHOLDERS:
3Com Corporation(15).......................... 2,643,665 7.0%
5400 Bayfront Plaza
Santa Clara, CA 95052
NexGen Technologies, L.L.C.(16)............... 6,452,084 17.0%
Pyramid Ventures, Inc.(17).................... 1,945,442 5.1%
One Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Reuters MarketClip Holdings Sarl(18).......... 2,828,055 7.5%
c/o Reuters America, Inc.
1700 Broad, 2nd Floor
New York, NY 10019
Telcom-ATI Investors, L.L.C.(19).............. 6,851,274 17.2%
211 N. Union St., Suite 300
Alexandria, VA 22314
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 6,452,084 shares owned by NexGen Technologies, L.L.C. over which
Mr. Oros exercises voting and investment control by virtue of his position
as Managing Member of NexGen. Also includes warrants to purchase 932,500
shares of common stock.
(2) Includes exercisable options to purchase 60,000 shares of common stock and
warrants to purchase 50,000 shares of common stock.
(3) Includes exercisable options to purchase 52,500 shares of common stock and
warrants to purchase 37,500 shares of common stock.
(4) The amount shown excludes approximately 18,170 shares in which Mr. Bonsal
has an indirect interest as a result of his non-voting limited liability
company membership interest in Telcom-ATI Investors and excludes the
indirect interest Mr. Bonsal has in 6,713 shares Telcom-ATI Investors has
the right to acquire.
(5) The amount shown excludes approximately 103,825 shares in which Mr. Beese
has an indirect interest as a result of his non-voting limited liability
company membership interest in Telcom-ATI Investors and excludes the
indirect interest Mr. Beese has in 38,355 shares Telcom-ATI Investors has
the right to acquire.
(6) Includes warrants to purchase 100,000 shares of common stock and warrants
to purchase 17,500 shares of common stock at $4 per share.
(7) Includes 2,972 shares owned by his wife, Cynthia L. Jackson and options to
purchase 3,869 shares exercisable on or before May 22, 2000.
11
<PAGE> 16
(8) Mr. Prakash, the president of Telcom-ATI Investors, (which is controlled by
Telcom Ventures, LLC), disclaims beneficial ownership of the 5,151,948
shares owned by Telcom-ATI Investors including approximately 52,000 shares
in which he has an indirect interest as a result of his option to acquire a
non-voting limited liability company membership interest in Telcom-ATI
Investors and the indirect interest Mr. Prakash has in approximately 19,000
shares Telcom-ATI Investors has the right to acquire.
(9) Ms. Roberts is senior vice president global marketing and business
development of 3Com Corp. and president of 3Com Ventures. Ms. Roberts
disclaims beneficial ownership of shares held by 3Com Corp.
(10) Includes 5,151,948 shares owned by Telcom-ATI Investors and entities it
controls, and an additional 1,875,000 shares which Telcom-ATI Investors has
the right to acquire over which Dr. Singh exercises voting and investment
control by virtue of his position as chairman and chief executive officer
of Telcom-ATI Investors.
(11) Includes exercisable options to purchase 6,250 shares of common stock. The
amount shown excludes approximately 15,572 shares in which Mr. Stamas has
an indirect interest as a result of his nonvoting limited liability company
membership interest in Telcom-ATI Investors and excludes the indirect
interest Mr. Stamas has in 5,753 shares Telcom-ATI Investors has the right
to acquire. Mr. Stamas also disclaims beneficial ownership of the 1,995,325
shares beneficially owned by Pyramid Ventures, Inc., an affiliate of
Deutsche Banc Alex. Brown.
(12) Mr. Vasan is a partner with Mayfield Fund. Mr. Vasan disclaims beneficial
ownership of shares held by Mayfield Fund except to the extent of any
pecuniary interest.
(13) Includes exercisable options to purchase 37,500 shares of common stock.
Also includes 5,000 shares owned by the Carol and Tom Wheeler Foundation of
which Mr. Wheeler is the trustee.
(14) Includes all the shares and options identified above.
(15) Includes exercisable warrants to purchase 143,665 shares of common stock.
(16) Telcom-ATI Investors, L.L.C. has notified NexGen that it is exercising its
option to acquire 1,875,000 shares of common stock currently held by
NexGen. Excluding these shares, the percentage of shares held by NexGen
would be 12.7%.
(17) Pyramid Ventures, Inc. is an indirect wholly-owned subsidiary of
DeutscheBank AG.
(18) Reuters MarketClip Holdings Sarl is an indirect wholly-owned subsidiary of
Reuters Group PLC.
(19) Includes an option to acquire 1,875,000 shares of common stock from NexGen
at a price of $1.92 per share. Telcom has notified NexGen that it is
exercising this option and plans to close the sale in April 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers (as defined in regulations
issued by the SEC) and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than ten percent shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of copies of such reports of ownership furnished
to the Company, the Company believes that during the past fiscal year all filing
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were complied with.
12
<PAGE> 17
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information relating to the Company's executive
officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David S. Oros........................ 40 Chairman and Chief Executive Officer
George M. Davis...................... 43 President, Enterprise Solutions and Services
Group
E. Wayne Jackson III................. 38 President, Software Products Group and Director
David C. Reymann..................... 41 Chief Financial Officer
Dale R. Shelton...................... 38 Chief Technology Officer
Brian W. Keane....................... 41 Senior Vice President, Business Affairs
Mitch I. Selbiger.................... 41 Senior Vice President, Marketing
J. Carter Beese, Jr.(1)(2)........... 43 Director
Frank A. Bonsal, Jr.(2).............. 63 Director
Mark D. Ein.......................... 35 Director
Rahul C. Prakash(1).................. 38 Director
Janice M. Roberts.................... 44 Director
Dr. Rajendra Singh................... 43 Director
George P. Stamas..................... 49 Director
Robin T. Vasan....................... 33 Director
Devin N. Wenig....................... 33 Director
Thomas E. Wheeler(1)................. 53 Director
</TABLE>
- ---------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
David S. Oros founded Aether in 1996 and currently serves as our chairman
and chief executive officer. Prior to the closing of our acquisition of Riverbed
he also served as president from Aether's inception. Mr. Oros also serves on the
board of directors of OmniSky. From 1994 until 1996, Mr. Oros was president of
NexGen Technologies, L.L.C., a wireless software development company that
contributed all of its assets to Aether. From 1992 until 1994, he was president
of the Wireless Data Group at Westinghouse Electric. Prior to that, Mr. Oros
spent from 1982 until 1992 at Westinghouse Electric directing internal research
and managing large programs in advanced airborne radar design and development.
Mr. Oros received a B.S. in mathematics and physics from the University of
Maryland and holds a U.S. patent for a multi-function radar system.
George M. Davis has served as our chief operating officer since September
1997 and was appointed as president of our enterprise solutions and services
group at the closing of the Riverbed acquisition. He joined us in September 1996
as vice president, business development to lead initiatives required to launch,
maintain and develop business opportunities for our services. From September
1994 until September 1996, Mr. Davis was director of enterprise management
systems at Northrop Grumman Corp. Prior to that time, Mr. Davis spent more than
14 years at Westinghouse Electric where he managed advanced military electronic
development and production projects. He received a B.S. in business and
economics from Bethany College.
E. Wayne Jackson III became president of our software products group and a
director at the completion of our acquisition of Riverbed. From October 1998
until March 2000, Mr. Jackson served as the president and chief executive
officer and a director of Riverbed. From September 1994 until October 1997, Mr.
Jackson served as director of the emerging technologies division of Noblestar
Systems Corp. Riverbed was created by Noblestar in 1998. He received a B.S. in
business administration, finance, from James Madison University.
David C. Reymann has served as our chief financial officer since joining us
in June 1998. Mr. Reymann is also responsible for our treasury management
services, investor relations and human
13
<PAGE> 18
resources. Before joining us, Mr. Reymann was director of finance and accounting
for The Sweetheart Cup Company from June 1996 until May 1998, where he managed
the financial analysis department and the accounting operations for 11 North
American manufacturing plants. Prior to that, Mr. Reymann spent 12 years with
Procter & Gamble serving in several key finance, accounting and operations
positions. Prior to that, Mr. Reymann spent five years at Ernst & Young where he
most recently specialized in emerging growth companies. Mr. Reymann received a
B.S. in accounting from the University of Baltimore and is a certified public
accountant.
Dale R. Shelton has served as our chief technology officer since February
2000. From June 1996 to February 2000, he served as our senior vice president,
engineering, during which time he directed the development of AIM and our
wireless data services. From January 1994 until June 1996, Mr. Shelton served as
the systems development leader for flash-flood prediction systems at the
National Weather Service. From June 1992 until January 1994, Mr. Shelton was
principal engineer for ARINC, Inc., where he led the development of aviation
tracking and maintenance systems. He received a B.S. in computer science from
the University of Maryland.
Brian W. Keane has served as senior vice president, business affairs since
joining us in August 1999. Mr. Keane is responsible for mergers and
acquisitions, strategic investments, joint ventures and new strategic business
initiatives. From February 1998 until August 1999, Mr. Keane was chief financial
officer for Management Information Consulting, Inc., a technology consulting
company. Prior to that, Mr. Keane spent ten years as an investment banker with
Smith Barney Inc. Mr. Keane received a B.A. in history and mathematics from
Cornell University and an M.B.A. from Harvard Business School.
Mitch I. Selbiger has served as our senior vice president, marketing since
January 2000. Mr. Selbiger is responsible for our advertising, branding,
marketing and public relations activities. From March 1999 until January 2000,
Mr. Selbiger served as vice president of marketing for OTG Software. Prior to
that, from July 1998 until March 1999, he served as vice president of marketing
for NetFactory. From August 1997 to July 1998, he served as director of eastern
area marketing for Netscape Communications, Inc. 1995 to 1997, he served as
director of government marketing for Sybase, Inc. Mr. Selbiger received a B.S.
in business administration from the University of Vermont and an M.B.A. from
George Washington University.
J. Carter Beese, Jr. was elected a director of Aether on October 20, 1999.
Since July 1998, Mr. Beese has served as president of Riggs Capital Partners, a
division of Riggs National Corp., where he oversees a $100 million venture
capital fund. From September 1997 until July 1998, he served as vice chairman of
the Global Banking Group of BT Alex. Brown. Prior to the merger of Bankers Trust
and Alex. Brown, Mr. Beese was chairman of Alex. Brown International from
November 1994 until September 1997. From February 1992 until November 1994, Mr.
Beese served as a commissioner of the U.S. Securities and Exchange Commission.
Mr. Beese serves as a senior advisor to the Center for Strategic and
International Studies, a non-partisan public policy think tank and is involved
in the World Economic Forum. He serves as a director on the boards of China.com;
Internet Securities, Inc., a company majority owned by Euromoney Institutional
Investor, Inc.; and Natural Solutions, Inc. Mr. Beese received a B.S. in
economics and political science from Rollins College.
Frank A. Bonsal, Jr. was elected a director of Aether on October 20, 1999.
Since 1978, Mr. Bonsal has been a founding partner of New Enterprise Associates,
one of the largest venture capital firms in the United States. Mr. Bonsal has
focused on the development of early stage companies. He currently serves as a
director on the boards of CARS, Inc., CORVIS Corp., Entevo Corp., Explore, Inc.,
GeneScreen, Inc. and Healthy Pet Inc. In addition, he is a special limited
partner of Amadeus Capital Partners, Boulder Venture, Novak Biddle, Trellis
Ventures and Windward Ventures. Mr. Bonsal received a B.A. in economics from
Princeton University.
Mark D. Ein was a co-founder of Aether, and was elected a director of
Aether on October 20, 1999. Mr. Ein is the founder and chief executive officer
of Venturehouse Group, a holding company that was established in September 1999
to create, invest in and acquire technology and telecommunications companies.
From 1992 until September 1999, Mr. Ein was a principal with The Carlyle Group,
where he
14
<PAGE> 19
was responsible for many of its telecommunications investment activities. Prior
to joining Carlyle, Mr. Ein was an associate with Brentwood Associates, where he
worked on leveraged buyout and venture capital investments. Prior to joining
Brentwood Associates, he was an analyst in the real estate department of
Goldman, Sachs and Co. Mr. Ein currently serves as a director on the boards of
LCC International, Inc. and several private companies. Mr. Ein received a B.S.
in economics from the University of Pennsylvania and an M.B.A. from Harvard
Business School.
Rahul C. Prakash was elected a director of Aether on October 20, 1999.
Since January 1997, Mr. Prakash has served as president of Telcom Ventures,
L.L.C., a wireless communications investment company. From January 1994 until
December 1996, Mr. Prakash served as vice president, business development of
Telcom Ventures. Prior to that time, he served as a director of business
development at LCC International, Inc., a worldwide provider of wireless
engineering and design services. From 1993 until 1994, Mr. Prakash was the
director of business development for Telemate, a joint venture he helped
establish between LCC and France Telecom. Mr. Prakash is also a director of
several private telecommunications companies controlled by Telcom Ventures. He
received an M.B.A. in international finance from American University and an
M.B.A. from the University of New Delhi, Faculty of Management Studies.
Janice M. Roberts was elected a director of Aether on October 20, 1999.
Since September 1992, Ms. Roberts has served as senior vice president of global
marketing and business development for 3Com. She is also president of 3Com
Ventures, a corporate investment fund, and a director of OmniSky. From January
1992 until September 1992, Ms. Roberts served as vice president and general
manager for 3Com's enterprise networking division. From 1989 until January 1992,
Ms. Roberts was with BICC Communications where she held several positions,
including most recently, president and managing director of its worldwide data
networking business. Previously, she held a number of senior international
marketing, sales and business development positions in engineering, electronics
and communications-based companies. She holds an Honors degree in economics and
business from the University of Birmingham in the United Kingdom and is a member
of the Chartered Institute of Marketing.
Dr. Rajendra Singh was elected a director of Aether on October 20, 1999.
Since December 1993, Dr. Singh has served as chairman of the board of directors
and chief executive officer of Telcom Ventures, L.L.C. From 1983 until June
1996, Dr. Singh served as chairman of the board of directors of LCC
International, Inc., which he co-founded with his wife in 1983. Dr. Singh has
played an instrumental role in the cellular industry by developing key standards
used today in wireless system design and methodology. Dr. Singh is a member of
the board of directors of Teligent, Inc., XM Satellite Radio Holdings, Inc. and
LCC International, Inc. He received a Ph.D. in electrical engineering from
Southern Methodist University.
George P. Stamas was elected a director of Aether on October 20, 1999.
Since January 2000, Mr. Stamas has served as a Vice Chair of Deutsche Banc Alex.
Brown. From April 1996 until December 1999, Mr. Stamas was a partner with the
law firm of Wilmer, Cutler & Pickering and now serves as a consultant to Wilmer,
Cutler & Pickering. From 1983 until April 1996, Mr. Stamas was a partner at
Piper & Marbury L.L.P. Mr. Stamas is counsel to, and a limited partner of, the
Baltimore Orioles baseball team. Mr. Stamas also serves on the board of
directors of FTI Consulting, Inc., a provider of litigation support services,
and Luminant Worldwide Corporation, a provider of Internet consulting services.
He received a B.S. in economics from the Wharton School of the University of
Pennsylvania and a J.D. from University of Maryland Law School.
Robin T. Vasan was appointed as a director of Aether at the completion of
our acquisition of Riverbed. Since June 1998, Mr. Vasan has been a general
partner of Mayfield Fund, a venture capital fund. From June 1994 until February
1997, he served as vice president, core technology of Risk Management Solutions,
an insurance software company. From 1997 until 1998, he attended Harvard
Business School. He received a B.A.S. in industrial engineering and economics
from Stanford University and an M.B.A. from Harvard Business School. Mr. Vasan
is a member of the board of directors of WebMethods, Inc., a
business-to-business infrastructure software and service company.
15
<PAGE> 20
Devin N. Wenig was elected a director of Aether on October 20, 1999. In
April 1994, Mr. Wenig joined Reuters America, Inc. and was promoted to managing
director of Reuters Information in February 2000, where he has global
responsibility for the regional and central marketing function, product
development, electronic commerce, the data groups and commercial policy for
Reuters's information businesses in the Americas. Mr. Wenig serves as a director
on the boards of Loan Pricing Corp., Intralinks, Inc., FreeEdgar.com and
Multex.com. He received a B.S. from Union College and a J.D. from Columbia
University.
Thomas E. Wheeler was elected a director of Aether on October 20, 1999.
Since 1992, Mr. Wheeler has served as president and chief executive officer of
the Cellular Telecommunications Industry Association. In 1994, Mr. Wheeler was
appointed by President Clinton to a six-year term as a member of the board of
trustees of the John F. Kennedy Center for the Performing Arts. Mr. Wheeler is a
director on the boards of the Public Broadcasting System and the U.S. Capitol
Historical Society. He received a B.S. in business administration from Ohio
State University.
NexGen, Telcom-ATI Investors, L.L.C., Reuters and 3Com -- who together hold
approximately 49.6% of the shares of our common stock -- are parties to a
stockholders agreement that governs voting for our directors. The agreement
requires each party to vote all its shares for two directors named by NexGen,
two directors named by Telcom-ATI Investors, two directors named jointly by
NexGen and Telcom-ATI Investors and one director named by each of Reuters and
3Com. Messrs. Oros and Ein were appointed by NexGen, Dr. Singh and Mr. Prakash
were appointed by Telcom-ATI Investors, Mr. Wenig was appointed by Reuters and
Ms. Roberts was appointed by 3Com as directors under the stockholder agreement.
Messrs. Bonsal and Wheeler have been named jointly by NexGen and Telecom-ATI. In
addition, in connection with our acquisition of Riverbed, we agreed to nominate
Messrs. Jackson and Vasan to the Board of Directors at the 2000 Annual Meeting.
The terms of the stockholder agreement are further described in "Transactions
Between Aether and its Officers, Directors and Significant Stockholders."
Directors serve for a term of one year.
Our executive officers are appointed by, and serve at the discretion of,
our board of directors. We expect that each of our officers will devote
substantially full time to our affairs. We expect that our non-employee
directors will devote such time to our affairs as is necessary to discharge
their duties. There are no family relationships among any of our executive
officers, directors or key employees.
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
The Board of Directors held a total of two meetings during 1999, and
executed three unanimous consents in lieu of meetings. All of the directors
attended both meetings of the Board of Directors and all committees of the Board
of Directors on which he or she served, except that two of the directors
attended one of the two meetings of the Board of Directors.
The Board of Directors currently consists of twelve members. The standing
committees of the Board of Directors include an Audit Committee and a
Compensation Committee.
The Compensation Committee consists of Messrs. Beese, Prakash and Wheeler.
Our Board of Directors established a Compensation Committee at the time of our
initial public offering. The Compensation Committee met one time during the year
ended December 31, 1999. The Compensation Committee determines the compensation
of senior executive officers (such as the chief executive officer and chief
financial officer), subject, if the board so directs, to the board's further
ratification of the compensation; determines the compensation for other officers
or delegates such determinations to the chief executive officer; grants options,
stock or other equity interests under our stock option or other equity-based
incentive plans; and administers those plans and, where such plans specify, our
other employee benefit plans.
The Audit Committee consists of Messrs. Beese and Bonsal. Our Board of
Directors established an Audit Committee at the time of our initial public
offering. Although the Audit Committee did not meet in
16
<PAGE> 21
1999, it met in January 2000 to discuss the year-end audit process with KPMG.
The Audit Committee makes recommendations to the board concerning the engagement
of independent accountants; reviews with the independent accountants the plans
and results of the audit engagement; approves professional services provided by
the independent accountants; considers the range of audit and non-audit fees;
verifies that auditors are independent of management and are objective in their
findings; reviews annual CPA audit and recommendations of internal controls and
related management response; reviews the audit reports with management and the
auditor; oversees the internal audit function; and monitors management's efforts
to correct deficiencies described in any audit examination.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation. The following table sets forth compensation for 1998
and 1999 awarded to, earned by or paid to our chief executive officer and the
four other most highly paid executive officers. We refer to these five officers
as the "named executive officers."
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
----------------------------------------
SHARES
ANNUAL COMPENSATION OTHER ANNUAL UNDERLYING ALL OTHER
----------------------------- COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) (#) ($)
--------------------------- ---- ---------- --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
David S. Oros.................. 1999 $200,000 $250,000 -- 945,100 --
Chairman, Chief Executive 1998 200,000 150,000 -- -- --
Officer and President
George M. Davis................ 1999 157,292 24,504 -- 55,000 $7,750
President, Enterprise 1998 133,333 52,895 $2,420 75,000 --
Solutions and Services Group
Dale R. Shelton................ 1999 129,167 20,000 -- 42,500 --
Chief Technology Officer 1998 109,200 4,000 -- 50,000 --
David C. Reymann............... 1999 126,042 -- -- 51,250 --
Chief Financial Officer 1998 64,905 -- -- 62,500 --
Brian W. Keane................. 1999 56,817 50,000 -- 125,000 --
Senior Vice President, 1998 -- -- -- -- --
Business Affairs
</TABLE>
Option Grants. The following table shows information regarding stock
options granted to the named executive officers during the year ended December
31, 1999. No stock appreciation rights were granted to these individuals during
the year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL
NUMBER OF SHARES PERCENTAGE OF EXERCISE RATES OF STOCK PRICE APPRECIATION FOR
UNDERLYING TOTAL OPTIONS PRICE PER OPTION TERM ($)
OPTIONS GRANTED GRANTED TO SHARE ---------------------------------------
NAME (#)(*) EMPLOYEES ($) EXPIRATION DATE 0% (6) 5% (7) 10% (7)
---- ---------------- ------------- --------- ------------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
David S. Oros......... 775,000(1) 28.04% $ 1.60 June 22, 2009 $11,160,000 $18,958,293 $30,922,407
157,500(1) 5.70% $ 4.00 September 20, 2009 $ 1,890,000 $ 3,474,814 $ 5,906,231
12,600(2) 0.46% $16.00 October 20, 2009 $ -- $ 126,785 $ 321,298
George M. Davis....... 50,000(1) 1.81% $ 1.60 June 22, 2009 $ 720,000 $ 1,223,116 $ 1,994,994
5,000(3) 0.18% $ 8.00 September 26, 2009 $ 30,000 $ 74,023 $ 141,562
Dale R. Shelton....... 37,500(1) 1.36% $ 1.60 June 22, 2009 $ 540,000 $ 917,337 $ 1,496,245
5,000(3) 0.18% $ 8.00 September 26, 2009 $ 30,000 $ 74,023 $ 141,562
David C. Reymann...... 18,750(1) 0.68% $ 1.60 June 22, 2009 $ 270,000 $ 388,668 $ 678,123
12,500(4) 0.45% $ 8.00 October 11, 2009 $ 100,000 $ 225,779 $ 418,748
20,000(3) 0.72% $ 8.00 September 26, 2009 $ 120,000 $ 296,090 $ 566,248
Brian W. Keane........ 125,000(5) 4.52% $ 4.80 August 16, 2009 $ 900,000 $ 1,843,342 $ 3,290,614
</TABLE>
- ---------------
* Options expire 90 days after the termination of employment of the option
holder.
(1) The warrants are immediately exercisable in their entirety.
17
<PAGE> 22
(2) Fifty percent of the options will become exercisable beginning on October
20, 2000, and the other 50% will become exercisable on October 20, 2001.
None of the options will become exercisable prior to such dates unless there
is a change of control of Aether, which includes a sale of all our assets or
the sale of at least 80% of the equity of our company.
(3) The options will become immediately exercisable in their entirety on
September 26, 2001 and none of them will become exercisable prior to that
date unless there is a change of control of Aether, which includes a sale of
all our assets or the sale of at least 80% of the equity of our company.
(4) The options will become immediately exercisable in their entirety on October
11, 2001 and none of them will become exercisable prior to that date unless
there is a change of control of Aether, which includes a sale of all our
assets or the sale of at least 80% of the equity of our company.
(5) One-third of the options are immediately exercisable. The remaining
two-thirds of the options become exercisable annually over a two-year period
in equal increments, beginning on August 16, 2000.
(6) The options listed in this column were issued with an exercise price below
the fair market value of the option at the time of issuance.
(7) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the SEC and are based on the assumption that the exercise
price was the fair market value of the shares on the date of grant. Prior to
October 20, 1000, the fair market value on the date of grant was determined
by our board of directors. There is no assurance provided to any executive
officer or any other holder of our securities that the actual price
appreciation over the ten-year option term will be at the assumed 5% and 10%
levels or at any other defined level.
Aggregate Option Exercises and Holdings. No options were exercised by the
named executive officers during the year ended December 31, 1999. The following
table provides information concerning the shares represented by outstanding
options held by each of the named executive officers as of December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DEC. 31, IN-THE-MONEY OPTIONS AT
1999 (#) DEC. 31, 1999 ($) (1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David S. Oros................ 932,500 12,600 $64,920,313 $ 700,875
George M. Davis.............. 175,000 80,000 $12,404,375 $5,578,250
Dale R. Shelton.............. 150,000 67,500 $10,638,751 $4,715,187
David C. Reymann............. 39,583 74,167 $ 2,774,115 $4,600,104
Brian W. Keane............... 41,667 83,333 $ 2,784,375 $5,568,750
</TABLE>
- ---------------
(1) Options were "in the money" because the closing price of Aether's common
stock on December 31, 1999 exceeded the exercise price of the options. The
value of unexercised options represents the difference between the exercise
price of net options and $71.625, which was the last reported sale price of
Aether common stock on December 31, 1999.
DIRECTOR COMPENSATION
Except for reimbursement for reasonable travel expenses relating to
attendance at board meetings and discretionary grants of stock options,
directors will not be compensated for their services as directors. Directors who
are employees will be eligible to participate in our equity incentive plan. We
have granted options to purchase 12,600 shares to each director (other than
Messrs. Jackson and Vasan) and options to purchase 4,000 shares to each member
of the audit and compensation committees. The exercise price of these options is
equal to $16.00 per share. Mr. Wenig hold his options in trust for the benefit
of Reuters, and he currently has no beneficial interest in the options.
18
<PAGE> 23
The following table identifies options that we have granted to non-employee
directors since January 1, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING EXERCISE
NON-EMPLOYEE DIRECTOR OPTIONS(#) PRICE($)
--------------------- ----------------- --------
<S> <C> <C>
J. Carter Beese, Jr. .............. 75,000 $ 0.40
20,600 16.00
Frank A. Bonsal, Jr. .............. 37,500 1.77
16,600 16.00
Mark D. Ein........................ 100,000 1.60
17,500 4.00
12,600 16.00
Rahul C. Prakash................... 16,600 16.00
Janice M. Roberts.................. 12,600 16.00
Dr. Rajendra Singh................. 12,600 16.00
George P. Stamas................... 6,250 0.40
5,000 2.40
12,600 16.00
Devin N. Wenig..................... 12,600 16.00
Thomas E. Wheeler.................. 37,500 1.77
16,600 16.00
</TABLE>
EMPLOYMENT AGREEMENTS
We have entered into employment contracts with Messrs. Oros, Reymann and
Jackson.
Mr. Oros' contract became effective June 22, 1999 and provides for a salary
of $200,000 per year, a performance bonus of up to $100,000 per year and
additional bonuses based on annual revenue targets and proceeds raised from
private placements of our equity securities in 1999. The contract has an initial
term expiring in June 2002 and automatically extends for additional one month
increments until terminated by Aether or Mr. Oros on 15 days notice. Pursuant to
the contract, we granted Mr. Oros a warrant to acquire 875,000 shares of our
common stock. The warrant currently has an exercise price of $1.60 per share of
common stock. We also gave Mr. Oros the right to allocate to key employees of
his choosing warrants to acquire 125,000 shares of common stock having the same
terms and conditions. Mr. Oros has awarded warrants for 50,000 shares of our
common stock to Mr. Davis, 37,500 shares of our common stock to Mr. Shelton and
18,750 shares of our common stock to Mr. Reymann. Mr. Oros subsequently received
our permission to assign part of his warrant, leaving him with a warrant to
acquire 775,000 shares. In September 1999, Mr. Oros received a warrant to
acquire 175,000 shares of our common stock at an exercise price of $4 per share.
From this grant, Mr. Oros subsequently assigned a warrant exercisable for 17,500
shares of our common stock. If we terminate Mr. Oros without cause, he is
entitled to receive from us an amount equal to the salary he would have received
during the balance of the term of the employment contract. Under the contract,
"cause" means committing an act of gross negligence or other willful act that
materially adversely affects Aether, refusing to comply in any respect with
specific directions of our board of directors, or being convicted or pleading no
contest to any felony or any misdemeanor involving fraud, breach of trust or
misappropriation. Each of these warrants became exercisable upon completion of
our initial public offering.
Mr. Reymann's contract was entered into June 1, 1999 and provides for a
minimum salary of $127,500 per year. The contract has an initial term expiring
on June 1, 2001. We and Mr. Reymann have agreed that if we terminate him without
cause, he is entitled to receive from us an amount equal to the salary he would
have received during the balance of the term of the employment contract.
19
<PAGE> 24
At the closing of our acquisition of Riverbed, we amended Mr. Jackson's
existing employment agreement with Riverbed to provide that he would serve as
president of our software products group, Mr. Jackson is paid a base salary of
$194,000 per year. The contract is on a year-to-year basis and automatically
extends for additional one-year periods on each January 22 until terminated by
Aether or Mr. Jackson on 30 days' notice. If we terminate him without cause, he
will be entitled to receive from us an amount equal to 12 months of his base
salary.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of Aether's Board of Directors consists solely
of three non-employee directors. The Compensation Committee determines all
compensation paid or awarded to Aether's key executive officers, except that
Aether's Board has delegated to Mr. Oros, as a Board Committee of one, the
ability to grant options to new hires for up to 40,000 shares, subject to his
duty to report periodically to the Compensation Committee.
PHILOSOPHY. The Compensation Committee's goal is to recruit and retain an
executive team of superior talent. To do so, the Committee attempts to offer
competitive and fair compensation that rewards executives for exceptional
performance and holds them accountable for Aether's performance. Particular
objective factors that the Committee believes are important in assessing
performance include growth in the number of subscribers to Aether's systems, the
development of new products and products for new industries, an increase in
Aether's customer base in the financial services field and in new fields, and
growth in revenue, earnings before interest expense, taxes, depreciation, and
amortization, and earnings per share. More subjective factors the Committee
believes are important in evaluating performance include success in undertaking
joint ventures and acquisitions and integrating newly acquired companies and
hiring and retention of key employees.
In establishing appropriate levels for base salary, the Compensation
Committee considers the market for senior executives of public companies in
businesses comparable to Aether's, based on their own business experience. The
Committee also considers the particular officer's overall contributions to
Aether over the past year and previously. Annual performance bonuses are based
on the Compensation Committee's evaluation of the executive's performance in
achieving several specified annual goals. Option grants are designed to reward
an executive officer for his overall contribution to Aether and to serve as an
incentive to achieve Aether's goal of increasing shareholder value.
Executive officers' compensation consists primarily of three components:
(i) base salary, (ii) cash bonus, and (iii) stock options.
BASE SALARY. The Committee establishes base salaries after considering a
variety of factors that determine an executive's value to Aether, including the
individual's knowledge, experience, and accomplishments and the level of
responsibility assumed. The Committee also sets base salaries at levels it
considers necessary to retain key employees.
CASH BONUS. The Committee determined each individual's cash bonus for the
fiscal year ended December 31, 1999. Cash bonuses are based on the Committee's
overall qualitative evaluation of the performance and accomplishments of each
executive officer in achieving various specified goals for the year.
STOCK OPTIONS. The Committee believes achievement of Aether's goals may be
fostered by a stock option program that is tailored to employees who
significantly enhance Aether's value. Accordingly, during the fiscal year ended
December 31, 1999, the Committee granted employees options to purchase 2,763,856
shares of Common Stock. Named Executive Officers received options with respect
to 1,218,850 shares of Common Stock.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. David S. Oros is one of Aether's
largest stockholders. His financial well-being is therefore directly tied to
Aether's performance as reflected in the price per share of Common Stock. For
his services as Aether's Chairman of the Board of Directors and Chief Executive
20
<PAGE> 25
Officer, Mr. Oros received an amount of compensation for 1999 determined in
accordance with the compensation policies established by the Compensation
Committee. The Committee awarded Mr. Oros a bonus of $250,000 for the fiscal
year ended December 31, 1999. In doing so, it reviewed his employment agreement
from before the public offering, considered the successful completion of
Aether's initial public offering, the Mobeo acquisition, and the continuing
progress in developing new opportunities for Aether and in recruiting and market
development.
COMPENSATION DEDUCTION LIMIT. The Securities and Exchange Commission
requires that this report comment on Aether's policy with respect to a special
rule under the tax laws, section 162(m) of the Internal Revenue Code. That
section limits, with exceptions described below, the compensation that a
corporation can deduct for payments to a chief executive officer and the four
other most highly compensated executive officers to $1 million per officer per
year. A company can deduct compensation (including from exercising options) in
excess of $1 million if it pays the compensation under a plan that its
shareholders approve and that is performance-related. Option exercises are
typically deductible under such a plan if granted with exercise prices at or
above the market price when granted or if grandfathered because granted before
the public offering. The Committee's policy with respect to the compensation
deduction limit is to make every reasonable effort to ensure that compensation
likely to be received by a senior executive is deductible under section 162(m),
while at the same time giving Company executives incentives to stay with and
enhance Aether's value. The Committee believes, however, that compensation
exceeding the $1 million deduction limit should not be ruled out where such
compensation is justified based on the executive's value to Aether and its
shareholders. The Committee believes that no executive compensation expenses
paid in 1999 will be non-deductible under section 162(m).
This Report shall not be deemed incorporated by reference in any document
previously or subsequently filed with the Securities and Exchange Commission
that incorporates by reference all or any portion of this proxy statement,
unless the report is specifically incorporated by reference.
J. Carter Beese
Rahul C. Prakash
Thomas E. Wheeler
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our Compensation Committee is an officer or employee
of Aether. None of our executive officers serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving on our Board of Directors or Compensation Committee.
STOCK PERFORMANCE CHART
As part of proxy statement disclosure requirements mandated by the
Securities and Exchange Commission, the Company is required to provide a
five-year comparison of the cumulative total shareholder return on its Common
Stock with that of a broad equity market index and either a published industry
index or a Company constructed peer group index. This graph is not deemed to be
"soliciting material" or to be "filed" with the SEC or subject to the SEC's
proxy rules or to the liabilities of Section 18 of the 1934 Act, and the graph
shall not be deemed to be incorporated by reference into any prior or subsequent
filing by the corporation under the Securities Act of 1933 or the 1934 Act.
The following chart compares the yearly percentage change in the cumulative
total shareholder return in the Company's Common Stock since our initial public
offering in October 1999 with the cumulative total return on the S&P 500 Index
(the equity index) and Business Software Services Index prepared by Media
General Financial Services (the peer index). The comparison assumes $100 was
invested on October 21, 1999 in the Company's Common Stock and in each of the
above indices with reinvestment of dividends.
21
<PAGE> 26
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG AETHER SYSTEMS
S&P 500 INDEX AND BUSINESS SOFTWARE SERVICES
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
AETHER SYSTEMS BUSINESS SOFTWARE SERVICES S&P 500 INDEX
-------------- -------------------------- -------------
<S> <C> <C> <C>
10/21/99 100.00 100.00 100.00
12/31/99 147.87 149.35 108.04
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1999, we have engaged in the following transactions with
the following persons:
- directors, nominees for election as directors, or executive officers;
- beneficial owners of 5% or more of the Company's common stock;
- immediate family members of the above, and
- entities in which the above persons have substantial interests.
EQUITY INVESTMENTS
The following discussion describes the issuance of equity interests in our
predecessor, Aether Systems, LLC. Immediately prior to the closing of our
initial public offering on October 26, 1999, we converted into a Delaware
corporation at which time, each holder of units in our limited liability company
was converted into two and one-half shares of our common stock and each option
or warrant for one unit was converted into an option or warrant for two and
one-half shares of our common stock. The discussion below gives only the number
of shares into which units were converted.
Effective June 1999, we issued to Mr. Oros a warrant to acquire 875,000
shares at an exercise price of $.01 per share. We subsequently agreed with Mr.
Oros to amend the exercise price to $1.60 per share. We also gave Mr. Oros the
right to allocate to key employees of his choosing warrants to acquire 125,000
shares having the same terms and conditions. Mr. Oros has awarded warrants to
acquire 50,000 shares to Mr. Davis, 37,500 shares to Mr. Shelton and 18,750
shares to Mr. Reymann. Mr. Oros subsequently received our permission to
subdivide his warrant to give Mark Ein a warrant to acquire 100,000 shares,
leaving Mr. Oros with a warrant to acquire 775,000 shares. In September 1999,
when we increased the exercise price on the warrants issued to Mr. Oros in June
1999, we granted Mr. Oros a warrant to acquire an additional 175,000 shares at
an exercise price of $4 per share to compensate him for the increase in the
exercise price on the earlier warrants. From this grant, Mr. Oros subsequently
assigned a warrant exercisable for 17,500 shares to Mr. Ein.
22
<PAGE> 27
In August 1999, we issued to Mr. Ein 100,000 shares upon exercise of his
options at an exercise price of $0.40 per share. In September 1999, Mr. Beese
exercised an option for 75,000 shares at an exercise price of $0.40 per share.
NexGen, Telcom-ATI Investors, Reuters and 3Com entered into a stockholder
agreement under which these parties vote for two directors named by each of
NexGen and Telcom-ATI Investors and for one director named by each of Reuters
and 3Com. In addition, commencing on the date of the first annual meeting of
stockholders, if the board of directors consists of up to nine members, these
parties will vote to elect to the board of directors one additional person named
jointly by NexGen and Telcom-ATI Investors Ventures; and if the board of
directors consists of 10 or more members, the parties will vote to elect two
members named jointly by NexGen and Telcom-ATI Investors. In connection with the
acquisition of Riverbed, these stockholders amended the stockholder agreement to
allow for a board of 12 members. The right to name directors will end when
parties to the agreement reduce their share ownership below levels set forth in
the agreement.
We entered into a registration rights agreement with NexGen, Telcom-ATI
Investors, Reuters, 3Com and Transettlements, which entitles these parties to an
aggregate of three demand registrations at any time after October 27, 2000, and
at the request of these parties, to include in any registration statement for
our own account or the account of any other stockholder, the shares of common
stock held by those parties, subject to limitations set forth in the agreement.
The agreement also requires us to file a shelf registration statement covering
the sale of all shares held by parties to the stockholder agreement from time to
time. The agreement requires us to file the shelf registration statement only
when we are eligible to use the short form registration statement on Form S-3,
which would be no earlier than October 20, 2000. Following our acquisition of
Riverbed, the shareholders of Riverbed became parties to this registration
rights agreement under which the shareholders of Riverbed and their assignees
have equivalent rights to the original holders and their assignees thereunder.
In addition, the shareholders of Riverbed and their assignees, in the aggregate,
have the right to one additional shelf registration after October 20, 2000 (or
earlier if the original holders sell shares in reliance on Rule 144) provided
that the sales by any Riverbed shareholder or assignee under such additional
right will not exceed the amount that would be permitted under Rule 144(e) if
the one year holding period had expired.
LOAN TO NEXGEN
In September 1998, we loaned NexGen $155,000 at an interest rate of 7.5%
per year pursuant to two notes. One note for $95,000 was due in December 1998,
and one note for $60,000 was due in October 1998. In August 1999, both notes
were amended to be due upon 30 days notice. On December 24, 1998, NexGen made a
payment of $19,346 with respect to these notes. At December 31, 1999, the
balance outstanding on these notes was $150,445. During 1999, NexGen paid
interest of $0 on the notes. On February 15, 2000, NexGen made an additional
payment of $151,716 in full satisfaction of the notes.
OMNISKY
On August 9, 1999, we formed a new company with 3Com in which we acquired
an interest in AirWeb Corporation, which was doing business as OpenSky and is
currently known as OmniSky Corporation. We contributed a perpetual,
non-exclusive, non-assignable, royalty-free worldwide license to our AIM
software platform in exchange for 7,000,000 shares of Series A Preferred Stock.
In connection with the formation of OmniSky, 3Com paid $7.0 million in cash and
agreed to contribute to OmniSky a perpetual, non-exclusive, non-assignable
license to 3Com's Web Clipping technology (including rights to derivative works)
and Palm OS software in exchange for 10,000,000 shares of Series A Preferred
Stock, which initially represented a 33% equity interest in OmniSky on a fully
diluted basis. The management team of OmniSky acquired in the aggregate 4.2
million shares of common stock and options to acquire an additional 5.8 million
shares. Following our initial public offering, we exercised a warrant to acquire
an additional 3,000,000 shares of Series A Preferred Stock for $2,500,000
increasing our equity interest in OmniSky to 33% on a fully diluted basis. In
January 2000, we exercised our right of first refusal to
23
<PAGE> 28
maintain our 33% equity interest by acquiring 1,439,809 shares of Series B
Preferred Stock for $6.7 million, net of the cancellation of approximately
$613,000 of indebtedness owed by OmniSky to us. 3Com did not exercise its right
of first offer and thus its 33% interest has been diluted.
As part of our investment with 3Com in OmniSky, we each received
registration rights, including two demand registration rights that we can use
after the earlier of the completion of OmniSky's initial public offering and
August 9, 2004. We also entered into a right of first refusal and co-sale
agreement, which, among other things, requires the management team to first
offer any OmniSky securities to OmniSky and then to us and 3Com before selling
the securities to a third party. This agreement also allows us and 3Com to sell
a pro rata portion of our stock to a third party along with the management team
if the right of first refusal is not exercised. We and 3Com have also agreed
that before either of us sells any shares of Series A Preferred Stock to an
unrelated third party, we would first offer the other (or any other holders of
Series A Preferred Stock) those shares on a pro rata basis and then offer their
shares to OmniSky.
Aether, 3Com and OmniSky's management are each entitled to appoint one
director to OmniSky's board of directors. OmniSky's board of directors currently
includes: David S. Oros, our chairman, chief executive officer and president and
Janice M. Roberts, who is one of our directors. We have entered into a voting
agreement with 3Com and OmniSky's management in which each of the parties has
agreed to vote in favor of each of the directors named by Aether, 3Com and
OmniSky's management until the earliest of (1) OmniSky's completion of an
initial public offering of at last $15 million, (2) OmniSky's completion of a
sale of substantially all of the assets of OmniSky or the transfer of more than
50% of the voting power of OmniSky or (3) the parties' termination of the
agreement. OmniSky cannot take certain major corporate actions, such as selling
the company or issuing securities with rights and preferences senior to the
Series A Preferred Stock, without the approval of holders of two-thirds of the
Series A Preferred Stock.
On August 9, 1999, we entered into a letter agreement with OmniSky under
which we have agreed to provide OmniSky, for a period of ten months from the
date of the letter agreement, engineering services for the design and
development of its proposed systems and services. The letter agreement
originally provided that OmniSky will pay us $250,000 per month for these
services but we subsequently amended it to be on a time and materials basis. In
addition, they paid us $500,000 for work performed prior to the date of the
letter agreement. Additionally, for a period of five years from the date of the
letter agreement, OmniSky has agreed to provide us the right to resell OmniSky's
basic package of services. We also have a right of first refusal for development
of all investment banking and brokerage applications for OmniSky for a period of
two years from the date of the letter agreement, subject to approval of the
company for whom the service is developed.
In October 1999, we agreed to purchase 25,000 Minstrel V modems from
OmniSky for a price per modem of $230, which was OmniSky's cost. OmniSky has an
exclusive buying arrangement with Novatel for Minstrel V modems, which runs
through March 2000. We have paid for 20,000 of the 25,000 modems in two
installments: $1,400,000 on October 15, 1999 and $3,200,000 on November 15,
1999. The modems are being delivered to us through April of 2000.
RIVERBED
On March 6, 2000, we acquired Riverbed for shares of our common stock. In
the merger, we issued 4,537,281 shares of our common stock and converted
existing options held by Riverbed employees into options to acquire shares of
our common stock. If all current Riverbed options vest and are exercised, we
would be obligated to issue 862,480 shares of our common stock. As part of the
transaction, we are holding in escrow 270,000 of the shares payable to Riverbed
stockholders for 12 months to secure their post-closing indemnification
obligations to us and we have agreed to indemnify up to $40.5 million of damages
the sellers may incur. Immediately after the closing, we appointed two Riverbed
nominees -- E. Wayne Jackson and Robin T. Vasan -- to our board of directors.
As a result of our acquisition of Riverbed, the stockholders of Riverbed
became parties to the registration rights agreement we entered into at the time
of our initial public offering with several of our shareholders, and the
stockholders of Riverbed are deemed to have equivalent rights to the original
holders
24
<PAGE> 29
and their assignees. In addition, the stockholders of Riverbed, in the
aggregate, have the right to one additional shelf registration after October 20,
2000, or sooner if any of the original holders sell shares sooner pursuant to
Rule 144. The additional shelf registration is limited to the number of shares a
holder could sell under Rule 144.
REUTERS
On February 8, 2000, we entered into a letter of intent with Reuters under
which we will contribute $100 million for 60% of a new European company. Under
the letter of intent, Reuters will own the remaining 40% through a contribution
of assets and $22 million in cash. David S. Oros, our chief executive officer,
will serve as chairman and interim chief executive officer of the new company.
This letter of intent is non-binding, and there is no assurance that we will
successfully complete definitive documentation with respect to this transaction.
ANNUAL REPORT ON FORM 10-K
THE COMPANY'S 1999 ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999, IS BEING DISTRIBUTED TO ALL
STOCKHOLDERS OF THE COMPANY TOGETHER WITH THIS PROXY STATEMENT, IN SATISFACTION
OF THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE COMMISSION. ADDITIONAL COPIES
OF THE REPORT, EXCEPT FOR EXHIBITS, ARE AVAILABLE AT NO CHARGE UPON REQUEST. TO
OBTAIN ADDITIONAL COPIES OF THE ANNUAL REPORT ON FORM 10-K, PLEASE CONTACT GREGG
LAMPF, DIRECTOR, INVESTOR RELATIONS, AT 11460 CRONRIDGE DRIVE, OWINGS MILLS,
MARYLAND 21117, OR AT TELEPHONE NUMBER (410) 654-6400.
STOCKHOLDER PROPOSALS
If you intend to propose any matter for action at our 2001 Annual Meeting
of Stockholders and wish to have the proposal included in our proxy statement,
you must submit your proposal to the Secretary of Aether at 11460 Cronridge
Drive, Owings Mills, Maryland 21117, not later than November 6, 2000 at 5:00
p.m. Eastern Standard Time. Please note that proposals must comply with all of
the requirements of Rule 14a-8 under the Securities Exchange Act of 1934 as well
as the requirements of our certificate of incorporation and bylaws. Only then
can we consider your proposal for inclusion in our proxy statement and proxy
relating to the 2001 Annual Meeting. We will be able to use proxies you give us
for the next year's meeting to vote for or against any shareholder proposal that
is not included in the proxy statement at our discretion unless the proposal is
submitted to us on or before February 14, 2001.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ David C. Reymann
David C. Reymann, Secretary
Owings Mills, Maryland
March 31, 2000
25
<PAGE> 30
APPENDIX A
AETHER SYSTEMS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
PURPOSE The Aether Systems, Inc. 2000 Employee Stock
Purchase Plan (the "2000 ESPP" or the "Plan")
provides employees of Aether Systems, Inc. (the
"Company") and selected Company Subsidiaries with
an opportunity to become owners of the Company
through purchasing shares of the Company's common
stock (the "Common Stock"). The Company intends
this Plan to qualify as an employee stock purchase
plan under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and its terms
should be construed accordingly. The Plan is
effective as of March 16, 2000.
ELIGIBILITY An Employee whom the Company or an Eligible
Subsidiary employs as of the first day of a Payroll
Deduction Period (and has employed for such prior
waiting period, initially set at 90 days, as the
Committee determines) is eligible to participate in
the 2000 ESPP for that Payroll Deduction Period.
However, an Employee may not make a purchase under
the 2000 ESPP if such purchase would result in the
Employee's owning Common Stock possessing 5% or
more of the total combined voting power or value of
the Company's outstanding stock. In determining an
individual's amount of stock ownership, any options
to acquire shares of Company Common Stock are
counted as shares of stock, and the attribution
rules of Section 424(d) of the Code apply.
Employee means any person employed as a common law
employee of the Company or an Eligible Subsidiary.
Employee excludes anyone who, with respect to any
particular period of time, was not treated
initially on the payroll records as a common law
employee, unless the Committee determines that
including the person is necessary to preserve tax
treatment.
ADMINISTRATOR The Compensation Committee of the Board of
Directors (the "Board") of the Company, or such
other committee as the Board designates (the
"Committee"), will administer the 2000 ESPP. The
Committee is vested with full authority and
discretion to make, administer, and interpret such
rules and regulations as it deems necessary to
administer the 2000 ESPP (including rules and
regulations deemed necessary in order to comply
with the requirements of Section 423 of the Code).
Any determination or action of the Committee in
connection with administering or interpreting the
2000 ESPP will be final and binding upon each
Employee, Participant, and all persons claiming
under or through any Employee or Participant.
Without shareholder consent and without regard to
whether the actions might adversely affect
Participants, the Committee (or the Board) may
establish and change the Payroll Deduction
Periods,
limit or increase the frequency and/or
number of changes in the amounts withheld
during a Payroll Deduction Period,
A-1
<PAGE> 31
establish the exchange ratio applicable to
amounts withheld in a currency other than
U.S. dollars,
lengthen or shorten the waiting period
before an Employee becomes eligible to
participate, so long as the change applies
uniformly,
permit payroll withholding in excess of the
amount the Participant designated to adjust
for delays or mistakes in the Company's
processing of properly completed withholding
elections,
establish reasonable waiting and adjustment
periods and/or accounting and crediting
procedures to ensure that amounts applied
toward the purchase of Common Stock for each
Participant properly correspond with amounts
withheld from the Participant's
Compensation,
delegate its functions (other than those
with respect to setting Payroll Deduction
Periods or determining the price of stock
and the number of shares to be offered under
the Plan) to officers or employees of the
Company; and
establish such other limitations or
procedures as it determines in its sole
discretion advisable and consistent with the
Plan.
The Committee may also increase the price provided
in Step 2 under GRANTING OF OPTIONS (by decreasing
the discount and/or by designating that the price
is determined as of either the beginning or the
ending date of a Payroll Deduction Period or the
higher of both rather than as of the lower) for
Payroll Deduction Periods beginning after Committee
action.
PAYROLL DEDUCTION PERIOD Payroll Deduction Periods are the periods during
which the Company collects payroll deductions for a
particular purchase. Unless the Committee specifies
otherwise, the Payroll Deduction Periods will be
successive calendar quarters beginning January 1,
April 1, July 1, and October 1, beginning when the
Committee determines they should begin.
PARTICIPATION An eligible Employee may become a "Participant" for
a Payroll Deduction Period by completing an
authorization notice and delivering it to the
Committee through the Company's Human Resources
professionals within a reasonable period of time
before the first day of such Payroll Deduction
Period. All Participants receiving options under
the 2000 ESPP will have the same rights and
privileges.
METHOD OF PAYMENT A Participant may contribute to the 2000 ESPP
solely through payroll deductions as follows:
The Participant must elect on an authorization
notice or other required documentation to have
deductions made from his Compensation for each
payroll period during the Payroll Deduction Period
at or above a minimum rate and under terms the
Committee determines. Compensation under the Plan
means an Employee's regular compensation, including
overtime, bonuses, and commissions (but expressly
excluding income from stock options or other
noncash compensation),
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from the Company or an Eligible Subsidiary paid
during a Payroll Deduction Period.
All payroll deductions will be credited to the
Participant's account under the 2000 ESPP. No
interest will accrue on the account.
Payroll deductions will begin on the first payday
coinciding with or following the first day of each
Payroll Deduction Period and will end with the last
payday preceding or coinciding with the end of that
Payroll Deduction Period, unless the Participant
sooner withdraws as authorized under WITHDRAWALS
below.
A Participant may not alter the rate of payroll
deductions during the Payroll Deduction Period.
The Company may use the consideration it receives
for general corporate purposes.
GRANTING OF OPTIONS On the first day of each Payroll Deduction Period,
a Participant will receive options to purchase a
number of shares of Common Stock with funds
withheld from his or her Compensation. Such number
of shares will be determined at the end of the
Payroll Deduction Period according to the following
procedure:
STEP 1 -- Determine the amount the Company
withheld from Compensation since the
beginning of the Payroll Deduction Period;
STEP 2 -- Determine the "Purchase Price" to
be the amount that represents 85% of the
lower of the Fair Market Value of a share of
Common Stock on the first day of the Payroll
Deduction Period and the last day of the
Payroll Deduction Period (provided that the
Committee can increase the price before a
Payroll Deduction Period begins); and
STEP 3 -- Divide the amount determined in
Step 1 by the amount determined in Step 2.
The Committee will determine the treatment of any
fractional shares from among the following:
The results of Step 3 will be used to
purchase whole and fractional shares,
Any amounts in Step 3 not used to purchase
whole shares will be refunded to the
Participant,
Any amounts in Step 3 not used to purchase
whole shares will be carried forward to the
next Payment Deduction Period, or
Such other treatment as the Committee
approves.
FAIR MARKET VALUE The Fair Market Value of a share of Common Stock
for purposes of the Plan as of each date described
in Step 2 will be determined as follows:
if the Company has no publicly-traded stock,
the Committee will determine the Fair Market
Value for purposes of the
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Plan using any measure of value it
determines in good faith to be appropriate;
if the Common Stock trades on a national
securities exchange, the closing sale price
on that date;
if the Common Stock does not trade on any
such exchange, the closing sale price as
reported by the National Association of
Securities Dealers, Inc. Automated Quotation
System ("Nasdaq") for such date;
if no such closing sale price information is
available, the average of the closing bid
and asked prices that Nasdaq reports for
such date; or
if there are no such closing bid and asked
prices, the average of the closing bid and
asked prices as reported by any other
commercial service for such date.
For January 1 and any other date described in Step
2 that is not a trading day, the Fair Market Value
of a share of Common Stock for such date shall be
determined by using the closing sale price or the
average of the closing bid and asked prices, as
appropriate, for the immediately following trading
day when determining the price for the first day of
the Payroll Deduction Period and the immediately
preceding trading day when determining the price on
the last day. The Committee can substitute a
particular time of day or other measure of "closing
sale price" if appropriate because of changes in
exchange or market procedures.
The Committee has sole discretion to determine the
Fair Market Value for purposes of this Plan, and
all participation is conditioned on the
participant's agreement that the Committee's
determination is conclusive and binding even though
others might make a different and also reasonable
determination.
No Participant shall receive options:
if, immediately after the grant, that
Participant would own shares, or hold
outstanding options to purchase shares, or
both, possessing 5% or more of the total
combined voting power or value of all
classes of shares of the Company or any
Subsidiaries (as defined below); or
that permit the Participant to purchase
shares under all employee stock purchase
plans of the Company and any Subsidiary with
a Fair Market Value (determined at the time
the options are granted) that exceeds
$25,000 in any calendar year.
EXERCISE OF OPTION Unless a Participant effects a timely withdrawal
under the WITHDRAWAL paragraph below, his option
for the purchase of shares of Common Stock during a
Payroll Deduction Period will be automatically
exercised as of the last day of the Payroll
Deduction Period for the purchase of the maximum
number of shares (including, if the Committee so
provides, fractional shares) that the sum of the
payroll deductions credited to the Participant's
account during such Payroll
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Deduction Period can purchase under the formula
specified in GRANTING OF OPTIONS.
DELIVERY OF COMMON STOCK As soon as administratively feasible after the
options are used to purchase Common Stock, the
Company will credit to each Participant or, in the
alternative, to an agent or custodian that the
Committee designates, the shares of Common Stock
the Participant purchased upon the exercise of the
option. If delivered to an agent or custodian, the
agent or custodian may hold the shares in nominee
name and may commingle shares held in its custody
in a single account or stock certificate without
identification as to individual Participants.
Unless the Committee determines otherwise,
Participants who are holding shares and any persons
to whom they transfer part or all of their shares
other than by sale must retain those shares with a
Company specified broker or agent until the second
anniversary of the first day of the Payroll
Deduction Period in which they bought the shares.
Unless the Committee determines otherwise, a
Participant may sell the shares despite the
foregoing restriction but may not transfer them to
another broker until the foregoing two year period
(the "Account Restriction Period") ends. The
Committee may require that the specified agent or
custodian hold the shares of Common Stock for a
minimum period of time after receipt (including
through and beyond the Participant's active
employment) and reinvest any dividends received in
additional shares of Common Stock. The Committee
may, in its discretion, establish a program for
cashless sales of Common Stock received under the
2000 ESPP.
SUBSEQUENT OFFERINGS A Participant will be deemed to have elected to
participate in each subsequent Payroll Deduction
Period following his initial election to
participate in the 2000 ESPP, unless the
Participant files a written withdrawal notice with
the Human Resources Department at corporate
headquarters (or such other recipient as the
Department designates) at least 10 days before the
beginning of the Payroll Deduction Period as of
which the Participant desires to withdraw from the
2000 ESPP.
WITHDRAWAL FROM THE PLAN A Participant may withdraw all, but not less than
all, payroll deductions credited to his account for
a Payroll Deduction Period before the end of such
Payroll Deduction Period by delivering a written
notice to the Human Resources Department or its
designee on behalf of the Committee at least 30
days before the end of such Payroll Deduction
Period (or by such other deadline as the Committee
determines). A Participant who for any reason,
including retirement, termination of employment, or
death, ceases to be an Employee before the last day
of any Payroll Deduction Period will be deemed to
have withdrawn from the 2000 ESPP as of the date of
such cessation, unless the Committee establishes
other procedures.
When a Participant withdraws from the 2000 ESPP,
his or her outstanding options under the 2000 ESPP
will immediately terminate.
Unless the Committee determines otherwise, if a
Participant withdraws from the 2000 ESPP for any
reason, the Company will pay to the Participant all
payroll deductions credited to his account or, in
the event of death, to the persons designated as
provided in Designation of Beneficiary, as soon as
administratively feasible after the date of such
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withdrawal and no further deductions will be made
from the Participant's Compensation.
A Participant who has elected to withdraw from the
2000 ESPP may resume participation in the same
manner and under the same rules as any Employee
making an initial election to participate in the
2000 ESPP (i.e., he may elect to participate in the
next following Payroll Deduction Period so long as
he or she files the authorization form by the
deadline for that Payroll Deduction Period). Any
Participant who is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and who withdraws from the 2000
ESPP for any reason will only be permitted to
resume participation in a manner that will permit
transactions under the 2000 ESPP to continue to be
exempt within the meaning of Rule 16b-3, as issued
under the Exchange Act.
STOCK SUBJECT TO PLAN The shares of Common Stock that the Company will
sell to Participants under the 2000 ESPP will be
shares of authorized but unissued Common Stock,
shares held as treasury stock, and shares purchased
on the market. The maximum number of shares made
available for sale under the 2000 ESPP will be
1,000,000, increased beginning December 31, 2001
and each succeeding December 31 by 200,000 shares
(with both numbers subject to the provisions in
ADJUSTMENTS UPON CHANGES IN CAPITAL STOCK below).
If the total number of shares for which options are
to be exercised in a Payroll Deduction Period
exceeds the number of shares then available under
the 2000 ESPP, the Company will make, so far as is
practicable, a pro rata allocation of the shares
available.
A Participant will have no interest in shares
covered by his participation until the last day of
the applicable Payroll Deduction Period.
After the end of the Account Restriction Period,
shares that a Participant purchases under the ESPP
will be registered in the name of the Participant
or, at the Participant's election, in street name.
ADJUSTMENTS UPON CHANGES IN
CAPITAL STOCK Subject to any required action by the Company
(which it will promptly take) or its stockholders,
and subject to the provisions of applicable
corporate law, if, during a Payroll Deduction
Period,
the outstanding shares of Common Stock
increase or decrease or change into or are
exchanged for a different number or kind of
security because of any recapitalization,
reclassification, stock split, reverse stock
split, combination of shares, exchange of
shares, stock dividend, or other
distribution payable in capital stock, or
some other increase or decrease in such
Common Stock occurs without the Company's
receiving consideration (excluding, unless
the Committee determines otherwise, stock
repurchases),
the Committee must make a proportionate and
appropriate adjustment in the number of shares of
Common Stock underlying the options, so that the
proportionate interest of the Participant
immediately following such event will, to the
extent practicable, be the same as immediately
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before such event. Any such adjustment to the
options will not change the total price with
respect to shares of Common Stock underlying the
Participant's election but will include a
corresponding proportionate adjustment in the price
of the Common Stock, to the extent consistent with
Section 424 of the Code.
The Board or the Committee may take any actions
described in the ADJUSTMENTS UPON CHANGES IN
CAPITAL STOCK section without any requirement to
seek optionee consent.
The Committee will make a commensurate change to
the maximum number and kind of shares provided in
the STOCK SUBJECT TO PLAN section.
Any issue by the Company of any class of preferred
stock, or securities convertible into shares of
common or preferred stock of any class, will not
affect, and no adjustment by reason thereof will be
made with respect to, the number of shares of
Common Stock subject to any options or the price to
be paid for stock except as this ADJUSTMENTS
section specifically provides. The grant of an
option under the Plan will not affect in any way
the right or power of the Company to make
adjustments, reclassifications, reorganizations or
changes of its capital or business structure, or to
merge or to consolidate, or to dissolve, liquidate,
sell, or transfer all or any part of its business
or assets.
SUBSTANTIAL CORPORATE
CHANGE Upon a Substantial Corporate Change, the Plan and
the offering will TERMINATE and all accumulated
funds will be distributed as though the
Participants had elected to withdraw unless either
(i) such termination would prevent use of "pooling
of interest" accounting for a reorganization,
merger, or consolidation of the Company that the
Board approves or (ii) unless provision is made in
writing in connection with such transaction for
the assumption or continuation of
outstanding elections, or
the substitution for such options or grants
of any options covering the stock or
securities of a successor employer
corporation, or a parent or subsidiary of
such successor, with appropriate adjustments
as to the number and kind of shares of stock
and prices, in which event the options will
continue in the manner and under the terms
so provided.
A Substantial Corporate Change means the
sale of all or substantially all of the
assets of the Company to one or more
individuals, entities, or groups (other than
an "Excluded Owner" as defined below),
complete or substantially complete
dissolution or liquidation of the Company;
a person, entity, or group (other than an
Excluded Owner) acquires or attains
ownership of 100% of the undiluted total
voting power of the Company's
then-outstanding securities eligible to vote
to elect members of the Board ("Company
Voting Securities");
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completion of a merger or consolidation of
the Company with or into any other entity
(other than an Excluded Owner) unless the
holders of the Company Voting Securities
outstanding immediately before such
completion, together with any trustee or
other fiduciary holding securities under a
Company benefit plan, retain control because
they hold securities that represent
immediately after such merger or
consolidation more than 20% of the combined
voting power of the then outstanding voting
securities of either the Company or the
other surviving entity or its ultimate
parent, or
any other transaction (including a merger or
reorganization in which the Company
survives) approved by the Board that results
in any person or entity (other than an
Excluded Owner) owning 100% of Company
Voting Securities.
An "Excluded Owner" consists of the Company, any
Company Subsidiary, any Company benefit plan, or
any underwriter temporarily holding securities for
an offering of such securities.
DESIGNATION OF BENEFICIARY A Participant may file with the Committee a written
designation of a beneficiary who is to receive any
payroll deductions credited to the Participant's
account under the 2000 ESPP or any shares of Common
Stock owed to the Participant under the 2000 ESPP
if the Participant dies. A Participant may change a
beneficiary at any time by filing a notice in
writing with the Human Resources professionals on
behalf of the Committee.
Upon the death of a Participant and upon receipt by
the Committee of proof of the identity and
existence of the Participant's designated
beneficiary, the Company will deliver such cash or
shares, or both, to the beneficiary. If a
Participant dies and is not survived by a
beneficiary that the Participant designated in
accordance with the immediate preceding paragraph,
the Company will deliver such cash or shares, or
both, to the personal representative of the estate
of the deceased Participant. If, to the knowledge
of the Committee, no personal representative has
been appointed within 90 days following the date of
the Participant's death, the Committee, in its
discretion, may direct the Company to deliver such
cash or shares, or both, to the surviving spouse of
the deceased Participant, or to any one or more
dependents or relatives of the deceased
Participant, or if no spouse, dependent, or
relative is known to the Committee, then to such
other person as the Committee may designate.
No designated beneficiary may acquire any interest
in such cash or shares before the death of the
Participant.
SUBSIDIARY EMPLOYEES Employees of Eligible Subsidiaries will be entitled
to participate in the 2000 ESPP, except as the
Committee otherwise designates.
Eligible Subsidiary means each of the Company's
Subsidiaries, except as the Board or Committee
otherwise specifies. Subsidiary means any
corporation (other than the Company) in an unbroken
chain of corporations including the Company if, at
the time an option is granted to a Participant
under the 2000 ESPP, each of the corporations
(other than the last corporation in the unbroken
chain)
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owns stock possessing 50% or more of the total
combined voting power of all classes of stock in
one of the other corporations in such chain.
Subsidiary includes any single member limited
liability company with its corporate member in the
foregoing chain.
TRANSFERS, ASSIGNMENTS, AND
PLEDGES A Participant may not assign, pledge, or otherwise
dispose of payroll deductions credited to the
Participant's account or any rights to exercise an
option or to receive shares of Common Stock under
the 2000 ESPP other than by will or the laws of
descent and distribution or under a qualified
domestic relations order, as defined in the
Employee Retirement Income Security Act. Any other
attempted assignment, pledge or other disposition
will be without effect, except that the Company may
treat such act as an election to withdraw under the
WITHDRAWAL section.
AMENDMENT OR TERMINATION OF
PLAN The Board of Directors of the Company or the
Committee may at any time terminate or amend the
2000 ESPP. Any amendment of the 2000 ESPP that (i)
materially increases the benefits to Participants,
(ii) materially increases the number of securities
that may be issued under the 2000 ESPP, or (iii)
materially modifies the eligibility requirements
for participation in the 2000 ESPP must be approved
by the shareholders of the Company to take effect.
The Company will refund to each Participant the
amount of payroll deductions credited to his
account as of the date of termination as soon as
administratively feasible following the effective
date of the termination.
EFFECT ON OTHER PLANS Whether exercising or receiving an option causes
the participant to accrue or receive additional
benefits under any pension or other plan is
governed solely by the terms of such other plan.
NOTICES All notices or other communications by a
Participant to the Committee or the Company shall
be deemed to have been duly given when the Human
Resources Department or local Human Resources
professionals of the Company receive them or when
any other person or entity the Company designates
receives the notice or other communication in the
form the Company specifies.
GENERAL ASSETS Any amounts the Company invests or otherwise sets
aside or segregates to satisfy its obligations
under this 2000 ESPP will be solely the Company's
property (except as otherwise required by Federal
or state wage laws), and the optionee's claim
against the Company under the 2000 ESPP, if any,
will be only as a general creditor. The optionee
will have no right, title, or interest whatever in
or to any investments that the Company may make to
aid it in meeting its obligations under the 2000
ESPP. Nothing contained in the 2000 ESPP, and no
action taken under its provisions, will create or
be construed to create an implied or constructive
trust of any kind or a fiduciary relationship
between the Company and any Employee, Participant,
former Employee, former Participant, or any
beneficiary.
PRIVILEGES OF STOCK
OWNERSHIP No Participant and no beneficiary or other person
claiming under or through such Participant will
have any right, title, or interest in or to any
shares of Common Stock allocated or reserved under
the Plan except as to such shares of Common Stock,
if any, that have been issued to such Participant.
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<PAGE> 39
TAX WITHHOLDING To the extent that a Participant realizes ordinary
income or wages for employment tax purposes in
connection with a sale or other transfer of any
shares of Common Stock purchased under the Plan or
the crediting of interest to an account, the
Company may withhold amounts needed to cover such
taxes from any payments otherwise due to the
Participant. Any Participant who sells or otherwise
transfers shares purchased under the Plan within
two years after the beginning of the Payroll
Deduction Period in which he purchased the shares
must, within 30 days of such transfer, notify the
Company's Payroll Department in writing of such
transfer. Each Participant, as a condition of
participation, agrees that the Company may treat
the purchase of shares and/or their disposition as
taxable events requiring the withholding or other
collection of income and employment taxes and
further agrees to pay any such taxes for which the
Company cannot reasonably withhold.
LIMITATIONS ON LIABILITY Notwithstanding any other provisions of the 2000
ESPP, no individual acting as a director, employee,
or agent of the Company shall be liable to any
Employee, Participant, former Employee, former
Participant, or any spouse or beneficiary for any
claim, loss, liability, or expense incurred in
connection with the 2000 ESPP, nor shall such
individual be personally liable because of any
contract or other instrument he executes in such
other capacity. The Company will indemnify and hold
harmless each director, employee, or agent of the
Company to whom any duty or power relating to the
administration or interpretation of the 2000 ESPP
has been or will be delegated, against any cost or
expense (including attorneys' fees) or liability
(including any sum paid in settlement of a claim
with the Board's approval) arising out of any act
or omission to act concerning this 2000 ESPP unless
arising out of such person's own fraud or bad
faith.
NO EMPLOYMENT CONTRACT Nothing contained in this Plan constitutes an
employment contract between the Company or an
Eligible Subsidiary and any Employee. The 2000 ESPP
does not give an Employee any right to be retained
in the Company's employ, nor does it enlarge or
diminish the Company's right to terminate the
Employee's employment.
DURATION OF ESPP Unless the Company's Board extends the Plan's term,
no Payroll Deduction Period will end after March
16, 2010.
APPLICABLE LAW The laws of the State of Delaware (other than its
choice of law provisions) govern the 2000 ESPP and
its interpretation.
LEGAL COMPLIANCE The Company will not issue any shares of Common
Stock under the Plan until the issuance satisfies
all applicable requirements imposed by Federal and
state securities and other laws, rules, and
regulations, and by any applicable regulatory
agencies or stock exchanges. To that end, the
Company may require the optionee to take any
reasonable action to comply with such requirements
before issuing such shares. No provision in the
Plan or action taken under it authorizes any action
that Federal or state laws otherwise prohibit.
The Plan is intended to conform to the extent
necessary with all provisions of the Securities Act
of 1933, as amended, ("Securities Act") and the
Securities Exchange Act of 1934, as amended, and
all regulations and rules the Securities and
Exchange Commission issues
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under those laws, including specifically Rule
16b-3. Notwithstanding anything in the Plan to the
contrary, the Committee and the Board must
administer the Plan, and Participants may purchase
Common Stock, only in a way that conforms to such
laws, rules, and regulations. To the extent
applicable law permits, the Plan and any offers
will be deemed amended to the extent necessary to
conform to such laws, rules, and regulations.
APPROVAL OF STOCKHOLDERS The ESPP must be submitted to the shareholders of
the Company for their approval within 12 months
after the Board adopts the ESPP. The adoption of
the ESPP is conditioned upon the approval of the
shareholders of the Company, and failure to receive
their approval will render the ESPP and any
outstanding options thereunder void and of no
effect.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS
<TABLE>
<S> <C> <C> <C> <C>
1. Election of directors. Nominees: For Against Abstain
(01) J. Carter Beese, Jr., (02) Frank A.
Bonsal, Jr., (03) Mark D. Ein, (04) E.
Wayne Jackson III, (05) David S. Oros, 2. Approval of Amendment [ ] [ ] [ ]
(06) Rahul C. Prakash, (07) Janice M. to the Company's Amended
Roberts, (08) Dr. Rajendra Singh, (09) and Restated Certificate of
George P. Stamas, (10) Robin T. Vasan, Incorporation.
(11) Devin N. Wenig, (12) Thomas E. Wheeler
3. The appointment of KPMG [ ] [ ] [ ]
LLP as Independent Auditors.
For Withheld
the [ ] from all [ ]
Nominees Nominees
4. Proposal to approve the [ ] [ ] [ ]
- -------------------------- Aether Systems, Inc.
[ ] For all nominees except as Employee Stock Purchase
noted above Plan.
</TABLE>
<TABLE>
<S> <C>
In their discretion, upon such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE [ ]
AT LEFT
MARK HERE IF YOU PLAN TO ATTEND THE
MEETING [ ]
NOTE: Please sign exactly as name appears hereon. Joint
owners should each sign. When assigning as attorney, executor,
administrator, trustee or guardian, give full name and title as
such.
Please sign, date and return promptly in the accompanying envelope.
</TABLE>
<TABLE>
<S> <C> <C> <C>
Signature: Date: Signature: Date:
------------------------- ---------------- ---------------------------------- -------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROXY
AETHER SYSTEMS, INC.
PROXY FOR ANNUAL MEETING OF APRIL 28, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints David S. Oros and Davis C. Reymann,
or either of them, as attorneys-in-fact, with full power of substitution, to
vote in the manner indicated on the reverse side, and with discretionary
authority as to any other matters that may properly come before the meeting, all
shares of common stock of Aether Systems, Inc. which the undersigned is entitled
to vote at the annual meeting of stockholders of Aether Systems, Inc. to be held
on April 28, 2000 at the BWI Airport Marriott, 1743 West Nursery Road,
Baltimore, MD 21240 at 10:00 a.m. or any adjournment thereof.
NOT VALID UNLESS DATED AND SIGNED ON THE REVERSE SIDE
