<PAGE>
As filed with the Securities and Exchange Commission on May 1, 2000
Registration No. 333-33282
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AT ROAD, INC.
(Exact name of Registrant as specified in its charter)
---------------
Delaware 7373 94-3209170
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
47200 Bayside Parkway
Fremont, CA 94538
(510) 668-1638
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
Krish Panu
President and Chief Executive Officer
At Road, Inc.
47200 Bayside Parkway
Fremont, CA 94538
(510) 668-1638
(Name, address including zip code, and telephone number including area code, of
agent for service)
---------------
Copies to:
Tae Hea Nahm Mark A. Bertelsen
Gene Yoon Jose F. Macias
Flora Szilagyi Betsey Sue
Eric M. Bowen Wilson Sonsini Goodrich & Rosati
VENTURE LAW GROUP 650 Page Mill Road
A Professional Corporation Palo Alto, CA 94304
2800 Sand Hill Road
Menlo Park, CA 94025
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the Registration Statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 1, 2000
Shares
[@ROAD LOGO]
Common Stock
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Prior to this offering, there has been no public market for our common stock.
The initial public offering price of the common stock is expected to be between
$ and $ per share. We have applied to list our common stock on the
Nasdaq Stock Market's National Market under the symbol "ARDI."
The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" on page 6.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions @Road
-------- ------------- -----------
<S> <C> <C> <C>
Per Share.................................... $ $ $
Total........................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
--------
Credit Suisse First Boston
Chase H&Q
U.S. Bancorp Piper Jaffray
The date of this prospectus is , 2000.
<PAGE>
[INSIDE FRONT COVER]
[COLOR ARTWORK]
DESCRIPTION OF COVER ARTWORK
Outside Front Gatefold:
In the top left corner, the text "THE @ROAD SERVICE" appears.
In the top left corner below the caption, there is a graphic that depicts a
satellite and has the text "GPS SATELLITE" to the immediate right of it.
Coming down from the satellite is a lightning bolt, which is implying data
being sent to the three vehicles below--the vehicle at the left is a mini-van,
the vehicle in the center is a limousine, and the vehicle on the right is a
bus. Each vehicle has an antenna attached to the roof of the vehicle. From the
vehicles moving in a diagonal direction up and to the right, there is a
lightning bolt to a steel tower that has the text "WIRELESS NETWORK" below it.
The tower has four concentric circles emanating from the top of the tower.
There are three legs to the tower. From the bottom of the right-most leg there
is an upward curving line to the right that goes into a cloud-like object that
has the text "INTERNET" in the center of it. The cloud has a dark outline with
a light interior. From the top and bottom of the cloud two additional lines
emerge. One line curves from the top middle of the cloud in an upwardly left
direction to three rectangular box-like structures meant to resemble computer
data servers with the text "@ROAD INTERNET SERVICE CENTER" to the left of the
structures. The three box-like structures cascade slightly up to the left.
From the bottom right of the cloud extends the second line, which moves down
to the right and back to the left. The line terminates in the back of a laptop
computer. On the screen of the computer is a graphical depiction of roads,
land and coastline, meant to illustrate an @Road website screen shot, as would
be seen by an @Road customer.
Inside Front Gatefold:
The gatefold is a two-page side-by-side display which depicts three different
screen shots from our website. Each is a different web page from our website.
In the top left corner of the gatefold is the first screen shot. It is a view
of a computer screen that is running Microsoft Internet Explorer. Down the
left-hand side of this screen shot is first the @Road logo, then a scrolling
menu that says above it "Display Vehicle" and would enable a user of this web
page to select a vehicle. Below this scrolling menu is another scrolling menu
that says above it "Update Position" and would enable a user of the web page
to select a vehicle. Immediately below this menu is a button that a user could
press that has the text "Apply" on it. Below this button are three additional
buttons, one below the next. The first button has the text "Settings" on it,
the second has the text "Locate," and the third has the text "Help." To the
right of this column is another column with a series of options that can be
selected. To the left of each option is a white box that if it were clicked on
would indicate that it had been selected with the appearance of an arrow in
the box. To the right of this column is a map. The map depicts the San
Francisco Bay Area. The map depicts water and land with major roadways and the
names of those roadways depicted. On the map there are light and dark diamonds
that indicate the location of a vehicle that is being tracked presently. One
of the vehicles is selected and additional information about that vehicle is
displayed, including the name of the vehicle, the date, the time and the
length of the current stop. The entire screen shot has a shadow behind it.
To the right of the first screen shot is the following text:
The location of a customer's vehicles can be displayed on a map.
Overlapping the bottom right corner of the first screen shot is the second
screen shot. This screen shot is of equal size as the first screen shot. It is
a view of a computer screen that is running Netscape Navigator. The page has
the text "Activity Report" in the upper left-hand corner. Underneath this text
is a second row of text "Vehicle Activity Report" and the text "from 3/16/2000
0:0:0 to 3/17/2000 0:0:0 0:0:59", which is meant to symbolize a report of this
vehicle's activity for this time period. Underneath this text in the next line
is text that reads "Vehicle: Vehicle3", meant to represent that the text
underneath this line refers to Vehicle3 of the customer's fleet. Underneath
this text in bold is the word "Summary:" with five lines of text underneath
one another. On the first line under "Summary" is "Total Time", the second
line is "Total Distance", the third line is "Number of Stops", the fourth line
is "Total Stop Time", the fifth line in bold is "Detail:" and directly
underneath it is a table that is eleven columns wide and eleven rows high that
provides information including the location of where each stop was made
including street address, closest cross street, city, state, zip code and
county. Under this table in the bottom left corner of the screen shot is text
that reads "Vehicle: Vehicle4", meant to represent that the text underneath
this text refers to Vehicle4 of the customer's fleet. Underneath this text in
bold is the word "Summary:" with five lines of text beneath one another. On
the first line under "Summary" is "Total Time", the second line is "Total
Distance", the third line is "Number of Stops", the fourth line is "Total Stop
Time", the fifth line is "Detail:" and directly underneath it is a table
similar to the table above but this table is on the web page and predominantly
below the screen shot. The entire screen shot has a shadow behind it.
To the right of the second screen shot is the following text:
We offer our customers comprehensive, detailed reporting of vehicle activity.
Overlapping the bottom right corner of the second screen shot is the third
screen shot. This screen shot is equal in size to the second screen shot. It
is a view of a computer screen that is running America Online and is titled
"@Road." Down the left-hand side of the screen shot is first the @Road logo,
directly below it is the text "Control Panel" in italics and then a group of
six buttons that a user could press. The first button is "Vehicle Status," the
second is "Map ViewPLUS," the third is "Reports," the fourth is "Messaging,"
the fifth is "Administration" and the sixth is "Support." Slightly below this
group of buttons is one more button that is a slightly lighter shade with the
text "Fleet Resources." To the right of this column is another frame with the
heading "Welcome." On the page are a series of sub-headings with related
hypertext links that if clicked on would enable a user of this web page to be
redirected to another desired website. The sub headings are: "Fleet & Driver
Services," "Supplies and Services," "Financial," "Fleet Equipment," "Fuel
Prices," "Shop," "Industry Related Services," and "Associations, Government
and Trade Magazines". The entire screen shot has a shadow behind it.
To the right of the third screen shot is the following text:
Our web-site offers online information and links to providers of goods and
services.
In the bottom left-hand corner of the gatefold is the @Road logo.
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 16
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 27
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 36
Related Party Transactions................................................. 45
Principal Stockholders..................................................... 47
Description of Capital Stock............................................... 49
Shares Eligible For Future Sale............................................ 51
Underwriting............................................................... 53
Notice To Canadian Residents............................................... 56
Legal Matters.............................................................. 57
Experts.................................................................... 57
Where You Can Find More Information........................................ 57
Index To Consolidated Financial Statements................................. F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
Until , 2000 (25 days after the commencement of this offering),
all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including the financial data
and related notes, before making an investment decision.
@Road
We integrate Global Positioning System technology, wireless communications
and the Internet to enable companies to efficiently manage their mobile
resources with location-relevant and time-sensitive information. Our solution
is an easy-to-use, cost-effective, Internet-based service for vehicle
management that provides location, reporting, dispatch, messaging and
management services. Our service allows customers to use our website to track
the movement of their vehicles, employees, and goods and services, and enables
two-way messaging between our customers and their mobile workers. As a result,
we believe our service provides significant value to our customers by reducing
their costs of doing business and increasing the productivity of their mobile
resources.
The complex task of monitoring and tracking the movement of products and
people is critical to companies seeking to minimize resource requirements while
maximizing their profitability. Many businesses use inefficient and incomplete
systems such as wireless phones and pagers or systems based on proprietary
technologies requiring substantial and ongoing investments in information
technology and hardware.
Our service utilizes the following existing technologies: Global Positioning
System, wireless networks and the Internet. The Global Positioning System is a
worldwide radio-navigation system formed from a constellation of satellites and
ground systems that are used as reference points to calculate positions. Our
service includes a proprietary hardware device that integrates wireless
Internet connectivity with a Global Positioning System receiver. The device is
installed in each vehicle and receives signals transmitted from Global
Positioning System satellites to determine the location and velocity of the
vehicle. These data are transmitted over wireless networks and the Internet to
our network of secure servers. Our customers can retrieve the information from
our website using an Internet browser. Because the customer data and software
reside at our Internet Service Center, our customers do not need to make a
substantial investment in capital equipment and support to use our services.
Our service offers the following benefits:
. Productivity enhancement. Customers can achieve enhanced productivity by
closely monitoring all their vehicles, routing vehicles more efficiently,
reducing vehicle downtime, and increasing the number of deliveries or
trips per vehicle.
. Differentiated service. Our customers can provide their customers with
more detailed information on the location of products and services and
allocate resources more efficiently to reduce wait times experienced by
their customers.
. Ease of implementation. The installation of our devices into a vehicle
takes less than an hour. Once installed, our customers can manage all
their vehicles through an Internet browser. As our customers' fleets
grow, our solution is easily scaleable by installing devices in
additional vehicles.
Our objective is to be the leading provider of location-relevant and time-
sensitive information services and solutions to businesses and organizations
managing mobile resources. Key elements of our strategy include:
. Establish @Road as the market leader in vehicle management services
. Increase the value of our solution by expanding the range of services we
provide
. Leverage partnerships to accelerate market acceptance
. Penetrate new markets and applications
. Maintain technology leadership
As of December 31, 1999, our service was being used with over 7,000
vehicles. Our customers' fleets range in size from two vehicles to over 350. We
market and sell our service to a broad range of customers that vary in size,
geographic location and industry including trucking companies, food and
beverage distributors, delivery services, and taxi cabs and limousines.
We commenced operations in July 1996, began to recognize revenues in June
1998 and reincorporated in Delaware on , 2000. Our address is 47200
Bayside Parkway, Fremont, CA 94538, and our telephone number is (510) 668-1638.
Our website is located at www.atroad.com. Information contained on our website
does not constitute part of this prospectus.
3
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by
@Road.................. shares
Common stock to be out-
standing after the
offering............... shares
Use of proceeds......... For general corporate purposes, including working
capital and capital expenditures. See "Use of Proceeds."
Proposed Nasdaq National
Market symbol.......... ARDI
</TABLE>
The number of shares of common stock to be outstanding after this offering
is estimated based on the number of shares outstanding on December 31, 1999,
adjusted to reflect our three-for-two forward stock split effected in February
2000. The table above excludes 4,056,888 shares subject to outstanding options
and stock purchase rights at a weighted average exercise price of $0.57 per
share as of December 31, 1999, and 2,544,925 shares available for future
issuance under our stock option plan. See "Management--Stock Plans" and Note 7
to notes to consolidated financial statements.
Summary Financial Data
<TABLE>
<CAPTION>
Period from
July 1, 1996
(commencement
of operations) Years Ended December 31,
to December 31, --------------------------
1996 1997 1998 1999
--------------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Revenues:
Service...................... $ -- $ -- $ 4 $ 612
Product...................... -- -- 64 294
Total revenues................ -- -- 68 906
Stock compensation expense.... -- -- -- 4,973
Total costs and expenses...... 299 1,102 1,568 15,199
Net loss...................... $ (275) $(1,004) $(1,410) $(13,489)
Basic and diluted net loss per
share........................ $ (0.12) $ (0.45) $ (0.62) $ (4.88)
Shares used in calculating
basic and diluted net loss
per share.................... 2,250 2,250 2,287 2,763
Pro forma basic and diluted
net loss per share........... $ (0.59)
Shares used in calculating pro
forma basic and diluted net
loss per share............... 22,882
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------
Pro forma
Actual Pro forma as adjusted
------- --------- -----------
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents......................... $22,714 $33,814 $
Working capital................................... 38,758 49,858
Total assets...................................... 45,174 56,274
Total stockholders' equity........................ 40,608 51,708
</TABLE>
- --------
. See Note 1 of the notes to consolidated financial statements for an
explanation of the determination of the number of shares and share
equivalents used in computing per share data.
. Pro forma information summarized above reflects the issuance of 1,280,769
shares of Series D convertible preferred stock at $8.67 per share for
proceeds of approximately $11,100,000 in January 2000.
. Pro forma as adjusted reflects the application of the net proceeds from the
sale of shares of our common stock at an assumed initial public
offering price of $ per share, after deducting the estimated underwriting
discount and the estimated offering expenses. It also reflects conversion of
all outstanding shares of preferred stock into common stock upon the closing
of the offering. See "Use of Proceeds" and "Capitalization."
4
<PAGE>
Except as otherwise indicated, information in this prospectus is based on
the following assumptions:
. our reincorporation in Delaware and concurrent name change from @Road,
Inc. to At Road, Inc. which occurred in 2000;
. a three-for-two forward stock split of our outstanding capital stock
which occurred in February 2000;
. the conversion of all outstanding shares of our preferred stock into
shares of common stock, on a one-for-one basis, immediately prior to the
closing of this offering;
. the filing of our amended and restated certificate of incorporation; and
. no exercise of the underwriters' over-allotment option.
@Road, At Road, the @Road logo, FleetASAP, StatWhere, internet Location
Manager, internet Data Terminal, iLM, iDT and www.atroad.com are trademarks
and/or service marks of At Road, Inc. All other brand names or trademarks
appearing in this prospectus are the property of their respective holders.
5
<PAGE>
RISK FACTORS
You should carefully consider these risk factors, together with all of the
other information included in this prospectus, before you decide to purchase
shares of our common stock. The risks and uncertainties described below are not
the only ones we face. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial may also harm our business.
Risks Related to Our Business
We have a limited operating history, which makes it difficult to evaluate your
investment in our common stock.
Your evaluation of our business will be difficult because we have a limited
operating history. We commenced operations in July 1996 and commercially
offered our first services in the second half of 1998. We may not continue to
grow or achieve profitability. We face a number of risks encountered by early-
stage companies in the Global Positioning System, wireless communications and
Internet information industries, including:
. the uncertainty of market acceptance of our services;
. our need to introduce reliable and robust products and services that meet
the demanding needs of customers;
. our need to expand our marketing, sales and support organizations, as
well as our distribution channels;
. our ability to anticipate and respond to market competition;
. our need to manage expanding operations;
. our dependence on wireless carriers;
. limited coverage of wireless networks; and
. migration to new networks, which could cause our products to be
incompatible or out of date.
Our business strategy may not be successful, and we may not successfully
address these risks.
We have historically incurred losses and these losses may increase in the
future.
We have never been profitable. As of December 31, 1999, we had an
accumulated deficit of $16.2 million. In order to become profitable and sustain
profitability, we will need to generate significant revenues to offset our cost
of revenues, and sales and marketing, research and development and general and
administrative expenses. We may not achieve or sustain our revenue or profit
goals and our losses may grow in the future. In order to facilitate the sale of
our services, we often sell our hardware below cost. As a result, we have
experienced, and expect to continue to experience, negative gross margins on
the sale of our hardware. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
If we do not increase revenue from the sale of our services to new and existing
customers, our business may not be successful.
Our success depends on our ability to increase revenue from the sale of our
services to new and existing customers and on market acceptance of our
services. We may not be able to achieve widespread adoption of our services. If
we are not able to expand our customer base and increase our revenue from new
and existing customers, our business will be seriously harmed.
Our success depends on our ability to maintain and expand our sales channels.
In order to increase our market awareness, customer base and revenues, we
need to expand our direct and indirect sales operations. There is strong
competition for qualified sales personnel in our business, and we may not be
able to attract and retain sufficient new sales personnel to expand our
operations. New sales personnel will
6
<PAGE>
require training and will take time to achieve full productivity. In addition,
we believe that our success is dependent on expansion of our indirect
distribution channels, including our relationships with wireless carriers and
independent sales agents. To date, we have relationships with a limited number
of these wireless carriers and independent sales agents. We may not be able to
establish relationships with additional distributors on a timely basis, or at
all, and our distributors may not devote adequate resources to promoting and
selling our services.
We have limited resources and may be unable to manage our anticipated growth in
operations.
If we fail to develop and maintain our services as we experience rapid
growth, demand for our services and our revenues could decrease. Our
development and expansion has placed, and will continue to place, significant
strain on our managerial, operational, and financial resources. Due to the
limited deployment of our services, we are unable to assess our ability to grow
the business and manage a substantially larger number of customers and
additional services.
If we cannot deliver the features and functionality our customers demand, we
will be unable to retain or attract new customers.
Our success depends upon our ability to determine the features and
functionality our customers demand and to design and implement services that
meet their needs in an efficient manner. We cannot assure you that we can
successfully determine customer requirements or that our future services will
adequately satisfy customer demands. To date, the design of our services has
been based on our internal efforts and feedback from a limited number of
existing and potential customers. In addition, we may experience difficulties
that could delay or prevent the successful development, introduction or
marketing of new services and service enhancements. If we cannot effectively
deploy, maintain and enhance our services, our expenses may increase, we may
not be able to recover our costs and our competitive position may be harmed.
We depend on wireless networks owned and controlled by others. If our customers
do not have continued access to sufficient capacity on reliable networks, we
may be unable to deliver services and our revenues could decrease.
Our ability to grow and achieve profitability depends on the ability of
wireless carriers to provide sufficient network capacity, reliability and
security to our customers. Even where wireless carriers provide coverage to
entire metropolitan areas, there are occasional lapses in coverage due to tall
buildings blocking the transmission of data to and from vehicles. This effect
could make our services less reliable and useful, and customer satisfaction
could suffer. Our financial condition could be seriously harmed if our wireless
carriers were to increase the prices of their services, or to suffer
operational or technical failures. If wireless carriers do not expand coverage,
we may be unable to offer our service to additional areas.
If one or more of the agreements we have with wireless carriers is terminated,
we may be unable to offer our services to our customers within the carrier's
coverage area.
There are a limited number of wireless carriers offering services compatible
with our service. These wireless carriers have little overlap in their primary
service coverage areas. Our existing agreements with wireless carriers may be
terminated upon as little as thirty-day written notice. If one or more of our
wireless carriers decides to terminate or not renew its contract with us, we
may incur additional costs relating to obtaining alternate coverage from
another wireless carrier outside of its primary coverage area, or we may be
unable to replace the coverage at all, causing a complete loss of service to
our customers in that coverage area.
We depend on a limited number of third parties to manufacture and supply
critical components for our services. If these parties do not perform their
obligations, we may be unable to find other suppliers or operate our business.
A customer requires an internet Location Manager to use our service. To use
our service with two-way messaging, a customer requires an internet Location
Manager and an internet Data Terminal. The internet Location Manager, which we
install in a customer's vehicle, determines the vehicle's location, velocity
and
7
<PAGE>
orientation and gathers other information about the vehicle. The internet Data
Terminal, when installed in a customer's vehicle, adds the incremental ability
to send and receive messages to and from the vehicle. We cannot be sure that
alternative sources for key components used in the internet Location Manager
and the internet Data Terminal will be available when needed, or if available,
that these components will be available on commercially reasonable terms. We
rely on sole suppliers and manufacturers for a number of key components for
these products and do not have long term agreements with any of these suppliers
and manufacturers. Our sole suppliers and manufacturers of key components
include:
. Taiwan Semiconductor Manufacturing Company, our sole manufacturer of
Global Positioning System receiver chips;
. Philsar Electronics, our sole manufacturer of radio frequency chips;
. Orient Semiconductor Electronics, our sole manufacturer of internet
Location Manager; and
. Micronet, our sole supplier of internet Data Terminals.
If our agreements with these suppliers and manufacturers are terminated or
expire, or if we are unable to obtain sufficient quantities of these
components, our search for additional or alternate suppliers and manufacturers
could result in significant delays, added expense and our inability to maintain
or expand our customer base. Any of these events could require us to take
unforeseen actions or devote additional resources to provide our services and
could harm our ability to compete effectively.
We depend on recruiting and retaining qualified personnel and our inability to
do so would seriously harm our business.
Because of the technical nature of our services and the market in which we
compete, our success depends on the continued services of our current executive
officers and our ability to attract and retain qualified personnel with Global
Positioning System, wireless communications and Internet software expertise.
Competition for qualified personnel in these industries is intense,
particularly in the San Francisco Bay Area. Competitors and others have in the
past, and may in the future, attempt to recruit our employees. In addition, new
employees generally require substantial training, which requires significant
resources and management attention. Even if we invest significant resources to
recruit, train and retain qualified personnel, we may not be successful in our
efforts.
We face competition from existing and potential competitors, which could reduce
our market share and revenues.
The market for our services is competitive and is expected to become even
more competitive in the future. Our customers choose our services primarily on
the basis of the functionality, price, ease of use, quality and geographic
coverage of our services. If we are unable to compete successfully in these
areas, competitive pressures may harm our business, resulting in a loss of
market share and revenues. Our current and potential competitors include:
. other providers of vehicle-location services, such as Qualcomm, whose
OmniTRACS service uses satellite communication technology to manage
fleets of trucks that travel long distances;
. other wireless Internet companies, such as Phone.com and Research in
Motion;
. companies working on emergency-911 solutions, such as True Position;
. companies with solutions that integrate location, wireless communications
and call centers, such as General Motors; and
. companies that provide wireless, location-relevant applications, such as
SignalSoft.
Many of our existing and potential competitors have substantially greater
financial, technical, marketing and distribution resources than we do.
Additionally, many of these companies have greater name recognition and more
established relationships with our target customers. Furthermore, these
competitors may be able to adopt more aggressive pricing policies and offer
customers more attractive terms than we can.
8
<PAGE>
Our services also compete with alternative means of communication between
vehicles and their managers, including wireless telephones, two-way radios and
pagers. In addition, we expect that new competitors will enter the market for
location-relevant wireless information as businesses and consumers increasingly
demand information when they are mobile. Furthermore, the widespread adoption
of industry standards may make it easier for new market entrants or existing
competitors to offer the services we offer or may offer in the future.
Our quarterly operating results are subject to fluctuations, and our stock
price may decline if we do not meet the expectations of investors and analysts.
Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter due to a number of factors,
many of which are outside our control. These factors include, but are not
limited to:
. delays in market acceptance or implementation by our customers of our
services;
. changes in demand by our customers for existing and additional services;
. changes in or cancellations of our agreements with wireless carriers;
. introduction of new services by us or our competitors;
. changes in our pricing policies or those of our competitors or suppliers;
. changes in our mix of sources of revenues; and
. changes in accounting standards, including standards relating to revenue
recognition, business combinations and stock-based compensation.
Our expense levels are based, in part, on our expectation of future
revenues. As a result, any shortfall in revenues relative to our expectations
could cause significant changes in our operating results from quarter to
quarter. We believe period-to-period comparisons of our revenue levels and
operating results are not meaningful. You should not rely on our quarterly
revenues and operating results to predict our future performance. In some
future quarter our operating results may be below the expectations of public
market analysts and investors and, as a result, the price of our common stock
may fall.
Our success and ability to compete depends upon our ability to secure and
protect patents, trademarks and other proprietary rights.
Our success depends on our ability to protect our proprietary rights to the
technologies used to implement and operate our services in the U.S. and in
foreign countries. In the event that a third party breaches the confidentiality
provisions in our contracts or misappropriates or infringes on our intellectual
property or the intellectual property licensed to us by third parties, our
business would be seriously harmed. To protect our proprietary rights, we rely
on a combination of trade secrets, confidentiality and other contractual
provisions, and patent, copyright and trademark laws, which afford us only
limited protection. Third parties may independently discover or invent
competing technologies or reverse engineer our trade secrets, software or other
technology. Furthermore, laws in some foreign countries may not protect our
proprietary rights to the same extent as the laws of the U.S. Therefore, the
measures we take to protect our proprietary rights may not be adequate. See
"Business--Intellectual Property."
A disruption of our services due to accidental or intentional security breaches
may harm our reputation, may cause a loss of revenues and may increase our
expenses.
Unauthorized access, computer viruses and other accidental or intentional
actions could disrupt our systems. We expect to incur significant costs to
protect against the threat of security breaches and to alleviate problems
caused by any breaches. Currently, the transmission of our customers'
proprietary information over the Internet is not protected by encryption
technology. If a third party were to misappropriate our customers' proprietary
information, we could be subject to claims, litigation or other potential
liabilities that could seriously harm our revenues and result in the loss of
customers.
9
<PAGE>
System failures could reduce our sales, increase costs or result in liability
claims and seriously harm our business.
Any disruption to our services, information systems or communications
networks could result in the inability of our customers to receive our services
for an indeterminate period of time. Our services may not function properly if
our systems fail, or if there is an earthquake, fire, flood or other natural
disaster, or an act of war. Any disruption to our services could cause us to
lose customers or face litigation that would involve substantial costs and
distract management from operating our business. We currently do not have fully
redundant systems for our services at an alternate site. Our operations depend
upon our ability to maintain and protect our computer systems in our principal
facilities in Fremont, California, which are on or near earthquake fault zones.
We depend on Global Positioning System technology owned and controlled by
others. If we do not have continued access to Global Positioning System
technology and satellites, we will be unable to deliver our services and our
revenues will decrease.
Our services rely on signals from Global Positioning System satellites built
and maintained by the U.S. Department of Defense. Global Positioning System
satellites and their ground support systems are subject to electronic and
mechanical failures and sabotage. If one or more satellites malfunction, there
could be a substantial delay before they are repaired or replaced, if at all,
and our services may cease and customer satisfaction would suffer.
In addition, the U.S. government could decide not to continue to operate and
maintain Global Positioning System satellites over a long period of time or to
charge for the use of the Global Positioning System. Furthermore, because of
ever-increasing commercial applications of the Global Positioning System, other
U.S. government agencies may become involved in the administration or the
regulation of the use of Global Positioning System signals in the future. If
the foregoing factors affect the Global Positioning System, such as by
affecting the availability and pricing of Global Positioning System technology,
our business will suffer.
Our Global Positioning System technology depends on the use of radio frequency
spectrum controlled by others.
Global Positioning System technology is dependent on the use of radio
frequency spectrum. An international organization known as the International
Telecommunications Union controls the assignment of spectrum. If the
International Telecommunications Union reallocates radio frequency spectrum,
our services may become less useful or less reliable. This would, in turn, harm
our business. In addition, emissions from mobile satellites and other equipment
using other frequency bands may adversely affect the utility and reliability of
our services.
One third party has claimed that our services infringe on their intellectual
property and another third party has named us a defendant in a lawsuit arising
from the recruitment of employees. These and other claims which may arise could
result in significant expenses and distract our management.
We received a letter from the holder of two patents claiming that we
infringe its patents. We are currently in the process of reviewing these two
patents; however, the ultimate outcome of this matter cannot be determined at
this time. The patent holder has indicated that it may be willing to license
these patents to us. However, we cannot assure you that we would be able to
license these two patents on commercially reasonable terms, if at all. We may
also incur substantial legal fees, and our management would be distracted, if
the patent holder files a lawsuit against us. See "Business--Intellectual
Property."
We are a defendant in a lawsuit arising from the recruitment of employees
from another company. As a result of the lawsuit, we may incur legal fees, our
management may be distracted, and we may be required to pay damages.
Third parties may claim that our current or future products infringe their
proprietary rights or assert other claims against us. As the number of entrants
into our market increases, the possibility of an intellectual
10
<PAGE>
property or other claim against us grows. Any intellectual property or other
claim, with or without merit, would be time-consuming and expensive to litigate
or settle and could divert management attention from focusing on our core
business. As a result of such a dispute, we may have to pay damages, incur
substantial legal fees, develop costly non-infringing technology, if possible,
or enter into license agreements, which may not be available on terms
acceptable to us. This would increase our expenses and could decrease the
functionality of our service, which would make our services less attractive to
our current or potential customers.
Defects or errors in our services could result in the cancellation or delays of
our services, which would damage our reputation and harm our financial
condition.
We must develop our services quickly to keep pace with the rapidly changing
Global Positioning System, wireless communications and Internet markets.
Products and services that address these markets are likely to contain
undetected errors or defects, especially when first introduced or when new
versions are introduced. Our services may not be free from errors or defects,
which could result in the cancellation or disruption of our services. This
would damage our reputation, and result in lost revenues, diverted development
resources, and increased service and warranty costs.
The reporting of inaccurate location-relevant information could cause the loss
of customers and expose us to legal liability.
The accurate reporting of location-relevant information is critical to our
customers' businesses. If we fail to accurately report location-relevant
information, we could lose customers, our reputation and ability to attract new
customers could be harmed, and we could be exposed to legal liability. We may
not have insurance adequate to cover losses we may incur as a result of these
inaccuracies.
We may be subject to product liability claims that could result in significant
costs to us.
We may be subject to claims for damages related to errors and malfunctions
of our hardware components or their installation. A product liability claim
could seriously harm our business because of the costs of defending against
this type of lawsuit, diversion of employees' time and attention, and potential
damage to our reputation. Some of our agreements with our customers contain
provisions designed to limit exposure to potential product liability claims.
Limitation of liability provisions contained in our agreements may not be
enforceable under the laws of some jurisdictions. As a result, we could be
required to pay substantial amounts of damages in settlement or upon the
determination of any of these types of claims.
Our acquisition of substantially all the assets of Differential Corrections and
pending acquisition of substantially all the assets of Hynet Technologies may
not deliver the value we have agreed to pay and may result in excessive
expenses if we do not successfully integrate these assets or if the costs and
management resources we expend in connection with the integration exceed our
expectations.
In March 2000, we agreed to purchase substantially all the assets of
Differential Corrections and Hynet Technologies. We completed the acquisition
of substantially all the assets of Differential Corrections in April 2000 and
expect to complete the acquisition of substantially all the assets of Hynet
Technologies in May 2000. These acquisitions will require integrating the
assets and operations of Differential Corrections and Hynet Technologies with
our own. The acquisition in connection with Hynet Technologies is subject to
obtaining necessary consents from third parties and other conditions to closing
and may not be completed. We may not be able to successfully integrate the
personnel, operations and customers of Differential Corrections and Hynet
Technologies into our business. Additionally, we may fail to achieve the
anticipated synergies from the acquisition of Differential Corrections and
Hynet Technologies, including marketing, product development, location accuracy
improvements, distribution and other operational synergies.
The integration process may further strain our existing financial and
managerial controls, reporting systems and procedures. This may result in the
diversion of management and financial resources from our core business
objectives. We may also have to assume unanticipated liabilities related to the
acquired assets.
11
<PAGE>
We may establish alliances or acquire technologies or companies in the future,
which could result in the dilution of our stockholders and disruption of our
business.
We are continually evaluating our business alliances and external
investments in technologies related to our business. Acquisitions of companies,
divisions of companies, businesses or products and strategic alliances entail
numerous risks, any of which could materially harm our business in several
ways, including:
. diversion of management's attention from our core business objective and
other business concerns;
. failure to integrate the acquired company into our pre-existing business;
. potential loss of key employees from either our pre-existing business or
the acquired business;
. dilution of our existing stockholders as a result of issuing equity
securities; and
. assumption of liabilities of the acquired company.
Some or all of these problems may result from current or future alliances,
acquisitions or investments. Furthermore, we may not realize any value from
these alliances, acquisitions or investments.
We may need and may not be able to obtain additional capital, which could
prevent us from carrying out our business strategy.
We anticipate that our available cash resources combined with the net
proceeds from this offering will be sufficient to fund our operating needs for
the next 18 months, including the expansion of sales and marketing and research
and development programs during that period. Thereafter, we expect to require
additional financing in an amount that we cannot determine at this time. If our
plans or assumptions change or are inaccurate, we may be required to seek
capital sooner than anticipated. We may need to raise funds through public or
private debt or equity financings. If we need to raise additional funds, we may
not be able to do so on commercially reasonable terms, or at all, and may not
be able to continue to fund our operations.
If our wireless carriers decide to abandon Cellular Digital Packet Data
technology or do not continue to expand their Cellular Digital Packet Data
networks, we may be unable to deliver our services and our sales could
decrease.
Our services function only on Cellular Digital Packet Data-enabled networks.
The Cellular Digital Packet Data protocol covers only portions of the U.S., is
not widely used and may not gain market acceptance. If wireless carriers decide
to abandon the Cellular Digital Packet Data protocol in favor of other types of
wireless technology, we may not be able to provide our current services to our
customers. In addition, if wireless carriers do not expand their Cellular
Digital Packet Data coverage areas, we will be unable to meet the needs of
customers who wish to use our services outside the current coverage area.
Fluctuations in the value of foreign currencies could result in increased
product costs and operating expenses.
We have suppliers and manufacturers that are located outside the U.S. Some
transactions relating to supply and development agreements may be conducted in
currencies other than the U.S. dollar, and fluctuations in the value of foreign
currencies relative to the U.S. dollar could cause us to incur currency
exchange costs. In addition, some of our transactions denominated in U.S.
dollars may be subject to currency exchange rate risk. We cannot predict the
effect of exchange rate fluctuations on our future operating results. Should
there be a sustained increase in average exchange rates for the local
currencies in these countries, our suppliers and manufacturers may request a
price increase at the end of the contract period.
Risks Related to Our Market
Our business will be harmed if the demand for services based on wireless
communications does not grow.
The markets for wireless data services and related products and services are
still emerging, and continued growth in demand for, and acceptance of, these
services remains uncertain. Current barriers to market
12
<PAGE>
acceptance of these services include cost, reliability, functionality and ease
of use. We cannot be certain that these barriers will be overcome. Since the
market for our services is new and evolving, it is difficult to predict the
size of this market or its growth rate. Our financial performance will depend
in large part upon the continued demand for vehicle management services through
wireless technologies. We cannot assure you that a sufficient volume of
customers will demand these or other services based on these technologies. If
the market for wireless on-line vehicle management and other services grows
more slowly than we currently anticipate, our revenues may not grow.
If the use of the Internet by businesses does not continue to grow, our
business will be harmed.
Our future success is dependent on continued growth in the use of the
Internet by businesses. The use and acceptance of the Internet by businesses
may not increase for a number of reasons, including the cost and availability
of Internet access and concerns about privacy, security and reliability.
Capacity constraints caused by growth in the use of the Internet may impede
further development of the Internet to the extent that users experience delays,
transmission errors and other difficulties. If the necessary infrastructure,
products, services or facilities are not developed, or if the Internet does not
become a viable and widespread commercial medium, we may not be able to grow
our business.
Government regulations and standards may harm our business and could increase
our costs or reduce our opportunities to earn revenues.
In addition to regulations applicable to businesses in general, we may also
be subject to direct regulation by governmental agencies, including the Federal
Communications Commission and Department of Defense. These regulations may
impose licensing requirements or safety standards with respect to human
exposure to electromagnetic radiation and signal leakage. A number of
legislative and regulatory proposals under consideration by federal, state,
provincial, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, wireless communications
and GPS technology, including on-line content, user privacy, taxation, access
charges and liability for third-party activities. Additionally, it is uncertain
how existing laws governing issues such as taxation on the use of wireless
networks, intellectual property, libel, user privacy and property ownership,
will be applied to our services. The adoption of new laws or the application of
existing laws may expose us to significant liabilities and additional
operational requirements, which could decrease the demand for our services and
increase our cost of doing business. Wireless carriers who supply us with
airtime are subject to regulation by the Federal Communications Commission and
regulations that affect them could also increase our costs or limit the
provision of our services.
Our platform contains encryption technology whose export is restricted by law,
which may slow our growth or result in significant costs.
The U.S. government generally limits the export of encryption technology,
which our services incorporate. Foreign countries may impose similar regulatory
requirements. If any export approval that we receive is revoked or modified, if
our technology is unlawfully exported or if the U.S. government adopts new
legislation or regulations restricting export of our services and encryption
technology, we may not be able to distribute our services to potential
customers outside the U.S., which may seriously harm our business. We may need
to incur significant costs and divert resources to develop replacement
technologies or may need to adopt inferior substitute technologies to satisfy
these export restrictions. These replacement or substitute technologies may not
be the preferred security technologies of our customers, in which case, our
business may not grow. In addition, we may suffer similar consequences if the
laws of any other country limit the ability of third parties to sell encryption
technologies to us.
13
<PAGE>
Risks Related to This Offering
Like many technology companies, our stock price is likely to be volatile, which
may cause you to lose your investment and may result in costly litigation that
could divert our resources.
Stock markets have recently experienced dramatic price and volume
fluctuations, particularly for shares of technology companies. These
fluctuations can be unrelated to the operating performance of these companies.
Broad market fluctuations may reduce the market price of our common stock and
cause you to lose some or all of your investment. These fluctuations may be
exaggerated if the trading volume of our common stock is low. In addition, due
to the technology-intensive and emerging nature of our business, the market
price of our common stock may rise and fall in response to:
. announcements of technological or competitive developments;
. acquisitions or strategic alliances by us or our competitors;
. the gain or loss of a significant customer or order;
. changes in estimates of our financial performance or changes in
recommendations by securities analysts; and
. security breaches.
When the market price of a company's stock drops significantly, stockholders
often institute securities class action lawsuits against that company. A
lawsuit against us could cause us to incur substantial costs and could divert
the time and attention of our management and other resources from our business.
Our securities have no prior public market and our share price may decline
after this offering.
There has never been a public market for our common shares, and an active
public market for our common shares may not develop or be sustained after this
offering. If an active public market for our common shares does not develop,
the liquidity of your investment may be limited, and our share price may
decline below its initial public offering price. The initial public offering
price will be determined by negotiations between the underwriters and us and
may bear no relationship to the price that will prevail in the public market.
Future sales of common stock by our existing stockholders could cause our share
price to fall.
If our stockholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could fall. The perception
among investors that these sales will occur could also produce this effect.
After this offering, based upon the number of common shares outstanding as of
December 31, 1999, we will have common shares outstanding.
All of the common shares we will issue in this offering will
be immediately available for resale in the public markets, other than shares
purchased by our affiliates. In accordance with applicable securities laws, the
common shares outstanding after this offering will be available for sale in the
public market, and additional common shares issuable upon the exercise of stock
options will be available for sale once we file a registration statement
relating to our stock option plans. Our directors, executive officers and the
majority of our existing stockholders have agreed not to sell any shares of our
common stock for a period of 180 days after this offering without the consent
of Credit Suisse First Boston. Credit Suisse First Boston may at its discretion
release these parties from that agreement. See "Shares Eligible for Future
Sale."
Our certificate of incorporation and bylaws and state law contain provisions
that could discourage a takeover.
Upon completion of this offering, we will adopt a certificate of
incorporation and bylaws, which in addition to state law, may discourage, delay
or prevent a merger or acquisition that a stockholder may consider favorable.
These provisions include the following:
. establishing a classified board in which only a portion of the total
board members will be elected at each annual meeting;
14
<PAGE>
. authorizing the board to issue preferred stock;
. prohibiting cumulative voting in the election of directors;
. limiting the persons who may call special meetings of stockholders;
. prohibiting stockholder action by written consent; and
. establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.
Upon completion of this offering, we will adopt a certificate of
incorporation that will permit our board to issue shares of preferred stock
without stockholder approval, which means that the board could issue shares
with special voting rights or other provisions that could deter a takeover. In
addition to delaying or preventing an acquisition, the issuance of a
substantial number of preferred shares could adversely affect the price of our
common stock and dilute existing stockholders. See "Management--Board
Composition" and "Description of Capital Stock."
A limited number of stockholders will collectively continue to own a majority
of our common stock after this offering and may act, or prevent certain types
of corporate actions, to the detriment of other stockholders.
Immediately after this offering, our directors, officers and greater than 5%
stockholders will own more than % of our outstanding common shares.
Accordingly, these stockholders may, if they act together, exercise significant
influence over all matters requiring stockholder approval, including the
election of a majority of the directors and the determination of significant
corporate actions after this offering. This concentration could also have the
effect of delaying or preventing a change in control that could otherwise be
beneficial to our stockholders.
We will have broad discretion in how we use the proceeds from this offering,
and our use of these proceeds may not yield a favorable return.
We intend to use the proceeds from this offering for general corporate
purposes, including the development of our products and services and potential
acquisitions. Accordingly, we will have broad discretion in using these
proceeds. You will not have the opportunity to evaluate the economic, financial
or other information that we may use to determine how we use these proceeds.
Upon completion of this offering, you will experience immediate dilution.
Our tangible assets are readily identified assets such as property,
equipment, cash, securities and accounts receivable. The value of these assets
on our pro forma balance sheet minus the value of our liabilities equals $
per share, after giving effect to the completion of this offering. The offering
price exceeds this amount by $ per share. Therefore, you will be
paying more for a share of stock than the value reflected in our accounts of
tangible assets for that share. If we were forced to sell all our assets and
distribute the proceeds, you would not recover the amount you paid for your
shares unless we can sell the assets for more than the value we report for our
tangible assets. We also have outstanding a large number of stock options to
purchase common stock with exercise prices significantly below the price per
share in this offering. As a result, you will experience further dilution to
the extent these options are exercised.
15
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements, trend analysis and other information contained in this
prospectus relating to markets for our services and trends in revenues, gross
margins and anticipated expense levels, as well as other statements including
words such as "anticipate," "believe," "plan," "estimate," "expect," "intend"
and other similar expressions constitute forward-looking statements. These
forward-looking statements are subject to business and economic risks and
uncertainties, and our actual results of operations may differ materially from
those contained in the forward-looking statements.
USE OF PROCEEDS
The net proceeds to us from the sale of shares of common stock in this
offering will be approximately $ million, $ million if the
underwriters' over-allotment option is exercised in full, at an assumed initial
public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and the estimated offering expenses
payable by us.
We intend to use the net proceeds from this offering primarily for general
corporate purposes, including further development and commercialization of our
products, research and development, working capital and capital expenditures.
We may use a portion of the net proceeds from this offering to acquire or
invest in businesses, technologies or services that complement our business.
The amounts and timing of our actual expenditures for each of these purposes
will vary significantly depending on a number of factors, including the status
of our product development efforts, competition, marketing and sales activities
and market acceptance of our products. We will retain broad discretion in the
allocation and use of the net proceeds of this offering. Pending their use, we
intend to invest the net proceeds in short-term, interest-bearing, investment-
grade securities.
The principal purposes of this offering are to increase our working capital,
create a public market for our stock, increase our visibility and facilitate
our future access to public equity markets.
DIVIDEND POLICY
We have never declared or paid cash dividends on shares of our capital
stock. We currently intend to retain all available funds and any future
earnings for use in the operation of our business and do not anticipate paying
any cash dividends in the foreseeable future.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis to reflect the issuance of 1,280,769 shares of
Series D convertible preferred stock at $8.67 per share for proceeds of
approximately $11,100,000 in January 2000 and conversion of all
outstanding shares of preferred stock into shares of common stock upon
the closing of this offering; and
. on a pro forma as adjusted basis to reflect the receipt and application
of the net proceeds from the sale by us of shares of common stock
offered hereby at an assumed public offering price of $ , after
deducting estimated underwriting discounts and commissions and the
estimated offering expenses payable by us and the application of the net
proceeds from the offering. See "Use of Proceeds."
The following table excludes:
. an aggregate of 4,056,888 shares subject to outstanding options and stock
purchase rights at a weighted average exercise price of $0.57 per share
as of December 31, 1999, and
. 2,544,925 shares available for future issuance under our 1996 stock
option plan. See "Management--Stock Plans," "Related Party Transactions"
and Note 7 of notes to consolidated financial statements.
. 78,923 shares of Series D convertible preferred stock issued in
conjunction with the acquisition of Differential Corrections.
The capitalization information set forth in the table below is qualified by
and should be read in conjunction with our consolidated financial statements
and related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
----------------------------
Pro
Pro forma as
Actual forma adjusted
-------- -------- --------
(in thousands, except
share data)
<S> <C> <C> <C>
Cash and cash equivalents......................... $ 22,714 $ 33,814 $
======== ======== ========
Stockholders' equity:
Convertible preferred stock, $0.0001 par value;
authorized: 26,927,886 shares actual, none pro
forma and pro forma as adjusted; outstanding:
25,430,187 actual, none pro forma and pro forma
as adjusted.................................... $ 51,606 $ -- $ --
Common stock, $0.0001 par value; authorized
48,072,114 shares actual, pro forma and pro
forma as adjusted; outstanding: 7,550,001
actual, 34,260,957 pro forma and pro forma
as adjusted.................................... 18,590 81,296
Deferred stock compensation....................... (11,632) (11,632) (11,632)
Notes receivable from stockholders................ (1,758) (1,758) (1,758)
Accumulated other comprehensive loss.............. (21) (21) (21)
Accumulated deficit............................... (16,177) (16,177) (16,177)
-------- -------- --------
Total stockholders' equity and
capitalization............................... $ 40,608 $ 51,708 $
======== ======== ========
</TABLE>
17
<PAGE>
DILUTION
Our pro forma net tangible book value, as of December 31, 1999, was
approximately $51.7 million or $1.51 per share of common stock. Pro forma net
tangible book value per share represents the amount of our pro forma
stockholders' equity divided by the total number of shares of common stock
outstanding, giving effect to the issuance of 1,280,769 shares of Series D
convertible preferred stock at $8.67 per share in January 2000 and the
conversion of all outstanding shares of preferred stock into common stock.
After giving effect to the sale of the shares of common stock offered by us
at an assumed initial public offering price of $ per share, and the
adjustments set forth above, our pro forma net tangible book value as of
December 31, 1999 would have been $ or $ per share. This represents an
immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................ $
Pro forma net tangible book value per share before the offering...... $1.51
Increase per share attributable to new investors.....................
-----
Pro forma net tangible book value per share after the offering.........
---
Dilution per share to new investors.................................... $
===
</TABLE>
The following table summarizes on a pro forma basis, as of December 31,
1999, the differences between the existing stockholders and new investors with
respect to the number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid.
<TABLE>
<CAPTION>
Average
Price Per
Shares Purchased Total Consideration Share
------------------ ------------------- ---------
Number Percent Amount Percent
---------- ------- ----------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 34,260,957 % $62,992,000 % $1.84
New investors..................
Totals....................... 100.0% $ 100.0%
========== ===== =========== ===== =====
</TABLE>
The information presented with respect to existing stockholders assumes no
exercise of outstanding options under the 1996 stock option plan. As of
December 31, 1999 options to purchase 4,056,888 shares were outstanding under
our 1996 stock option plan with a weighted average price of $0.57 per share.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations, the consolidated financial statements, the related
notes and the other information contained in this prospectus. The selected
consolidated statement of operations data for the years ended December 31,
1997, 1998 and 1999 and the consolidated balance sheet data as of December 31,
1998 and 1999 have been derived from our audited consolidated financial
statements appearing elsewhere in this prospectus. The selected consolidated
balance sheet data as of December 31, 1997 are derived from audited
consolidated financial statements not included in this prospectus. The selected
statement of operations data for the period ended December 31, 1996 and the
consolidated balance sheet data as of December 31, 1996 are derived from
unaudited financial statements not included in this prospectus. The historical
results presented below are not necessarily indicative of future results. The
pro forma information in the following table gives effect to the automatic
conversion of all outstanding shares of our convertible preferred stock into
common stock upon the closing of this offering.
<TABLE>
<CAPTION>
Period from
July 1, 1996
(commencement Years Ended December 31,
of operations) to --------------------------
December 31, 1996 1997 1998 1999
----------------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Revenues:
Service........................ $ -- $ -- $ 4 $ 612
Product........................ -- -- 64 294
------- ------- ------- --------
Total revenues................ -- -- 68 906
------- ------- ------- --------
Costs and expenses:
Cost of service revenue........ -- -- 27 681
Cost of product revenue........ -- -- 87 1,777
Sales and marketing............ -- 107 266 3,530
Research and development....... 204 745 731 2,109
General and administrative..... 95 250 457 2,129
Stock compensation............. -- -- -- 4,973
------- ------- ------- --------
Total costs and expenses...... 299 1,102 1,568 15,199
------- ------- ------- --------
Loss from operations............. (299) (1,102) (1,500) (14,293)
Interest income, net............. 25 98 90 804
------- ------- ------- --------
Net loss......................... $ (274) $(1,004) $(1,410) $(13,489)
======= ======= ======= ========
Basic and diluted net loss per
share........................... $ (0.12) $ (0.45) $ (0.62) $ (4.88)
======= ======= ======= ========
Shares used in calculating basic
and diluted net loss per share.. 2,250 2,250 2,287 2,763
======= ======= ======= ========
Pro forma basic and diluted net
loss per share.................. $ (0.59)
========
Shares used in calculating pro
forma basic and diluted net loss
per share....................... 22,882
========
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1997 1998 1999
------ ------ ------ -------
(in thousands)
<S> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents......................... $2,170 $ 590 $5,356 $22,714
Working capital................................... 2,126 1,078 5,599 38,758
Total assets...................................... 2,271 1,305 6,006 45,174
Total stockholders' equity........................ 2,217 1,213 5,788 40,608
</TABLE>
<TABLE>
<CAPTION>
Year ended
December 31, 1999
-----------------
(in thousands)
<S> <C>
Detail of stock compensation:
Cost of service revenue....................................... $ 17
Cost of product revenue....................................... 52
Sales and marketing........................................... 501
Research and development...................................... 445
General and administrative.................................... 3,958
------
Total....................................................... $4,973
======
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and the related notes included in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ significantly from those
projected in the forward-looking statements as a result of many factors,
including those discussed in "Risk Factors," "Business" and elsewhere in this
prospectus.
Overview
We integrate Global Positioning System technology, wireless communications
and the Internet to enable companies to efficiently manage their mobile
resources with location-relevant and time-sensitive information. Our solution
is an easy-to-use, cost-effective, Internet-based service for vehicle
management that provides location, reporting, dispatch, messaging and
management services. Our solution allows customers to use our website to track
the movement of their vehicles, employees, and goods and services, and enables
two-way messaging between our customers and their mobile workers. We believe
our solution provides significant value to our customers by reducing costs and
increasing efficiency.
From July 1996 through June 1998, our operations consisted primarily of
various start-up activities relating to our current business, including
development of Global Positioning System technologies, recruiting personnel and
raising capital. We did not recognize any revenues prior to June 1998, and our
expenses consisted of research and development, sales and marketing and general
and administrative expenses. In 1998, we expanded our strategy and redirected
our focus to provide location-relevant and time-sensitive information services
and solutions to companies managing mobile resources.
In the second half of 1998, we introduced FleetASAP, a cost-effective
solution that leverages existing infrastructure, including the Global
Positioning System, wireless networks and the Internet to enable companies to
efficiently manage their mobile resources. Our solution includes a proprietary
hardware and software platform that integrates wireless Internet connectivity
with a Global Positioning System receiver. The platform is installed in each
vehicle and receives signals transmitted from Global Positioning System
satellites to determine the location and velocity of the vehicle. These data
are transmitted over wireless networks and the Internet to our network of
secure servers. Our customers can retrieve the information from our website
using an Internet browser. Because the customer data and solution software
reside on our Internet infrastructure, our customers do not need to make a
substantial investment in infrastructure and support to use our services.
Since 1998, we have derived substantially all of our revenues from the sale
of our service and the associated product hardware. Our service revenue is
comprised of monthly fees. Our customers can contract to receive our services
for terms of one, two or three years and can purchase enhanced features for
additional charges. As more customers use our service, the impact on our
service revenue is compounded. Our product revenue consist of sales of the
internet Location Manager and the internet Data Terminal. Since the selling
prices of our platforms are often below our costs, we defer platform costs in
amounts equal to or less than the related deferred product revenue; as a
result, we expense a portion of the platform costs at the time of shipment and
the remaining deferred platform costs are amortized ratably over the minimum
service contract period.
We recognize service revenue over the period during which services are
performed. Product revenue is deferred and recognized ratably over the minimum
service contract period. Allowances for sales returns are recorded at the time
product revenue is recognized.
To date, we have not sold our service outside the U.S. and Canada; however,
we intend to expand our service offerings to additional countries during the
fourth quarter of the year 2000. We do not expect that revenues from
international sales will be material in 2000.
20
<PAGE>
We will incur substantial stock compensation expense in future periods,
which represents non-cash charges incurred as a result of the issuance of stock
options to employees and consultants. The charge related to options granted to
employees is recorded based on the difference between the deemed fair value of
the common stock and the option exercise price of such options at the date of
grant, which is amortized over the option-vesting period. The charge related to
options granted to consultants is calculated at the end of each reporting
period based on the Black-Scholes model, which approximates fair value and is
amortized based on the term of the consulting agreement or service period. The
amount of the charge in each period can fluctuate depending on our stock price
and volatility. As of December 31, 1999, deferred stock compensation was $11.6
million, which will be amortized in future periods.
Since inception, we have invested substantially in research and development,
marketing, the building of sales channels, and our overall infrastructure. We
anticipate that such investments will continue to grow in the near future. We
have incurred losses in each year since inception and expect to incur net
losses in the foreseeable future. As of December 31, 1999, we had an
accumulated deficit of $16.2 million. Net losses have increased in each quarter
in 1999, and we expect this trend to continue. Our limited operating history
makes it difficult to forecast future operating results. Even if we were to
achieve profitability in any period, we may not sustain or increase
profitability on a quarterly or annual basis.
Results of Operations
Years Ended December 31, 1997, 1998 and 1999
Service Revenue
Service revenue increased from $4,000 in 1998 to $612,000 in 1999. The
increase in service revenue was attributable to the commercial release of our
FleetASAP service. Initial product installation and service commencement began
at the end of 1998 and, as a result, no revenue was recognized in 1997. The
number of vehicles utilizing our services has grown from 135 as of December 31,
1998 to over 7,000 as of December 31, 1999.
Product Revenue
Product revenue increased from $64,000 in 1998 to $294,000 in 1999, in line
with the commercial release of our service. We did not recognize any product
revenue in 1997.
Cost of Service Revenue
Cost of service revenue consists of employee salaries and expenses related
to the delivery and support of our services, costs and expenses associated with
connecting our services to wireless networks and the Internet, and depreciation
of our Internet infrastructure. Cost of service revenue increased from $27,000
in 1998 to $681,000 in 1999. The growth in cost of service was due primarily to
the commercial release and expansion of our services, but also reflects
increases in service infrastructure, including personnel, in support of the
FleetASAP service. We did not record any cost of service revenue for 1997.
Cost of Product Revenue
Cost of product revenue consists of the cost of our platform, including the
internet Location Manager, internet Data Terminal and related parts, as well as
costs associated with the final assembly, test, delivery, and installation of
our products. The cost of products sold to our customers is deferred until
services are initiated and are amortized ratably over the initial contract
period. Cost of product revenue increased from $87,000 in 1998 to $1.8 million
in 1999. The increase in cost of product revenue was attributable primarily to
the commercial release and expansion of our services and the resulting increase
in the number of customers using our services. We did not record any cost of
product revenue for 1997.
21
<PAGE>
The selling prices of our platform are often below our costs. It is our
practice to defer platform costs in amounts equal to or less than the related
deferred product revenue and, as a result, we expense the excess portion of
costs at the time of shipment. The remaining deferred platform costs are
amortized ratably over the minimum service contract period. We expect that this
will continue for the foreseeable future as we continue to expand our installed
base and view product installation as enabling our core service business. It is
anticipated that the impact on future liquidity will be minimal as the service
revenue stream expands and is renewed.
Research and Development Expenses
Research and development expenses consist of employee salaries and expenses
related to development personnel and consultants, as well as expenses
associated with software and hardware development. In 1997, research and
development expenses also included prototype costs and testing expenses related
to the development of our Global Positioning System technology. Research and
development expenses were $745,000 in 1997, $731,000 in 1998, rising to $2.1
million in 1999. Increased development salaries of $1.0 million and outside
consultant expense of $238,000 accounted for the change in 1999. Research and
development headcount increased from five as of December 31, 1998 to 30 as of
December 31, 1999. We expect that research and development expenses will
continue to increase in future periods.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, or SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This standard requires
companies to capitalize qualifying computer software costs that are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for years beginning after December
15, 1998. We implemented this standard in 1999 and capitalized approximately
$242,000 of costs related to internally developed software systems.
Sales and Marketing Expenses
Sales and marketing expenses consist of employee salaries, sales
commissions, and marketing and promotional expenses. These expenses increased
from $107,000 in 1997 to $266,000 in 1998, and to $3.5 million in 1999. Hiring
of additional personnel, expansion of sales channels, and activities related to
development of market awareness of our service in 1999 resulted in increases of
$1.5 million, $566,000 and $368,000, respectively. Sales and marketing
headcount grew from three as of December 31, 1998 to 39 as of December 31,
1999. We expect that sales and marketing expenses will continue to increase as
we hire additional personnel, expand our sales and marketing efforts and pay
sales commissions.
General and Administrative Expenses
General and administrative expenses consist of employee salaries and related
expenses for executive, administrative, accounting, and professional fees and
recruiting. These expenses increased from approximately $250,000 in 1997, to
$457,000 in 1998, and to $2.1 million in 1999. Of the increase in 1999, hiring
of additional personnel and their related expenses accounted for $1.4 million
of the change. General and administrative headcount increased from four as of
December 31, 1998 to 15 as of December 31, 1999. We expect that these expenses
will increase as we hire additional personnel and incur related expenses in
anticipation of the growth of the business and our operation as a public
company.
Stock Compensation
Deferred stock compensation related to the granting of stock options to
employees and consultants was $11.6 million as of December 31, 1999. Stock
compensation expense in 1999 of $5.0 million represents the amortization of
deferred stock compensation related to the vesting of employee and consultant
stock options granted in 1999. We expect amortization of stock compensation of
approximately $6.9 million, $2.9 million, $1.3 million, $416,000 and $117,000
in the years ended December 31, 2000, 2001, 2002, 2003 and 2004 respectively,
related to these options.
22
<PAGE>
Interest Income, Net
Net interest income is comprised primarily of interest earned on cash and
cash equivalents and short-term investments, offset by interest expense related
to obligations under our line of credit. Net interest income was approximately
$98,000, $90,000 and $804,000 in 1997, 1998 and 1999, respectively. These
balances increased significantly during 1999 as a result of investment in debt
securities of the proceeds from our convertible preferred stock financings
completed in June and December 1999.
Income Taxes
Since inception, we have incurred net losses for federal and state tax
purposes and have not recognized any tax provision or benefit. As of December
31, 1999, we had approximately $10.3 million of both federal and state net
operating loss carryforwards to offset future taxable income. These
carryforwards, if not utilized, expire through 2019 and 2003, respectively.
Net Loss
Net loss increased from $1.0 million in 1997 to $1.4 million in 1998, and to
$13.5 million in 1999. These increases were principally due to operating costs
and expenses of $1.1 million in 1997, $1.6 million in 1998, and $15.2 million
in 1999.
Quarterly Results of Operations
The following table sets forth our consolidated operating results for each
of the four quarters of 1999. This data has been derived from unaudited
consolidated financial statements that, in the opinion of our management,
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such information when read in conjunction
with our annual audited consolidated financial statements and notes thereto
appearing elsewhere in this prospectus. These operating results are not
necessarily indicative of results of any future period.
<TABLE>
<CAPTION>
Quarters Ended
--------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1999 1999 1999 1999
--------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C>
Consolidated Statements of Operations
Data:
Revenues:
Service.............................. $ 7 $ 35 $ 145 $ 425
Product.............................. 24 32 80 158
----- ------- ------- -------
Total revenues..................... 31 67 225 583
----- ------- ------- -------
Costs and expenses:
Cost of service revenue.............. 9 61 154 457
Cost of product revenue.............. 30 192 613 942
Research and development............. 203 291 572 1,043
Sales and marketing.................. 176 424 1,133 1,797
General and administrative........... 309 381 477 962
Stock compensation................... 63 300 637 3,973
----- ------- ------- -------
Total costs and expenses........... 790 1,649 3,586 9,174
----- ------- ------- -------
Loss from operations................... (759) (1,582) (3,361) (8,591)
Interest income, net................... 56 76 351 321
----- ------- ------- -------
Net loss............................... $(703) $(1,506) $(3,010) $(8,270)
===== ======= ======= =======
</TABLE>
23
<PAGE>
During the four quarters ended December 31, 1999, both service and product
revenues increased period over period, a direct result of the commercial
release of our FleetASAP service and the increase of installed units from 135
as of December 31, 1998 to over 7,000 as of December 31, 1999. As more
customers use our service, the impact on our service revenue is compounded.
Cost of service revenue and cost of product revenue increased over the four
quarters in 1999, as a result of the growth in revenues, as well as increases
in units shipped and expansion of our service infrastructure. This expansion in
service infrastructure was in anticipation of future service demand.
Total employees grew from 14 as of December 31, 1998 to 103 as of December
31, 1999. As a result of the growth in the number of employees in our research
and development, sales and marketing, and general and administrative
organizations, operating expenses related to each of these functions increased
on a quarter-to-quarter basis.
We believe period-to-period comparisons of our operating results are not
necessarily meaningful. You should not rely on them to predict future
performance. The amount and timing of our operating expenses may fluctuate
significantly in the future as a result of a variety of factors. We face a
number of risks and uncertainties encountered by early stage companies,
particularly those in rapidly evolving markets. We may not be able to
successfully address these risks and difficulties. For a description of these
risks, see "Risk Factors."
Liquidity and Capital Resources
Since our inception, we have financed operations primarily through private
sales of convertible preferred stock, which totaled $51.6 million in aggregate
net proceeds through December 31, 1999. As of December 31, 1999, we had $22.7
million of cash and cash equivalents and $15.9 million of short-term
investments (including $2.0 million of restricted short-term investments), and
working capital of $38.8 million.
We currently have a $2.0 million revolving line of credit facility against
which there were no borrowings or letters of credit outstanding as of December
31, 1999. The line, against which letters of credit may be issued, is
collateralized by a restricted certificate of deposit of $2.0 million. The line
of credit agreement expires in March 2000.
Net cash used for operating activities was $1.0 million, $1.6 million, and
$8.2 million for 1997, 1998 and 1999, respectively. For 1997, 1998 and 1999,
cash used for operating activities was attributable primarily to net losses and
increases in accounts receivable, inventory, and deferred product costs, offset
in part by amortization of deferred stock compensation, increases in accounts
payable, accrued liabilities, and deferred revenues.
Net cash provided by investing activities was $438,000 and $399,000 for 1997
and 1998, respectively, the result of proceeds from maturities of short-term
investments. For 1999, cash used in investing activities of $17.7 million
resulted from purchases of short-term investments of $20.0 million, offset by
proceeds from maturities of short-term investments of $4.0 million, and $1.6
million of purchases of property and equipment.
Net cash provided by financing activities was $6.0 million and $43.3 million
for 1998 and 1999, respectively. Cash provided by financing activities in each
year was attributable to proceeds from the issuance of convertible preferred
stock. There were no financing activities in 1997.
On March 8, 2000, we agreed, subject to certain conditions, to purchase
substantially all the assets and certain related liabilities of Differential
Corrections for cash of $4.0 million and 78,923 shares of series D convertible
preferred stock. This purchase was completed on April 7, 2000.
On March 23, 2000, we agreed, subject to certain conditions, to purchase
substantially all the assets and certain related liabilities of Hynet
Technologies for 50,000 shares of common stock. We expect to complete this
purchase in May 2000.
24
<PAGE>
Both of these transactions provide access to technology that will be used to
further enhance marketability and performance of our newly launched services.
Given the size of the workforce, cost structure, and existing revenue streams
of these companies, no significant impact on future earnings or cash flow is
anticipated.
On April 1, 2000, we invested $1.0 million in Cellport Systems under a
convertible secured subordinated promissory note. Upon the occurrence of
certain conditions on or before September 30, 2000, the note converts into
equity of Cellport Systems. In connection with this investment, the parties
entered into an engineering and development agreement.
As of December 31, 1999, we had no material commitments for capital
expenditures, although we anticipate a substantial increase in capital
expenditures and lease commitments consistent with our anticipated growth in
operations, infrastructure and personnel. We also may establish additional
operations as we expand globally.
We believe that the net proceeds from this offering, together with our
current cash, cash equivalents and short-term investments, will be sufficient
to meet our anticipated cash needs for operating expenses, working capital and
capital expenditures for at least the next 18 months. If cash generated from
operations is insufficient to satisfy our liquidity requirements, we may seek
to sell additional equity or debt securities or to obtain a larger credit
facility. If additional funds are raised through the issuance of debt
securities, holders of these securities could have certain rights, preferences
and privileges senior to holders of common stock, and the terms of this debt
could restrict our operations. The sale of additional equity or convertible
debt securities could result in additional dilution to our existing
stockholders, and we cannot be certain that additional financing will be
available in amounts or on terms acceptable to us, if at all. If we are unable
to obtain additional financing, we may be required to reduce the scope of our
operations, which could harm our business, financial condition and operating
results.
Quantitative and Qualitative Disclosure of Market Risks
Short-Term Investments
At December 31, 1999, we held $15.9 million in short-term investments,
consisting of investment grade financial instruments with an original maturity
of from three to eighteen months. These available-for-sale securities are
subject to interest rate risk and will fall in value if market interest rates
increase. If market interest rates were to increase immediately and uniformly
by 10% from levels at December 31, 1999, the fair market value of the short-
term investments would decline by an immaterial amount. We generally expect to
have the ability to hold fixed income investments until maturity and therefore
would not expect operating results or cash flows to be affected to any
significant degree by a sudden change in market interest rates on short-term
investments.
Foreign Currency Exchange Rate
We transact business primarily in U.S. dollars. We are subject to exposure,
however, from adverse movements in foreign currency exchange rates in those
countries where we conduct business. Operating expenses incurred by our
subsidiary in India are denominated in Indian rupees. This subsidiary was
formed in November 1999 to perform research and development activities. To
date, the effect of fluctuations in foreign currency exchange rates on expenses
has not been material.
We hold fixed-price agreements denominated in U.S. dollars with key foreign-
based suppliers. Orient Semiconductor Electronics, in Taiwan, manufactures the
internet Location Manager; Novatel, in Canada, provides the modem for the
internet Location Manager; Taiwan Semiconductor Manufacturing Company, in
Taiwan, manufactures our Global Positioning System receiver chips; Philsar
Electronics, in Canada, manufactures our radio frequency chips; and Micronet,
in Israel, supplies our internet Data Terminal. Should there be a sustained
increase in average exchange rates for the local currencies in these countries,
our suppliers
25
<PAGE>
may request increased pricing on any new agreements. If this were to occur for
all of these currencies and with each of these suppliers, a 10% increase in
average exchange rates could increase our product costs by approximately 9%.
We do not use derivative financial instruments for speculative trading
purposes, nor do we currently hedge any foreign currency exposure to offset the
effects of changes in foreign exchange rates. Similarly, we do not use
financial instruments to hedge operating expenses of our Indian subsidiary.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. SFAS No. 133 will
be effective for our year ending December 31, 2001. We believe that this
statement will not have a significant impact on our financial position, results
of operations or cash flows.
26
<PAGE>
BUSINESS
We integrate Global Positioning System technology, wireless communications
and the Internet to enable companies to efficiently manage their mobile
resources with location-relevant and time-sensitive information. Our solution
is an easy-to-use, cost-effective, Internet-based service for vehicle
management that provides location, reporting, dispatch, messaging, and
management services. Our solution allows customers to use our website to track
the movement of their vehicles, employees, and goods and services, and provides
for two-way messaging between our customers and their mobile workers. We
believe our solution provides significant value to our customers by reducing
costs and increasing efficiency.
Our service utilizes the following existing technologies, including the
Global Positioning System, wireless networks and the Internet. Our service
includes a proprietary hardware device that integrates wireless Internet
connectivity with a Global Positioning System receiver. The platform is
installed in each vehicle and receives signals transmitted from Global
Positioning System satellites to determine the location and velocity of the
vehicle. These data are transmitted over wireless networks and the Internet to
our network of secure servers. Our customers can retrieve the information from
our website using an Internet browser. Because the customer data and solution
software reside at our Internet Service Center, our customers do not need to
make a substantial investment in capital equipment and support to use our
services.
Industry Background
Growth of Wireless Communications
Wireless communications has grown rapidly due to declining usage costs, the
proliferation of wireless telephones and mobile computing devices, expanding
network coverage and the integration of enhanced features such as voice and
text messaging. Recent developments in wireless technology and deployments of
wireless networks have enabled the wireless transfer of data in packets.
Packet-based data transmission is more efficient and less expensive than
circuit-switched data transmission because it allows multiple users to share
the same bandwidth, eliminating the need for a dedicated circuit for each user.
Dataquest, an information technology market research and consulting firm,
estimates that the number of wireless data subscribers worldwide will grow from
approximately 14 million at the end of 1998 to approximately 102 million at the
end of 2003. There can be no assurances that this or the projections below will
be reached. We also expect business use of wireless communications to grow. As
global wireless coverage increases and broadband wireless transmission
technologies are deployed, more users will be able to access more data over
wireless networks, facilitating access to information management and e-business
applications to geographically-dispersed users.
Growth of Business Use of the Internet
The Internet has emerged as a global communications medium to deliver and
share information and to conduct business electronically. International Data
Corporation, a company that forecasts worldwide information technology market
trends, estimates that the number of web users worldwide will grow from
approximately 144 million users in 1998 to 602 million users by the end of
2003. The dramatic growth in the number of Internet users has led to the
proliferation of information and services available on the Internet, including
e-commerce, e-mail, financial services, news and other content. Businesses are
now using the Internet as a medium for managing business-critical functions
such as supply chain management, customer relationships, enterprise resource
planning and collaboration with business partners. We expect companies to
conduct an increasing amount of business transactions over the Internet.
Increasing Commercial Use of Global Positioning System Technology
The Global Positioning System is a worldwide radio-navigation system formed
from a constellation of satellites and ground systems that are used as
reference points to calculate positions accurately to a matter of meters.
Because of improvements in Global Positioning System receiver technology and
reductions in the cost of Global Positioning System enabling components, there
has recently been a proliferation of Global Positioning System devices for
commercial applications. Significant areas of growth for products and services
27
<PAGE>
enabled by the Global Positioning System are vehicle positioning and
navigation, mobile computing devices, wireless telephones and portable
recreational receivers, according to Allied Business Intelligence, a market
research firm researching Global Positioning System technologies. Due to the
global scale of the automotive industry, we expect vehicle location and
navigation to be one of the most promising areas of future deployment of Global
Positioning System technology.
Market Opportunity
The management of vehicles and other mobile resources is complex. Monitoring
and tracking the physical movement of products and people is critical to
companies seeking to minimize resource requirements while maximizing their
profitability. Many businesses use inefficient and incomplete systems such as
wireless telephones and pagers to manage mobile resources. A limited number of
businesses use systems based on proprietary technologies requiring substantial
and ongoing investments in information technology and hardware. Businesses and
organizations seek an easy-to-use, comprehensive, cost-effective solution for
managing their vehicles and other mobile resources. Bobit Publishing, a
provider of information for transportation market areas, reports that there
were approximately 9.6 million fleet cars in the U.S. in 1999. Based on this
number and U.S. Department of Transportation statistics on commercial trucks,
buses and trailers, the total number of vehicles and trailers in the U.S. fleet
market was approximately 40 million in 1999.
The @Road Solution
Our solution uses Global Positioning System technology, wireless
communications and the Internet to enable companies to efficiently manage their
mobile resources. To implement our solution, we developed FleetASAP, an easy-
to-use, comprehensive, cost-effective Internet-based management and e-business
service for companies with mobile resources. FleetASAP offers a comprehensive
turnkey solution for vehicle management by providing location, reporting,
dispatch, messaging, and management solutions to meet the needs of any size
fleet. FleetASAP allows customers to track the movement of their vehicles,
employees, and goods and services through our website and provides for two-way
messaging between our customers and their mobile workers. With our service,
customers can gather and use location-relevant information from mobile
resources and make informed decisions that enhance productivity and
profitability.
Our solution includes a proprietary hardware device embedded with software
that integrates wireless Internet connectivity with a Global Positioning System
receiver. Our basic hardware product is called the internet Location Manager
and two-way text messaging is enabled with the addition of hardware called an
internet Data Terminal. Customers can use our service with any number or type
of vehicles, including cars, rental cars, buses, school buses, vans, trucks,
trailers or limousines, by installing our internet Location Manager, which
incorporates a Global Positioning System receiver, in each vehicle. The
internet Location Manager receives signals transmitted from Global Positioning
System satellites to determine the location, velocity and orientation of the
vehicle or device in which it is installed. These data are transmitted to the
@Road Internet Service Center, our network of secure servers, using wireless
networks and the Internet. Our customers can then retrieve the information from
our web site using an Internet browser. Customers can purchase an additional
messaging unit, the internet Data Terminal, that uses the Internet and wireless
networks to send and receive messages to and from a vehicle enabled with an
internet Data Terminal.
We have designed our solution to be easily adapted to other wireless
protocols in order to enable the global expansion of our service. We have
entered into strategic relationships with AT&T Wireless, GTE Wireless, Bell
Atlantic Mobile and Ameritech to provide wireless data connectivity between
@Road-enabled vehicles and the Internet over these companies' Cellular Digital
Packet Data wireless networks.
Customers who adopt our solution find a variety of compelling benefits. Many
of these benefits translate into competitive advantages for our customers.
Benefits of our solution include the following:
. Productivity enhancement. Our solution allows our customers to track,
monitor, and manage their mobile resources more effectively and
efficiently. Customers can achieve enhanced productivity from
28
<PAGE>
their fleet operations by closely monitoring all vehicles in their fleet,
routing vehicles more efficiently, reducing vehicle downtime, and
increasing the number of deliveries or trips per vehicle. In addition,
these improvements to vehicle management can result in more efficient
vehicle maintenance and reduced misuse of vehicles.
. Differentiated service. Our customers can be more responsive to their
customers by more effectively managing their mobile resources. Because
our customers are able to track the location of each vehicle in their
fleet, they are able to provide their customers with more detailed
information on the location of products and services. At the same time,
our customers can allocate their limited resources more efficiently to
reduce wait times experienced by their customers. They can also provide
better customer service because we provide our customers with records
relating to the status and activity of their vehicles at relevant times.
. Ease of implementation. The installation of our platform, the internet
Location Manager and the optional internet Data Terminal, into a vehicle
takes less than an hour. Once installed, our customers can manage all
their vehicles through any Internet browser, such as Microsoft Explorer,
Netscape Navigator or that of America Online. Because we manage the
software services and customer data at our Internet Service Center, the
customer does not incur any incremental information technology costs
associated with the use of our services. As our customers' fleets grow,
our services are easily scaleable by installing our platform in
additional vehicles. Additionally, we implement software upgrades
centrally on our server and remotely over a wireless connection to the
vehicle. Customers benefit from these enhancements to our service without
removing the vehicle from service.
Strategy
Our objective is to be the leading provider of location-relevant and time-
sensitive information services and solutions to businesses and organizations
managing vehicles and mobile resources. Our service identifies the location of
a vehicle at a particular time. This enables us to deliver information and
services to that vehicle or about that vehicle which takes advantage of the
identity of the vehicle, the location and movement of the vehicle, and the time
when a vehicle is at a particular location. Key elements of our strategy
include:
. Establish @Road as the market leader in vehicle management services. We
believe our competitive advantages will establish us as the market leader
in providing vehicle management services to businesses and organizations.
Establishing this leadership position is a key element in successfully
penetrating new markets, creating new sources of revenues and growing our
overall business. We are one of the first companies to enter the vehicle
management services market with a comprehensive turnkey solution at a low
cost. We intend to aggressively grow our customer base and market
additional services to our existing customer base. We expect to expand
our existing distribution channels to continue to focus on small to mid-
size fleets and grow our direct sales force to target customers with
thousands of vehicles. Moreover, as wireless network coverage increases,
and new wireless networks are deployed, we expect to increase our selling
efforts into the worldwide market.
. Increase the value of our solution by expanding the range of services we
provide. We will add new features and functionality to our services to
enhance their value. We intend to offer services that synthesize the
information currently retrieved by our service. For example, we expect to
offer a service whereby customers can turn mileage data into a
maintenance schedule for their fleets. We expect to expand our use of
Internet content to provide business- and consumer-oriented commerce and
additional content to our customers. In addition, we are developing an
open platform architecture, with application program interfaces and
enhanced web site features that will allow our partners to integrate
their applications with our services.
. Leverage partnerships to accelerate market acceptance. We believe that
leveraging the market presence, brand recognition, and distribution
resources of established vendors and wireless carriers will help us
establish broad business and consumer awareness and acceptance of our
services. We intend to
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partner with vehicle manufacturers, providers of vehicle maintenance and
support services, wireless telephone and personal digital assistant
manufacturers, wireless carriers, suppliers of consumer services, Internet
content and commerce providers, and other suppliers of goods and services.
We believe that the successful design and implementation of our
partnership strategy will facilitate the extension of our services to new
markets such as the consumer vehicle and mobile device markets.
. Penetrate new markets and applications. We intend to use our core
competencies and relationships with key partners and customers to develop
services for additional markets. We believe our technology is well suited
to many applications that can leverage location-relevant, time-sensitive
information and two-way messaging using wireless communications and the
Internet. To address expanding market opportunities, we have designed our
services to be carrier- and connectivity-independent, which will allow us
to rapidly deploy our services in additional geographic markets as
coverage of digital wireless packet-based data networks increases. In
addition, we intend to expand our services to include both commercial and
consumer applications.
. Maintain technology leadership. We have developed and patented technology
that integrates Global Positioning System technology, wireless
communications and the Internet. We also have substantial experience in
the design and deployment of products and services incorporating these
technologies. We believe that our existing intellectual property,
technological experience and expected continued investment in research
and development will provide us with significant competitive advantages,
enabling us to maintain our technological leadership position.
Services
Our FleetASAP service integrates the Global Positioning System, wireless
communications and the Internet to provide location, reporting, dispatch,
messaging, and other management services to our customers for managing and
tracking their mobile resources. Our service also allows two-way messaging
between managers of vehicles and their drivers. We believe that our services
provide significant value to our customers by reducing costs and increasing
efficiency. We have initially targeted companies with commercial vehicles.
The following features and benefits of FleetASAP give it a competitive
advantage over existing solutions:
. Cost-effective. Our FleetASAP service is cost-effective for our customers
because we pass on to them the efficiencies we gain by using the Internet
and wireless networks developed by other companies and Global Positioning
System technology developed by the U.S. government. Our customers are not
required to make a substantial capital investment because the customer
data and our software reside at our Internet Service Center, and the
service is accessible through the Internet.
. Ease of implementation and use. The internet Location Managers and
internet Data Terminals are shipped to the customer fully configured and
ready to install, which typically takes an authorized technician less
than one hour. Once these devices are installed, our customers can use
our service by logging on to our web site. The user interface is
intuitive to use, requires minimal training and can be personalized to
meet the requirements of each of our customers. FleetASAP is designed to
be available to our customers through the Internet 24 hours a day, seven
days a week, with the exception of scheduled maintenance. Additionally,
we upgrade each vehicle's platform software wirelessly, minimizing
vehicle downtime.
. Robust reporting capabilities. FleetASAP reports offer our customers
comprehensive, detailed reporting of vehicle activity, either
individually, or for all or a selected group of a customer's vehicles.
Reports can be personalized by customers and downloaded for additional
sorting and analysis. A customer's preferences are stored in our Internet
Service Center and can be altered at any time to meet their changing
needs. The location of each vehicle in a customer's fleet can be
displayed on a map, making vehicle location and tracking simple. Map
views can be personalized by customers to
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graphically display different information about their vehicles. Vehicle
tracking information is stored at our Internet Service Center, allowing
vehicle managers to monitor their vehicles over an extended period of
time. Reports can also be used to help our customers manage the
maintenance requirements of their vehicles.
. Return on investment. Our service results in a variety of cost savings to
our customers. Our customers can use FleetASAP to determine the location
of their vehicles at particular times and send the most appropriate
vehicle to the next job. In addition, customers can increase their
productivity by monitoring and managing the activities of their vehicles.
Effective managing, routing and dispatching of vehicles saves fuel and
time, decreases our customers' costs and increases their customers'
satisfaction. When we provide our customers with messaging capabilities
using internet Data Terminals, which bundles two-way communications for a
flat rate, our customers can reduce their communications costs, including
cellular telephone fees, which are often usage-based.
. Scaleability. Our platform and software architecture are designed to
serve a growing number of users with increasing data transmission volumes
without compromising performance, delivery times or data accuracy of our
services. Because the three technology components of our solution are
designed to accommodate a practically unlimited number of users, as in
the case of the Global Positioning System, or can be expanded to
accommodate additional users, as in the case of wireless networks or the
Internet, we believe that we can support a significantly expanding
customer base.
. Global Positioning System-determined location. FleetASAP uses the Global
Positioning System to determine location, enabling reliable, accurate and
cost-effective location and tracking of our customers' vehicles. We
believe Global Positioning System technology is more reliable than other
positioning technologies because of its proven accuracy, the large number
of deployed satellites and its ability to determine location regardless
of velocity and altitude. The Global Positioning System uses pre-existing
infrastructure developed by the U.S. government, which reduces the cost
of the service.
. Wireless data connectivity. FleetASAP currently uses the Cellular Digital
Packet Data protocol to transmit data to and from customer vehicles. We
have agreements with four major wireless carriers to provide Cellular
Digital Packet Data service to our customers. Cellular Digital Packet
Data coverage includes more than 150 metropolitan areas in the U.S. Our
services are designed to be tolerant of network difficulties, with the
ability to confirm receipt of data and retransmit data if errors are
detected. Additionally, if a customer's vehicle is out of Cellular
Digital Packet Data coverage, the internet Location Manager records up to
two days of information which is then transmitted to our Internet Service
Center when the vehicle returns to Cellular Digital Packet Data coverage.
. Messaging capabilities. Our customers may enhance our FleetASAP service
by purchasing an optional two-way messaging feature, the internet Data
Terminal, that uses the Internet and wireless networks to enable our
customers to communicate regularly with their vehicles. Our customers can
pre-program each internet Data Terminal with a specific set of reply
messages that can be sent with the press of a button, minimizing driver
distraction while on the road. An audit trail of messages, including the
driver's acknowledgment that a message was received, is stored at our
Internet Service Center for fourteen days.
. StatWhere. Our customers may enhance our FleetASAP service by purchasing
connecting sensors and additional reporting functions. StatWhere allows
the internet Location Manager to report the status of an event on the
vehicle. For example, a sensor attached to a school bus door reports to
the internet Location Manager whether the door was open or closed.
. Fleet Resources. Our Fleet Resources web page contains links to a number
of value-added retail and informational sites that we believe serve
additional needs of our customers. For example, our customers can
purchase new tires, office supplies and several other goods, and obtain
current information about traffic conditions and fuel prices.
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. Sturdy construction. The internet Location Manager and the internet Data
Terminal are designed and tested to withstand the harsh environment of
commercial vehicles, even off-road vehicles, including vibration, shock,
and extreme temperatures.
Customers
We market and sell FleetASAP to a broad range of customers that vary in
size, geographic location and industry. The number of vehicles utilizing our
services has grown from 135 as of December 31, 1998 to over 7,000 as of
December 31, 1999. Our customers' fleets range from two vehicles to over 350.
Currently we have customers in the following industries:
.Trucking companies .School buses
.Plumbing .Taxi cabs and limousines
.Commercial buses .Public works
.Construction .Landscaping
.Food and beverage distribution
.Waste management
.Delivery services .Industrial machinery
.Vehicle repair .Furniture delivery
.Courier services .Equipment rental
Research and Development
We concentrate our research and development activities on services and
platform engineering. To enhance our existing services and to introduce new
services to our existing and potential customers, we focus on the following key
areas:
. Services. We intend to continue to develop our services by offering new
features while enhancing existing features. For example, we launched a
service enabling customers to create personalized vehicle identifiers in
December 1999 and a service enabling customers to view summary vehicle
activity reports in February 2000. We intend to dedicate substantial
resources to expand our software development activities.
. Platform. We intend to continue to develop and release platform upgrades
to add new service features as well as to enhance existing features. For
example, we released the second-generation internet Data Terminal in July
1999 and we released the second-generation internet Location Manager in
December 1999. We also intend to work with component suppliers, contract
manufacturers and wireless network carriers to integrate our platform
into other devices and develop our platform as a leading technology in
the location-relevant information services market.
As of December 31, 1999, we had 30 employees and consultants in research and
development.
Technology
Our technology efforts focus on enhancing reliability, availability and
features in our service solution while maintaining scaleability. Our
proprietary technologies are designed to work with technologies from other
companies, including our partners, competitors, and other third parties.
Although our current service utilizes our patented Global Positioning System
chipset, our service has been designed to work with other location
technologies. Similarly, although we offer an embedded wireless modem in our
platform, our service is designed to work with a wide range of wireless
communications devices. Additionally, although our service is currently based
on delivering information through the Internet from our Internet Service
Center, the service is designed to provide any content available from the
Internet. We expect to develop additional proprietary
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technology where feasible and to purchase or license technology where cost-
effective. Our technology efforts focus on the following areas:
. Location Technology. The Global Positioning System is a worldwide radio-
navigation system formed from a constellation of satellites and ground
systems that are used as reference points to calculate positions. We have
designed a patented Global Positioning System chipset and algorithm with
four times the processing power of most other commercial Global
Positioning System receivers. As a result, our platform determines its
location in approximately half the time required by most other commercial
receivers. In addition, we are in the process of integrating differential
Global Positioning System technology, an error-correction technology that
generally increases the accuracy of vehicle location to better than ten
meters, which is a tenfold improvement over the Global Positioning
System.
. Wireless Technology. Our services currently operate over Cellular Digital
Packet Data networks. We also have laboratory-tested different versions
of our platform that are compatible with other wireless technologies and
protocols. Our goal is to bring to market a platform that is independent
of wireless connectivity protocols and hardware, allowing our customers
to connect wirelessly to our Internet Service Center using various
protocols and wireless carriers, using our platform, the customer's
existing wireless telephone, or other wireless devices.
. Internet Technology. Although our solution involves complex aggregation
and processing of customer data, the customer can access all the
functionality of our service through an Internet browser. Because our
application, reporting and customer data software are independent of one
another, each can be modified or upgraded without affecting the others.
In order to expand the services we provide to our customers, we have
developed an application programming interface that enables our customers
to integrate our vehicle location information into their applications. We
also expect to develop additional application programming interfaces that
will enable our customers to integrate our two-way messaging and landmark
locations into their applications.
. Information Technology. We have an information technology organization
distinct from our research and development organization that is dedicated
to building and maintaining our secure Internet Service Center. By
managing our solution at our Internet Service Center, we relieve our
customers of the technology and operations burden of managing the
integration of complex Global Positioning System, wireless data and
Internet systems. Our Internet Service Center is located in Sunnyvale,
California and is backed up by a second facility in Fremont, California.
From our Internet Service Center, we maintain a variable capacity
connection to the Internet and dedicated connections to the wireless
networks we use. In the event of a power failure, our systems would be
powered by a backup power supply. In addition, by the third quarter of
this year we intend to establish a remote backup facility to provide
additional fault-tolerance, and redundancy and to insure capacity for
planned future growth.
Key Alliances and Relationships
We will continue to establish relationships with a number of companies to
accelerate the adoption of our services. We believe that establishing strategic
relationships will facilitate our technological leadership and provide early
access to emerging technologies and new customers. Some of our existing
relationships include the following:
. Wireless Carriers. We have established strategic relationships with AT&T
Wireless, GTE Wireless, Bell Atlantic Mobile and Ameritech to provide
wireless connectivity between @Road-enabled vehicles and the Internet. We
contract directly with AT&T Wireless for the provision of wireless
communications, which are bundled with our service. With GTE Wireless,
Bell Atlantic Mobile and Ameritech, our customers have separate contracts
for wireless communications with their carrier.
. Manufacturers. We have an agreement with Intel Corporation, which grants
Intel a royalty-bearing license to our Global Positioning System chipset
technology. As part of this agreement, Intel and @Road have agreed to
cooperate on a variety of development activities. In addition, one of our
early investors, Orient Semiconductor Electronics, manufactures and tests
our internet Location Manager.
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Sales and Marketing
Our sales and marketing objective is to achieve broad market penetration
through vertical marketing and targeted sales activities. As of December 31,
1999, our sales and marketing team consisted of 39 employees. We currently
market and sell our solution through a combination of direct sales, wireless
carrier partners and agents.
. Direct sales force. We have deployed our direct sales force throughout
the U.S. in all major Cellular Digital Packet Data markets. Our direct
sales force calls on potential customers with large fleets and works with
our wireless carrier partners and independent sales agents to increase
our customer base.
. Wireless carrier partners. Our wireless carrier partners are AT&T
Wireless, Bell Atlantic Mobile, GTE Wireless and Ameritech. These
partners market and facilitate sales of our solution through their own
sales channels as part of their service offerings.
. Agent sales program. We recently launched an agent sales program, which
is designed to build a network of independent sales agents throughout the
U.S. to sell our service. The program provides independent sales
organizations fees for the sale, installation and ongoing support of our
solution. We believe that the agent sales program will substantially
increase the number of individuals and organizations selling the
FleetASAP service into the targeted customer base across the U.S.
Our marketing department is engaged in a wide variety of activities, such as
awareness and lead generation programs and product management. These activities
include public relations, seminars, direct mail, trade shows, and co-marketing
and co-branding with wireless carriers.
Competition
We compete with companies that offer the ability to obtain location-relevant
information about their mobile resources. We also compete with alternative
means of communication between vehicles and their managers, including wireless
telephones, two-way radios, and pagers. We compete primarily on the basis of
price, ease of use, functionality, quality and geographic coverage of our
services. As the demand by businesses and consumers for location-relevant
information increases, we anticipate that the quality, functionality and
breadth of our competitors' products and services will improve and that new
competitors will enter our market. In addition, the widespread adoption of
industry standards may make it easier for new market entrants or existing
competitors to improve existing services or offer some or all of the services
we offer or may offer in the future. It is unclear to what extent network
infrastructure developers and key network operators will seek to provide
integrated Global Positioning System, wireless data and Internet solutions,
including access devices developed internally or through captive suppliers.
OmniTRACS is a service from Qualcomm that uses satellite communication
technology to manage fleets of trucks that travel extended distances between
urban areas, referred to as long-haul trucking. Other potential competitors
include wireless Internet companies, such as Phone.com and Research in Motion,
companies working on emergency-911 solutions, such as TruePosition, companies
with solutions that integrate location, wireless communications and call
centers, such as General Motors, and companies that provide wireless, location-
relevant applications, such as SignalSoft. Many of our existing and potential
competitors have substantially greater financial, technical, marketing and
distribution resources than we do. Additionally, many of these companies have
greater name recognition and more established relationships with our target
customers. Further, the widespread adoption of industry standards may make it
easier for new market entrants or existing competitors to offer the services we
offer or may offer in the future.
Intellectual Property
We rely on a combination of patent, trade secret, trademark and copyright
laws, and nondisclosure and other contractual restrictions to protect our
proprietary technology. We have been granted two patents, one of
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which covers our Global Positioning System chipset technology and another that
covers the method and structure for distributing information over a network. In
addition, we have applied for three patents to further protect and extend our
technology leadership position. Although we have applied for patent protection
primarily in the U.S., we intend to file patent applications in other countries
where there is a strategic technological or business justification. As part of
our confidentiality procedures, we generally enter into nondisclosure
agreements with our employees, consultants, distributors and corporate partners
and limit access to and distribution of our software, documentation and other
proprietary information.
It may be possible for a third party to obtain and use our technology
without authorization, or to develop similar technology, particularly because
we license portions of our technology to certain customers, strategic partners,
suppliers and distributors. In addition, our services are licensed in foreign
countries and the laws of these countries may treat the protection of
intellectual property rights differently from, and may not protect our
intellectual property to the same extent as, the laws of the U.S. We also rely
on technology and other intellectual property licensed from third parties and
use third party software that may not be available to us on commercially
reasonable terms, if at all, in the future. Some of our license agreements are
non-exclusive, and therefore, our competitors may have access to the same
technology that is licensed to us. We received a letter from the holder of two
patents, claiming that we infringe its patents, and requesting information
about our Global Positioning System chipset. We are currently in the process of
reviewing these two patents. The patent holder has indicated that it is willing
to license these patents to us. However, we cannot assure you that we would be
able to license these two patents on commercially reasonable terms, if at all.
We may also incur substantial legal fees and our management would be distracted
if the patent holder files a lawsuit against us. See "Risk Factors--Our success
and ability to compete depends upon our ability to secure and protect patents,
trademarks and other proprietary rights."
Employees
As of December 31, 1999, we had 103 employees, 99 of whom were located in
the U.S. and four of whom were located in Chennai, India. We believe
relationships with our employees are good.
Legal Proceedings
We have received a letter from the holder of two patents claiming that we
infringe its patents. We are in the process of reviewing the patents; however,
the ultimate outcome of this matter cannot be determined at this time. We are
presently a defendant in a lawsuit arising out of the recruitment of employees.
We are in the process of reviewing the claims alleged in this lawsuit and while
the ultimate outcome cannot be predicted with certainty, we believe this
lawsuit is immaterial and without merit. We also may be a potential defendant
in lawsuits and claims arising in the ordinary course of business in the
future.
Facilities
Our principal executive offices are located in Fremont, California. We lease
approximately 54,000 square feet under a lease that expires in February, 2005.
In addition, we lease 24,000 square feet in Fremont, California for our
engineering and information technology organization under a lease that expires
in December, 2000. We also lease space in Chennai, India for a portion of our
software engineering organization. We believe that our current facilities are
adequate to meet our needs through the end of 2000, at which time we may need
to lease additional space.
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MANAGEMENT
Executive Officers, Management and Directors
Our executive officers, directors and additional corporate management
members and their ages as of March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- ----------
<S> <C> <C>
Executive Officers and Directors
Krish Panu.............. 42 Chairman of the Board, Chief Executive Officer and President
Rodric Fan.............. 56 Director and Chief Technology Officer
Thomas Hoster........... 49 Chief Financial Officer and Vice President, Finance and Administration
David Manovich.......... 48 Vice President, Sales
Thomas Allen............ 46 Vice President, Information Technology and Management Systems
Kris Chellam............ 49 Director
Stuart Phillips......... 41 Director
Andrew Sheehan.......... 42 Director
T. Peter Thomas......... 53 Director
Additional Corporate Management
Julia Langley........... 42 Vice President, Corporate Development and Alliances
John Lankes............. 51 Vice President, Marketing
Valerie Menager......... 47 Vice President, Human Resources
Amin Mufti.............. 45 Vice President, Business Development
Shirish Puranik......... 38 Vice President, Software Development
Michael Walker.......... 44 Vice President, Platform Engineering
</TABLE>
Krish Panu has served as our Chief Executive Officer, President and as a
director of @Road since February 1999 and Chairman of the Board since December
1999. Prior to joining @Road, he served as Vice President and General Manager
of the Logic Products division of Atmel Corporation, a manufacturer of advanced
semiconductors. He held various senior management positions at Atmel
Corporation from August 1991 to November 1998. From September 1989 to August
1991, he held the position of Vice President of Sales and Marketing at Catalyst
Semiconductor, a manufacturer of non-volatile memory products. Mr. Panu also
serves on the boards of directors of two privately held companies. Mr. Panu
holds an M.S. in computer engineering and an M.B.A. from Wayne State University
in Michigan.
Rodric Fan founded @Road and has been one of its directors since August
1996. Since September 1998, Mr. Fan has served as our Chief Technology
Officer, and from August 1996 to September 1998, he served as our Chief
Executive Officer and President. From May 1993 to August 1996 Mr. Fan was the
Technical Director for GPS-related projects and Global Star Satellites, and
from May 1989 to May 1993 he was the Manager of the Satellite Orbit Control
Division, at Space Systems Loral, a producer of commercial communications and
weather satellites. Mr. Fan holds a B.E.S. in Electrical Engineering from
Brigham Young University and an M.S. in Electrical Engineering specializing in
the areas of data communications from Northwestern Polytec University.
Thomas Hoster has served as our Vice President, Finance and Administration
and Chief Financial Officer since November 1999. Prior to joining @Road, Mr.
Hoster was Senior Vice President and Chief Financial Officer of GetSmart, an
on-line provider of consumer financial services, from May 1998 to March 1999.
Prior to GetSmart, Mr. Hoster was Chief Financial Officer of ClickAction, a
provider of e-mail marketing services, formerly known as MySoftware Company,
from June 1996 to May 1998. Prior to that, Mr. Hoster held several finance and
administration positions at Octel Communications, a voice messaging company,
from December 1989 to June 1996. Mr. Hoster has a B.S.E. in Electrical
Engineering from Princeton University and an M.B.A. from Stanford University.
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David Manovich has served as our Vice President, Sales since August 1999.
Prior to joining @Road, Mr. Manovich served as Partner at Union Atlantic, an
investment banking consulting firm, from January 1998 to August 1999. From
October 1985 to January 1996 and from March 1997 to January 1998, Mr. Manovich
worked at Apple Computer, a personal computer technology company, serving as
Executive Vice President of Worldwide Sales and Service, Senior Vice President
of International Sales, Vice President of Retail/Consumer Sales, Director of
Business Markets and Country Manager--UK and Ireland, and Director of US
Channel Sales. From March 1996 to March 1997, Mr. Manovich worked at Fujitsu PC
Corporation, a personal computer manufacturing company, serving as Vice
President of Sales. Mr. Manovich holds a B.S. in Business Administration and an
M.B.A. in Finance from the University of Montana.
Thomas Allen has served as our Vice President, Information Technology and
Management Systems since August 1999. From June 1999 to August 1999, Mr. Allen
served as Director of Operations of IPass, an Internet services company. From
January 1996 to June 1999, Mr. Allen served as Vice President of Network
Engineering at Visa International, a payment card company. From March 1983 to
August 1995, Mr. Allen served as General Manager at Southern California Edison,
an electric utility company. Mr. Allen holds a B.S. in Industrial Engineering
from State University of New York at Buffalo, an M.B.A. from San Jose State
University and a Certificate in Executive Management from the Peter F. Drucker
Management Center at the Claremont Graduate University.
Kris Chellam has served as a director of @Road since December 1999. Since
July 1998, Mr. Chellam has served as Senior Vice President, Finance and Chief
Financial Officer of Xilinx, a provider of programmable logic solutions. Prior
to joining Xilinx, he served at Atmel Corporation, a manufacturer of advanced
semiconductors, as Senior Vice President and General Manager of a product group
from March to July 1998 and as Vice President, Finance and Administration, and
Chief Financial Officer from September 1991 through March 1998. Mr. Chellam
became a member of the Institute of Chartered Accountants in England and Wales
in April 1975.
Stuart Phillips has served as a director of @Road since September 1998.
Since June 1997, Mr. Phillips has been a General Partner at U.S. Venture
Partners a venture capital firm. From October 1993 to June 1997, Mr. Phillips
served as Vice President of Central Engineering at Cisco Systems, an
internetworking company. Mr. Phillips also serves on the boards of directors of
CacheFlow, a manufacturer of Internet caching appliances, and several privately
held companies. He holds a B.S. in electronics from the University of Wales at
Cardiff, U.K.
Andrew Sheehan has served as a director since March 2000. Since April 1998,
Mr. Sheehan has been employed by and is a managing member of the general
partner of ABS Capital Partners III, a private equity fund. From 1985 to 1998,
Mr. Sheehan held various positions at BT Alex. Brown, an investment company,
most recently as managing director. Mr. Sheehan is also a director of Rainmaker
Systems, a provider of electronic customer relationship management services,
and several privately held companies. Mr. Sheehan received his B.A. from
Dartmouth College and his M.B.A. from the Wharton School of Business.
T. Peter Thomas has served as a director of @Road since September 1998.
Since November 1985, Mr. Thomas has been a managing director of Institutional
Venture Partners, a venture capital firm. Mr. Thomas also serves as a director
of Telcom Semiconductor and Atmel Corporation. Mr. Thomas holds a B.S. in
Electrical Engineering from Utah State University and an M.S. in Computer
Science from the University of Santa Clara.
Julia Langley has served as our Vice President of Corporate Development and
Alliances since January 2000. From March 1999 to January 2000, Ms. Langely
served as Senior Vice President, Corporate Business Development for Vadem, a
mobile technology company. From April 1995 to March 1999, Ms. Langely served
with Philips Electronics as Executive Vice President, Philips Consumer
Electronics Services, as Executive Vice President, Philips Consumer
Communications, Paging Line of Business, and as Senior Vice President,
Strategic Marketing and Business Development, Phillips Digital Video Group. Ms.
Langley holds a B.A. from Emory University; an M.B.A. from the Wharton School
of Business and a J.D. from the University of Georgia School of Law.
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John Lankes has served as our Vice President, Marketing since May 1999.
Prior to joining @Road, Mr. Lankes served as Vice President of Wireless Data
Services for Southern New England Tele-communications Corporation from June
1995 to May 1999. From May 1991 to March 1993, Mr. Lankes was Vice President of
Marketing for AirTouch Teletrac, a wireless communications company. From
November 1982 to November 1986, Mr. Lankes was Vice President of Sales and
Marketing for the Great Lakes Region of Epson America, a technology company.
Mr. Lankes has a B.A. from the University of Detroit.
Valerie Menager has served as our Vice President, Human Resources since
March 2000. Prior to joining @Road, Ms. Menager served as Senior Employment
Counsel for Nortel Networks, a telecommunications manufacturer, from February
1999 to March 2000. From October 1997 to February 1999, Ms. Menager provided
consulting services to Atmel Corporation, a semiconductor company, Nortel
Networks and Bay Networks, an Internet equipment manufacturer. Prior to that
Ms. Menager served at Atmel Corporation as Vice President and Legal Counsel
from May 1997 to September 1997, Director of Human Resources and Legal Counsel
from September 1991 to May 1997 and Legal Counsel from July 1989 to September
1991. Ms. Menager has a B.A. from the University of California at Santa Cruz,
and M.A. from the University of California at Los Angeles and a J.D. from
Loyola University of Los Angeles.
Amin Mufti has served as our Vice President, Business Development since
January 1997. From March 1994 to July 1996, Mr. Mufti was General Manager at
International Microcomputer Software. Mr. Mufti has a B.S. in Mechanical
Engineering and an M.S. in Aeronautical Engineering from Stanford University.
Shirish Puranik has served as our Vice President of Software Development
since July 1999. From August 1992 to July 1999, Mr. Puranik worked in the
Database Group of Oracle Corporation, most recently as Director of Product
Development. From February 1988 to August 1992, Mr. Puranik was an engineer in
the distributed database group at Digital Equipment Corporation. Mr. Puranik
has a B.S. in Electrical Engineering from the Indian Institute of Technology,
Bombay, an M.S. in Electrical Engineering from the University of Florida and an
M.S. in Engineering Management from Stanford University.
Michael Walker has served as our Vice President, Platform Engineering since
July 1999. From April 1997 to July 1999, Mr. Walker served as Vice President
Engineering at Silicon Wireless, a manufacturer of wireless communications
infrastructure. From August 1993 to April 1997, Mr. Walker served as Vice
President of Engineering and Vice President of Operations at Sierra Wireless, a
manufacturer of wireless data modems. Mr. Walker holds a B.A.Sc. in Electric
Engineering from Queen's University in Canada and an M.S. in Electrical
Engineering from Simon Fraser University.
Board Composition
We currently have authorized six directors. Each director is elected for a
period of one year at our annual meeting of stockholders and serves until the
next annual meeting or until their successor is duly elected and qualified. The
executive officers serve at the discretion of the board of directors. There are
no family relationships among any of our directors or executive officers.
Subsequent to the offering and our reincorporation in Delaware, our certificate
of incorporation will be amended to provide for the classification of the board
into three classes serving staggered terms. The class I directors, Krish Panu
and T. Peter Thomas, will serve an initial term until the 2001 annual meeting
of stockholders, the class II directors, Rodric Fan and Andrew Sheehan, will
serve an initial term until the 2002 annual meeting of stockholders, and the
class III directors, Kris Chellam and Stuart Phillips, will serve an initial
term until the 2003 annual meeting of stockholders. Each class will be elected
for three-year terms following its respective initial term.
Board Compensation
Except for reimbursement for reasonable travel expenses relating to
attendance at board meetings and the grant of stock options, directors are not
compensated for their services as directors. Our directors are eligible to
participate in our 1996 stock option plan and, beginning in 2000, in our 2000
stock option plan. Messrs. Thomas,
38
<PAGE>
Phillips, Chellam and Sheehan, our nonemployee directors, received options to
purchase 37,500, 37,500, 82,500 and 25,000 shares of common stock respectively
under our 1996 stock option plan in 1999 and 2000. Beginning in 2000, the
directors who are our employees may be eligible to participate in our 2000
employee stock purchase plan and the directors who are not employees of @Road
will be eligible to participate in our 2000 directors' stock option plan.
Board Committees
The board currently has an audit committee and a compensation committee. The
audit committee reviews our annual audit and meets with our independent
auditors to review our internal controls and financial management practices.
The board's audit committee currently consists of Kris Chellam, T. Peter Thomas
and Andrew Sheehan. The compensation committee recommends compensation for
certain of our personnel to the board and administers our stock plans. The
compensation committee currently consists of T. Peter Thomas, Andrew Sheehan
and Stuart Phillips.
Compensation Committee Interlocks and Insider Participation
The members of the compensation committee of our board of directors are
currently T. Peter Thomas, Stuart Phillips and Andrew Sheehan. None of T. Peter
Thomas, Stuart Phillips or Andrew Sheehan has at any time been an officer or
employee of @Road or any subsidiary of @Road.
Executive Compensation
The following table provides summary information regarding the compensation
received for services rendered to @Road during the fiscal year ended December
31, 1999 by the Chief Executive Officer and the only other executive officer
whose aggregate compensation during our last fiscal year exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------- ------------
Securities
Name and Principal Other Annual Underlying All Other
Position Salary ($) Bonus ($) Compensation ($) Options (#) Compensation($)
- ------------------ ---------- --------- ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Krish Panu, Chairman of
the Board, Chief
Executive Officer and
President.............. $168,462 $ -- $-- 3,375,000(1) $--
Rodric Fan, Director and
Chief Technology
Officer................ $138,910 45,000 -- 150,000(2) --
</TABLE>
- --------
(1)Represents options to purchase 3,000,000 shares and 375,000 shares granted
as restricted stock award.
(2)Represents 150,000 shares granted as restricted stock award.
39
<PAGE>
The following table provides summary information regarding stock options
granted to the chief executive officer and the other executive officer named in
the table above during the fiscal year ended December 31, 1999. Options were
granted pursuant to our 1996 stock option plan and are immediately exercisable
at the time of grant. No stock appreciation rights were granted to these
officers during the year.
The percentages shown below are based on a total of 7,047,575 shares subject
to options granted to all of our employees and consultants during the year
ended December 31, 1999. The exercise price per share of the options shown
below was equal to the fair market value of the common stock on the date of
grant as determined by our board of directors. The 5% and 10% assumed annual
rates of compounded stock price appreciation are mandated by the rules of the
SEC. There is no assurance that the actual stock price appreciation over the
ten-year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the common stock appreciates over the
option term, no value will be realized from the option grants made to the chief
executive officer and the other named executive officer.
<TABLE>
<CAPTION>
Potential
Realizable Value
At Assumed Annual
Rates of Stock
Price
Appreciation For
Individual Grants Option Term
--------------------------------------------- -----------------
Percent Of
Number Of Total
Securities Options
Underlying Granted To Exercise
Options Employees In Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date 5% 10%
---- ---------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Krish Panu, Chairman of
the Board, Chief
Executive Officer &
President.............. 2,625,000 37.2% 0.067 2/22/2009 $110,760 $280,776
375,000 5.3 0.667 8/30/2009 157,520 399,313
Option Grants in Last Fiscal Year
Rodric Fan, Director and
Chief Technology
Officer................ -- -- -- -- -- --
</TABLE>
Option Exercises and Holdings
The following table provides summary information concerning the shares of
common stock represented by outstanding stock options held by each of the named
officers as of December 31, 1999.
The value realized and the value of unexercised options represents the
difference between the fair market value of the shares as of December 31, 1999,
using an assumed initial public offering price of $ per share as the fair
market value, and the exercise price of the option.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Options at the-Money Options at
Acquired December 31, 1999 ,
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Krish Panu, Chairman of
the Board, Chief
Executive Officer and
President.............. 2,250,000 750,000 -- $
Rodric Fan, Director and
Chief Technical
Officer................ -- -- -- -- -- --
</TABLE>
40
<PAGE>
Change-of-Control Agreements
We have entered into an agreement with Krish Panu that provides that
following a change of control transaction, subject to limitations, the vesting
of any stock option or restricted stock held by Mr. Panu shall be automatically
fifty percent vested. Additionally, if Mr. Panu's employment is terminated
involuntarily other than for cause within twelve months following a change of
control transaction, then subject to limitations, the vesting of any stock
option or restricted stock held by Mr. Panu shall be automatically fully
vested. We have entered into agreements with our remaining executive officers
and corporate management which provide that in the event of an involuntary
termination within:
. one year following a change of control transaction and the employee was
employed by us for less than one year prior to the change of control
transaction, the vesting of any stock option or restricted stock held by
the employee shall automatically be accelerated as though the employee
maintained his employment with us for twelve months following the
involuntary termination or
. one year following a change of control transaction and the employee was
employed by us for at least one year prior to the change of control
transaction, the vesting of any stock option or restricted stock held by
the employee shall automatically be accelerated as though the employee
maintained his employment with us for 24 months following the involuntary
termination.
Stock Plans
2000 Stock Option Plan. Our 2000 stock option plan was adopted by the board
of directors in March 2000 and will be submitted for approval by our
stockholders prior to completion of this offering. A total of 2,000,000 shares
of common stock have been reserved and are available for grant under the 2000
stock option plan as of the date of this offering. In addition, the 2000 stock
option plan provides that up to 9,825,000 shares of common stock that are
either reserved and available for issuance under our 1996 stock option plan, or
that will return to the 1996 stock option plan upon either the cancellation of
options issued under that plan or the repurchase of outstanding shares common
stock issued under the 1996 stock option plan in connection with the
termination of the holder's employment or consulting relationship with us,
shall become available for issuance under the 2000 stock option plan. The 2000
stock option plan also provides for an automatic annual increase on the first
day of each of our fiscal years beginning in 2001 and ending in 2010 equal to
the lesser of 2,500,000 shares, 4% of our outstanding common stock on the last
day of the immediately preceding fiscal year, or a lesser number of shares as
determined by the board of directors. The maximum total number of shares of
common stock that may be sold under the Plan during its term is 36,825,000.
The purposes of the 2000 stock option plan are to attract and retain the
best available personnel, to provide additional incentives to our employees and
consultants and to promote the success of our business. The 2000 stock option
plan provides for the granting to employees, including officers and directors,
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, and for the granting to employees and consultants,
including non-employee directors, of non-statutory stock options. If an option
holder would have the right in any calendar year to exercise for the first time
one or more incentive stock options for shares having a total fair market value
in excess of $100,000, any excess options shall be treated as non-statutory
stock options. Unless terminated earlier, the 2000 stock option plan will
terminate in March, 2010.
The 2000 stock option plan may be administered by the board or a committee
of the board. The administrator determines the terms of options granted under
the 2000 stock option plan, including the number of shares subject to an option
and its exercise price, term and exercisability. However, no individual
employee may receive option grants under the 2000 stock option plan during any
one fiscal year that would allow him or her to purchase more than 2,500,000
shares.
The exercise price of all incentive stock options granted under the 2000
stock option plan must be at least equal to the fair market value of our common
stock on the date of grant. After the effective date of this
41
<PAGE>
offering, the exercise price of non-statutory stock options granted under the
2000 stock option plan will be the price determined by the administrator.
Payment of the option exercise price may be made in cash or other consideration
as determined by the administrator.
The administrator determines the term of options, which may not exceed 10
years, or 5 years in the case of an incentive stock option granted to a 10%
stockholder. Generally, an option may not be transferred by the option holder
other than by will or the laws of descent or distribution. However, after the
effective date of this offering, the administrator may grant non-statutory
stock options with limited transferability rights. We expect that options
granted under the 2000 stock option plan generally will vest at the rate of 1/4
of the total number of shares subject to the options twelve months after the
date of grant, and 1/48 of the total number of shares subject to the options
each month thereafter.
If we merge with or consolidate into another corporation, or sell
substantially all of our assets, we would expect that the successor corporation
will assume outstanding options or substitute equivalent awards. If the
successor corporation refuses to assume or substitute the options, each
outstanding stock option will terminate on the effective date of the
transaction. Outstanding options will adjust in the event of a stock split,
stock dividend or other similar change in our capital structure.
The administrator has the authority to amend or terminate the 2000 stock
option plan. However, the administrator may not take any action that impairs
the rights of any holder of an outstanding option without the holder's consent.
In addition, we must obtain stockholder approval of amendments to the plan as
required by applicable law.
1996 Stock Option Plan. Our 1996 stock option plan was adopted by the board
of directors in October 1996 and was approved by the stockholders in October
1996. The plan was amended at various times after October 1996, including an
amendment to provide that following adoption of the 2000 stock option plan, up
to 9,825,000 shares of stock which are either reserved and available for
issuance under the plan, or which would otherwise return to the plan upon
either the cancellation of outstanding options or the repurchase of shares in
connection with the termination of the holder's employment or consulting
relationship with us, will become available for issuance under our 2000 stock
option plan.
As of December 31, 1999, a total of 11,326,125 shares of common stock had
been reserved for issuance under the 1996 option plan. As of December 31, 1999,
options to purchase 5,099,312 shares of common stock had been exercised,
options to purchase 3,681,888 shares of common stock were outstanding and
2,544,925 shares remained available for future option grants. However, no
future grants will be made under the 1996 stock option plan after the effective
date of this offering.
The terms of the 1996 stock option plan are substantially similar to those
of the 2000 stock option plan except for the following:
. Unless the board terminates it earlier, the 1996 stock option plan will
terminate in September 2006.
. The 1996 stock option plan does not impose an annual limit on the size of
awards that may be granted to any one individual under the plan.
. Generally, the exercise price of non-statutory stock options must be
equal to at least 85% of the fair market value of our common stock on the
date of grant.
. The 1996 stock option plan provides for the indemnification of the
administrator for claims arising out of the administration of the plan
unless it is determined that the administrator is liable for gross
negligence, bad faith, or intentional misconduct.
2000 Employee Stock Purchase Plan. Our 2000 employee stock purchase plan was
adopted by the board of directors in March 2000 and will be submitted for
approval by our stockholders prior to completion of this offering. The 2000
employee stock purchase plan becomes effective upon the effective date of this
offering. A total of 450,000 shares of common stock has been reserved for
issuance under the 2000 employee stock
42
<PAGE>
purchase plan, plus an automatic annual increase on the first day of each of
our fiscal years beginning in 2001 and ending in 2010 equal to the lesser of
900,000 shares, 2% of our outstanding common stock on the last day of the
immediately preceding fiscal year, or a lesser number of shares as determined
by the board of directors. Unless terminated earlier by the board of directors,
the 2000 employee stock purchase plan will terminate 10 years following the
date of this offering.
The 2000 employee stock purchase plan is intended to qualify under Section
423 of the Internal Revenue Code. The plan will be implemented by a series of
overlapping offering periods of approximately 24 months duration, with new
offering periods (other than the first offering period) commencing on August 1
and February 1 of each year. Each offering period will generally consist of 4
consecutive purchase periods of 6 months duration, at the end of which an
automatic purchase will be made for participants. The initial offering period
is expected to commence on the effective date of this offering.
The 2000 employee stock purchase plan will be administered by the board of
directors or by a committee appointed by the board. Our employees (including
officers and employee directors), or employees of any majority-owned subsidiary
designated by the board, are eligible to participate if they are regular
employees who work at least 20 hours per week and more than 5 months per year.
The 2000 employee stock purchase plan permits eligible employees to purchase
common stock through payroll deductions, which may not exceed 20% of an
employee's total compensation. Stock is purchased at a price equal to the lower
of 85% of the fair market value of the common stock at the beginning of the
offering period or at the end of the purchase period. In addition, no employee
may purchase more than 2,700 shares of common stock under the plan in any one
purchase period. Employees may end their participation in the plan at any time
during an offering period, and participation ends automatically on termination
of employment.
If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, we expect that each right to purchase stock
under the 2000 employee stock purchase plan will be assumed or an equivalent
right substituted by the successor corporation. If our acquiror does not agree
to assume or substitute outstanding rights, the offering period then in
progress will be shortened so that employees' rights to purchase stock under
the plan are exercised prior to the transaction. Outstanding options will
adjust in the event of a stock split, stock dividend or other similar change in
our capital structure.
Our board of directors has the power to amend or terminate the 2000 employee
stock purchase plan and to change or terminate offering periods as long as such
action does not adversely affect any outstanding rights to purchase stock
thereunder. However, the board may amend or terminate the 2000 employee stock
purchase plan or an offering period even if it would adversely affect
outstanding options in order to avoid our incurring adverse accounting charges.
2000 Directors' Stock Option Plan. The 2000 directors' stock option plan was
adopted by the board of directors in March 2000 and will be submitted for
approval by our stockholders prior to completion of this offering. It will
become effective upon the effective date of this offering. A total of 1,200,000
shares of common stock has been reserved for issuance under the 2000 directors'
plan. The 2000 directors' plan provides for the grant of non-statutory stock
options to our non-employee directors. The 2000 directors' plan is designed to
work automatically without administration. If administration is necessary, it
will be performed by the board of directors, with any interested director
abstaining from the decision-making process. Unless terminated earlier, the
2000 directors' plan will terminate 10 years from the effective date of this
offering.
Under the directors' plan, each individual who first becomes a non-employee
director after the effective date of the directors' plan will receive an
automatic initial grant of an option to purchase 40,000 shares of common stock
upon appointment or election to the board. These automatic grants to purchase
40,000 shares will vest and become exercisable as to 1/4th of the total number
of shares subject to the option on the 12 month anniversary of the date of
grant and as to 1/48th of the total number of shares subject to the option each
month
43
<PAGE>
following the date of grant. The directors' plan also provides for automatic
annual grants of options to purchase 10,000 shares of common stock on the date
of each annual meeting of our stockholders to each non-employee director who
has served on the board for at least six months prior to the meeting. The
automatic grants to purchase 10,000 shares will vest and become exercisable in
installments of 1/12th of the total number of shares subject to the option each
month following the date of grant. All options granted under the 2000
directors' plan will have a term of 10 years and an exercise price equal to the
fair market value of our common stock on the date of grant.
If we merge with or consolidate into another corporation, or sell all or
substantially all of our assets, each option outstanding under the directors'
plan will become immediately fully vested and exercisable immediately before
the transaction. Outstanding options will adjust in the event of a stock split,
stock dividend or other similar change in our capital structure. The board may
amend or terminate the directors' plan, but any such amendment that would
impair the rights of any holder of an outstanding option will not affect those
outstanding options without the holder's consent. In addition, we must obtain
stockholder approval of amendments to the plan as required by applicable law.
Limitation of Liability and Indemnification Matters
As permitted by the Delaware General Corporation Law, we have included in
our amended and restated certificate of incorporation a provision to eliminate
the personal liability of our officers and directors for monetary damages for
breach or alleged breach of their fiduciary duties as officers or directors,
respectively, subject to certain exceptions. In addition, our bylaws provide
that we are required to indemnify our officers and directors under certain
circumstances, including those circumstances in which indemnification would
otherwise be discretionary, and we are required to advance expenses to our
officers and directors as incurred in connection with proceedings against them
for which they may be indemnified. We have entered into indemnification
agreements with our officers and directors containing provisions that are in
some respects broader than the specific indemnification provisions contained in
the Delaware law. The indemnification agreements require us, among other
things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as officers and directors,
other than liabilities arising from willful misconduct of a culpable nature, to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms.
We currently intend to purchase a policy for directors' and officers'
insurance. At present, we are not aware of any pending or threatened litigation
or proceeding involving any of our directors, officers, employees or agents in
which indemnification would be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification. We believe that our charter provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.
44
<PAGE>
RELATED PARTY TRANSACTIONS
Since January 1, 1997, we have not been a party to any transaction or series
of similar transactions in which the amount involved exceeds $60,000 and in
which any director, executive officer, or holder of more than 5% of our common
stock had or will have a direct or indirect material interest other than:
. normal compensation arrangements which are described under "Management--
Executive Compensation" above; and
. the transactions described below.
Private Placement Transactions
Since January 1, 1997, we have issued shares of preferred stock for the
purchase of preferred stock in private placement transactions involving related
parties, as follows:
. An aggregate of 12,413,793 shares of series B preferred stock at $0.483
per share in September 1998 to twelve investors;
. An aggregate of 6,956,400 shares of series C preferred stock at $3.33 per
share in June 1999 to thirty-three investors; and
. An aggregate of 3,590,763 shares of series D preferred stock at $8.67 per
share in December 1999 and January 2000 to twenty-nine investors.
The table below summarizes the shares of preferred stock purchased by our
executive officers, directors and 5% stockholders and persons and entities
associated with them in the above private placement transactions. Shares held
by affiliated persons and entities have been aggregated.
<TABLE>
<CAPTION>
Investors Preferred Stock
- --------- ---------------------------
Series
Series B Series C D
--------- --------- -------
<S> <C> <C> <C>
ABS Capital Partners III, L.P and Andrew Sheehan.. 0 1,650,000 230,769
Admirals, L.P..................................... 0 1,500,000 576,922
Institutional Venture Partners and its affiliates,
including T. Peter Thomas........................ 5,586,207 1,440,000 692,307
U.S. Venture Partners and its affiliates,
including Stuart Phillips........................ 5,586,207 1,440,000 692,307
Kris Chellam...................................... 0 75,000 15,000
</TABLE>
Transactions with Management
In connection with the exercise of options to purchase common stock granted
pursuant to our 1996 stock option plan, we have provided loans to the following
executive officers pursuant to notes secured by stock pledge agreements, which
are summarized below:
<TABLE>
<CAPTION>
Issue Note
Name Due Date Interest Rate Date Amount
- ---- -------- ------------- ----- ------
<S> <C> <C> <C> <C>
Krish Panu 12/16/2004 6.11% 12/16/99 $275,000
Krish Panu 2/23/2005 6.46 2/23/00 500,000
Rodric Fan 12/16/2004 6.11 12/16/99 200,000
Thomas Hoster 11/30/2004 6.11 12/1/99 450,000
David Manovich 12/16/2004 6.11 12/16/99 250,000
Thomas Allen 12/15/2004 6.11 12/15/99 100,000
John Lankes 12/16/2004 6.11 12/16/99 78,500
Julia Langley 2/22/05 6.46 2/22/00 250,000
Shirish Puranik 12/15/2004 6.11 12/15/99 260,000
Michael Walker 12/1/2004 6.11 12/1/99 100,000
</TABLE>
45
<PAGE>
In March 2000, the board of directors approved the acceleration of the
vesting of a stock option held by Krish Panu to purchase 375,000 shares of
common stock.
In April 2000, the board of directors ratified a loan to John Lankes in the
amount of $80,000 under a note secured by a stock pledge agreement for
financing relocation expenses for his employment with @Road.
We have entered into employment and change-of-control agreements with some
of our officers and directors. See "Management--Employment and Change-of-
Control Agreements."
We have entered into indemnification agreements with our officers and
directors containing provisions which may require us, among other things, to
indemnify our officers and directors against certain liabilities that may arise
by reason of their status or service as officers or directors, other than
liabilities arising from willful misconduct of a culpable nature, and to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified.
Transactions with Shareholders
Orient Semiconductor Electronics, which holds more than 5% of our common
stock, manufactured internet Location Managers for us pursuant to purchase
orders in the aggregate amounts of approximately $21,000 in 1998 and $512,000
in 1999. At December 31, 1999, approximately $256,000 owed to Orient
Semiconductor Electronics was included in our accounts payable.
Registration Rights Agreements
Some of our shareholders are entitled to have their shares registered by us
for resale. See "Description of Capital Stock--Registration Rights."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of December 31, 1999 and as adjusted to
reflect the sale of the common stock offered by us pursuant to this prospectus
and conversion of all outstanding shares of preferred stock into shares of
common stock by
. each of our directors, our chief executive officer and our one other
executive officer whose aggregate compensation during our last fiscal
year exceeded $100,000,
. all directors and executive officers as a group, and
. each person who is known by us to own beneficially more than 5% of our
common stock.
Percentage of beneficial ownership is based on 32,980,188 shares of common
stock outstanding as of December 31, 1999, together with options that are
exercisable within sixty days of December 31, 1999 for each person.
Except as otherwise noted, the address of each person listed in the table is
c/o @Road, Inc., 47200 Bayside Parkway, Fremont, CA 94538, and the persons
listed in the table have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them, subject to
community property laws where applicable. Beneficial ownership is determined in
accordance with the rules of the SEC and includes voting and investment power
with respect to the shares.
<TABLE>
<CAPTION>
Percent
Beneficially Owned
----------------------
Number of Shares Before After
Name of Beneficial Owner Beneficially Owned Offering Offering
- ------------------------ ------------------ --------- ---------
<S> <C> <C> <C>
Krish Panu(1)...................... 3,375,000 9.9%
Institutional Venture Partners(2).. 7,718,514 23.4
U.S. Venture Partners(3)........... 7,718,514 23.4
Orient Semiconductor
Electronics(4).................... 2,902,500 8.8
Admirals, L.P.(5).................. 2,076,922 6.3
ABS Capital Partners III, L.P(6)... 1,880,769 5.7
Rodric Fan (7)..................... 2,400,000 7.3
Kris Chellam(8).................... 172,500 *
Stuart Phillips(9)................. 37,500 *
T. Peter Thomas(10)................ 37,500 *
All directors and executive
officers as a group (9
persons)(11)...................... 22,269,528 65.6
</TABLE>
- --------
* Less than one percent of the outstanding shares of common stock.
(1) Represents 2,250,000 shares acquired by exercise of stock options and
1,125,000 shares issuable upon exercise of options and a stock purchase
right exercisable within 60 days of December 31, 1999.
(2) Represents 7,539,412 shares held by Institutional Venture Partners, VIII,
L.P., 55,862 shares held by Institutional Venture Partners Founders Fund I,
L.P., 98,102 shares held by Institutional Venture Management Fund, VIII,
L.L.C., and 25,138 shares held by Institutional Venture Management Fund
VIII-A, L.L.C. T. Peter Thomas, a director of @Road, is a managing director
of the general partner of each of these partnerships, shares voting and
dispositive power with respect to the shares held by each such entity, and
disclaims beneficial ownership of such shares in which he has no pecuniary
interest. Address is 3000 Sand Hill Road, Bldg. 2, Suite 290, Menlo Park,
California 94025.
(3) Represents 6,323,586 shares held by U.S. Venture Partners V, L.P., 692,308
shares held by U.S. Venture Partners VII, L.P., 154,576 shares held by U.S.
Venture Partners V Entrepreneur Partners, L.P., 351,310 shares held by U.S.
Venture Partners V International, L.P., and 196,734 shares held by 2180
Associates Fund V, L.P. Stuart Phillips, a director of @Road, is a general
partner of the general partner of each of these partnerships, shares voting
and dispositive power with respect to the shares held by each such
47
<PAGE>
entity, and disclaims beneficial ownership of such shares in which he has
no pecuniary interest. Address is 2180 Sand Hill Road, Suite 300, Menlo
Park, California 94025.
(4) Represents 2,250,000 shares held by Orient Semiconductor Electronics,
Limited and 652,500 shares held by Orient Semiconductor Electronics, Inc.
Address is c/o Edmond Tseng, 2700 Augstine Dr., #140, Santa Clara,
California 95054.
(5) Address is Galleon Management, 135 E. 57th Street, 26th Floor, New York,
New York 10022.
(6) Andrew Sheehan is a managing member of ABS Capital Partners III, LLC, the
general partner of ABS Capital Partners III, L.P., which owns such
shares. Mr. Sheehan disclaims beneficial ownership of these shares except
to the extent of his pecuniary interest. Mr. Sheehan has shared voting
power and shared investment power of these shares. Address is 1 South
Street, 25th Floor, Baltimore, Maryland, 21202.
(7) Represents 1,530,000 shares held by Fan Family Trust; 675,000 shares held
by R. C. Fan Management Company, L.P.; 60,000 shares held by Eric Fan;
60,000 shares held by Carey B. Fan; 60,000 shares held by David W. Fan;
and 15,000 shares held by Dorian Falcone.
(8) Includes 82,500 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1999.
(9) Represents 37,500 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1999. Excludes 7,718,514 shares held by
U.S. Venture Partners V, L.P. and its affiliates. See note (2). Address
is 2180 Sand Hill Road, Suite 300, Menlo Park, California 94025.
(10) Represents 37,500 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1999. Excludes 7,718,514 shares held by
Institutional Venture Partners, VIII, L.P. and its affiliates. See note
(1). Address is 3000 Sand Hill Road, Bldg. 2, Suite 290, Menlo Park,
California 94025.
(11) Includes 987,499 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1999 and 15,437,028 shares held by
affiliates of our directors and officers.
48
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, after giving effect to the conversion
of all outstanding shares of preferred stock into common stock and the filing
of our amended and restated certificate of incorporation, our authorized
capital stock will consist of 250,000,000 shares of common stock, $0.0001 par
value, and 10,000,000 shares of undesignated preferred stock, $0.0001 par
value.
Common Stock
As of December 31, 1999, there were 32,980,188 shares of common stock
outstanding, held of record by 29 stockholders, after giving effect to the
conversion of all outstanding shares of our preferred stock into common stock.
There will be shares of common stock outstanding, assuming no exercise of
the underwriter's over-allotment option or exercise of outstanding options
under the stock plans after March 15, 2000, after giving effect to the sale of
the shares of common stock to the public offered hereby.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferential rights with respect to any outstanding preferred stock, holders of
common stock are entitled to receive ratably such dividends as may be declared
by the board of directors out of funds legally available therefor. In the event
of liquidation, dissolution or winding up of @Road, the holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities and satisfaction of preferential rights of any outstanding
preferred stock. The common stock has no preemptive or conversion rights or
other subscription rights. The outstanding shares of common stock are, and the
shares of common stock to be issued upon completion of this offering will be,
fully paid and non-assessable.
Preferred Stock
Upon the closing of the offering, all outstanding shares of preferred stock
will be converted into 25,430,187 shares of common stock and automatically
retired. Thereafter, the board of directors is authorized to issue preferred
stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the stockholders.
The issuance of preferred stock may have the effect of delaying, deferring
or preventing a change in control of @Road without further action by the
stockholders. The issuance of preferred stock with voting and conversion rights
may adversely affect the voting power of the holders of common stock, including
voting rights, of the holders of common stock. In certain circumstances, such
issuance could have the effect of decreasing the market price of the common
stock. As of the closing of the offering, no shares of preferred stock will be
outstanding and we currently have no plans to issue any shares of preferred
stock.
Registration Rights
As of December 31, 1999, the holders of 26,907,677 shares of common stock or
their transferees are entitled to certain rights with respect to the
registration of such shares under the Securities Act. These rights are provided
under the terms of an agreement between us and the holders of these registrable
securities. Subject to certain limitations in the agreement, the holders of at
least a majority of the registrable securities, excluding registrable common
stock held by Rodric Fan, may require, on two occasions beginning six months
after the date of this prospectus, that we use our best efforts to register the
registrable securities for public resale. If we register any of our common
stock either for our own account or for the account of other security holders,
the holders of registrable securities are entitled to include their shares of
common stock in such registration, subject to the ability of the underwriters
to limit the number of shares included in the offering. The holders of
registrable securities may also require us, not more than twice in any twelve-
month period, to register all or a
49
<PAGE>
portion of their registrable securities on Form S-3 when use of such form
becomes available to us, provided, among other limitations, that the proposed
aggregate selling price, net of any underwriters' discounts or commissions, is
at least $1,000,000. We must bear all registration expenses, and the holders
of the securities being registered must bear all selling expenses relating to
the registrable securities.
Effect of Certain Certificate of Incorporation and Bylaw Provisions
In March 2000, our board of directors approved certain amendments to our
certificate of incorporation and bylaws to provide, among other things, that
our directors will be elected without the application of cumulative voting.
Such provision will be submitted to our stockholders for approval in April
2000 and shall become effective at the first meeting of stockholders following
the annual meeting of stockholders when we shall have had at least 800
stockholders. Such amendments also provide that, after the closing of the
offering contemplated hereby, any action required or permitted to be taken by
our stockholders may be taken only at a duly called annual or special meeting
of the stockholders. The bylaws also establish procedures, including advance
notice procedures with regard to the nomination, other than by or at the
direction of the board of directors, of candidates for election as directors.
The foregoing provisions could have the effect of making it more difficult
for a third party to effect a change in the control of the board of directors.
In addition, these provisions could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, a majority of our outstanding voting stock.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Stock
Transfer and Trust Company.
50
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. Furthermore, since only a limited
number of shares will be available for sale shortly after this offering because
of certain contractual and legal restrictions on resale (as described below),
sales of substantial amounts of our common stock in the public market after the
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding shares of
common stock assuming no exercise of the underwriters' option to purchase
additional shares in the offering and no exercise of outstanding options to
purchase our common stock after , 2000. Of these shares, the shares sold
in the offering, plus any shares issued upon exercise of the underwriters'
over-allotment option, will be freely tradable without restriction under the
Securities Act, unless purchased by our affiliates, as defined in Rule 144
under the Securities Act.
The remaining 32,980,188 shares of common stock outstanding are restricted
securities within the meaning of Rule 144 under the Securities Act. These
restricted shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act, which are summarized below. Sales of the
restricted shares in the public market, or the availability of such shares for
sale, could adversely affect the market price of the common stock.
All of our directors and officers and current stockholders holding at least
one percent of our outstanding stock have entered into lock-up agreements
generally providing that they will not offer, sell, contract to sell or grant
any option to purchase or otherwise dispose of the shares of our common stock
or any securities exercisable for or convertible into our common stock owned by
them for a period of 180 days after the effective date of this offering without
the prior written consent of @Road or a designated representative of the
underwriters. As a result of these contractual restrictions, notwithstanding
possible earlier eligibility for sale under the provisions of Rules 144, 144(k)
and 701, shares subject to lock-up agreements will not be saleable until such
agreements expire or are waived by the designated underwriters' representative.
Upon expiration of the 180-day lock-up period, shares will be eligible
for immediate sale (of which shares will be subject to certain volume,
manner of sale and other limitations under Rule 144 or 701). The remaining
restricted shares will be eligible for sale under Rule 144 on the:
. satisfaction of the one-year holding period required by Rule 144; or
. expiration of the repurchase options held by us over the four years
following the original purchase date of the shares.
In general, under Rule 144 as currently in effect, beginning after the
expiration of the lock-up agreements, a person, or persons whose shares are
aggregated, who has beneficially owned restricted shares for at least one year
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of: (1) one percent of the number of shares of
common stock then outstanding; or (2) the average weekly trading volume of the
common stock during the four calendar weeks preceding the sale. Sales under
Rule 144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been an affiliate of ours
at any time during the three months preceding a sale and has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Rule 701 provides that, beginning 90 days after the date of this prospectus,
persons other than affiliates may sell our common stock acquired from us in
connection with written compensatory benefit plans, including our stock option
plans, subject only to the manner of sale provisions of Rule 144 and lock-up
agreements.
51
<PAGE>
Beginning 90 days after this prospectus (but subject to the applicable lock-up
period), affiliates may sell these shares subject to all provisions of Rule 144
except the one-year minimum holding period.
In addition, we intend to file a registration statement on Form S-8 under
the Securities Act as promptly as possible after the effective date of this
offering to register shares to be issued pursuant to our employee benefit
plans. See "Management--Stock Plans." This Form S-8 registration statement is
expected to become effective immediately upon filing, and shares covered by
that registration statement will then be eligible for sale in the public
markets, subject to:
. the Rule 144 limitations applicable to affiliates;
. the expiration of the lock-period; and
. vesting restrictions imposed by us.
As of , 2000 there were outstanding options to purchase shares
of common stock, of which options to purchase shares of our common stock
were exercisable. See "Risk Factors--Future sales of common stock by our
existing stockholders could cause our share price to fall." and "Management--
Stock Plans."
After the closing of this offering, the holders of approximately shares
of our common stock will be entitled to have their shares registered by us for
resale. For a discussion of these rights, see "Description of Capital Stock--
Registration Rights."
52
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Chase Securities Inc.
and U.S. Bancorp Piper Jaffray Inc. are acting as representatives, the
following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number
of
Underwriter Shares
----------- ------
<S> <C>
Credit Suisse First Boston Corporation................................
Chase Securities Inc. ................................................
U.S. Bancorp Piper Jaffray Inc. ......................................
----
Total...............................................................
====
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and the selling group members may allow a discount of $ per
share on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to broker/dealers may be
changed by the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions paid by
us . . . . . . . . . .
....................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
issuances pursuant to the exercise of employee stock options outstanding on the
date hereof or pursuant to our dividend reinvestment plan.
Our officers and directors and all of our stockholders have agreed that they
will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common
stock, enter into a transaction
53
<PAGE>
which would have the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of our common stock, whether any such transaction is
to be settled by delivery of our common stock or such other securities, in cash
or otherwise, or publicly disclose the intention to make any such offer, sale,
pledge or disposition, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus.
The underwriters have reserved for sale at the initial public offering price
up to shares of the common stock for employees, directors and certain
other persons associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the
other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments that the underwriters may be required
to make in that respect.
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol ARDI.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors to be considered in
determining the public offering price include the following:
. the information set forth in this prospectus and otherwise available to
the representatives;
. market conditions for initial public offerings;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. our prospects for future earnings;
. the present state of our development and our current financial condition;
. the general condition of the securities markets at the time of this
offering; and
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
54
<PAGE>
A prospectus in electronic format may be made available on the websites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters
for sale to their online brokerage account holders. Internet distributions will
be allocated by the representatives of the underwriters on the same basis as
other allocations.
55
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under
the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
56
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Venture Law Group, A Professional Corporation, Menlo Park, California. Tae
Hea Nahm, a director of Venture Law Group, is our Secretary. The underwriters
have been represented by Wilson Sonsini Goodrich & Rosati, Palo Alto,
California. As of the date of this prospectus, certain attorneys of Venture Law
Group and an investment partnership affiliated with Venture Law Group own an
aggregate of 65,673 shares of our common stock and an option to purchase 22,500
shares of our common stock.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1999 and
for each of the three years in the period ended December 31, 1999 included in
this prospectus and the related consolidated financial statement schedule
included elsewhere in the registration statement have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports appearing herein
and elsewhere in the registration statement, and have been so included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement, including any amendments to the registration statement, on Form S-1
under the Securities Act with respect to the common stock offered by this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement. For further information with respect to @Road and the
common stock offered by this prospectus, reference is made to the registration
statement and its exhibits, and the financial statements and notes filed as a
part of the registration statement. With respect to each such document filed
with the Commission as an exhibit to the registration statement, reference is
made to the exhibit for a more complete description of the matter involved. The
registration statement, including its exhibits and the financial statements and
notes filed as a part of the registration statement, as well as such reports
and other information filed with the Commission, may be inspected without
charge at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, NY 10048,
and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of all or any part of the registration statement may be obtained
from the Commission upon payment of certain fees prescribed by the Commission.
These reports and other information may also be inspected without charge at a
web site maintained by the Commission at http://www.sec.gov.
57
<PAGE>
@ROAD, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999.............. F-3
Consolidated Statements of Operations for the Years Ended December 31,
1997, 1998 and 1999...................................................... F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Loss for
the Years Ended December 31, 1997, 1998 and 1999......................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999...................................................... F-6
Notes to Consolidated Financial Statements for the Years Ended December
31, 1997, 1998 and 1999.................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
@Road, Inc.:
We have audited the accompanying consolidated balance sheets of @Road, Inc.
and subsidiary (the "Company") as of December 31, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity and
comprehensive loss, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of @Road, Inc. and subsidiary at
December 31, 1998 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
March 23, 2000
F-2
<PAGE>
@ROAD, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
<TABLE>
<CAPTION>
December 31, Pro Forma
----------------- December 31,
1998 1999 1999
------- -------- ------------
(Note 1)
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 5,356 $ 22,714 $33,814
Short-term investments....................... -- 13,939 13,939
Restricted short-term investments............ -- 2,000 2,000
Accounts receivable (net of allowances of $0
and $131)................................... 62 807 807
Inventories.................................. 238 1,880 1,880
Deferred product costs....................... 67 1,282 1,282
Prepaid expenses and other................... 94 204 204
------- -------- -------
Total current assets....................... 5,817 42,826 53,926
Property and equipment, net.................... 174 1,566 1,566
Deferred product costs......................... -- 594 594
Other assets................................... 15 188 188
------- -------- -------
Total assets............................... $ 6,006 $ 45,174 $56,274
======= ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................. $ 51 $ 2,020 $ 2,020
Accrued liabilities.......................... 100 1,345 1,345
Deferred revenue............................. 67 703 703
------- -------- -------
Total current liabilities.................. 218 4,068 4,068
Deferred revenue............................... -- 464 464
Other long-term liabilities.................... -- 34 34
------- -------- -------
Total liabilities.......................... 218 4,566 4,566
Commitments and contingencies (Note 9)
Stockholders' equity:
Convertible preferred stock, $0.0001 par
value, 26,927,886 shares authorized; shares
issued and outstanding: 16,163,793 in 1998
and 25,430,187 in 1999, pro forma -- none
outstanding................................. 8,469 51,606 --
Common stock, par value $0.0001, 48,072,114
shares authorized; shares issued and
outstanding: 2,311,125 in 1998 and 7,550,001
in 1999, pro forma -- 34,260,957 shares
outstanding................................. 7 18,590 81,296
Deferred stock compensation.................. -- (11,632) (11,632)
Notes receivable from stockholders........... -- (1,758) (1,758)
Accumulated other comprehensive loss......... -- (21) (21)
Accumulated deficit.......................... (2,688) (16,177) (16,177)
------- -------- -------
Total stockholders' equity................. 5,788 40,608 51,708
------- -------- -------
Total liabilities and stockholders'
equity.................................. $ 6,006 $ 45,174 $56,274
======= ======== =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
@ROAD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Revenues:
Service......................................... $ -- $ 4 $ 612
Product......................................... -- 64 294
------- ------- --------
Total revenues................................ -- 68 906
------- ------- --------
Costs and expenses:
Cost of service revenue......................... -- 27 681
Cost of product revenue......................... -- 87 1,777
Sales and marketing............................. 107 266 3,530
Research and development........................ 745 731 2,109
General and administrative...................... 250 457 2,129
Stock compensation (*).......................... -- -- 4,973
------- ------- --------
Total costs and expenses...................... 1,102 1,568 15,199
------- ------- --------
Loss from operations.............................. (1,102) (1,500) (14,293)
Interest income, net.............................. 98 90 804
------- ------- --------
Net loss.......................................... $(1,004) $(1,410) $(13,489)
======= ======= ========
Basic and diluted net loss per share.............. $ (0.45) $ (0.62) $ (4.88)
======= ======= ========
Shares used in calculating basic and diluted net
loss per share................................... 2,250 2,287 2,763
======= ======= ========
Pro forma basic and diluted net loss per share
(unaudited) (Note 1)............................. $ (0.59)
========
Shares used in calculating pro forma basic and
diluted net loss per share (unaudited) (Note 1).. 22,882
========
(*)Stock compensation:
Cost of service revenue......................... $ -- $ -- $ 17
Cost of product revenue......................... -- -- 52
Sales and marketing............................. -- -- 501
Research and development........................ -- -- 445
General and administrative...................... -- -- 3,958
------- ------- --------
Total......................................... $ -- $ -- $ 4,973
======= ======= ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
@ROAD, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Notes Accumulated
Convertible Receivable Other Total
Preferred Stock Common Stock Deferred from Compre- Accumu- Compre-
------------------ ------------------ Stock Stock- hensive lated Stockholders' hensive
Shares Amount Shares Amount Compensation holders Loss Deficit Equity Loss
---------- ------- --------- -------- ------------ ---------- ----------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES,
January 1,
1997........... 3,750,000 $ 2,489 2,250,000 $ 3 $ -- $ -- $ -- $ (274) $ 2,218
Net loss........ (1,004) (1,004) $ (1,004)
---------- ------- --------- -------- -------- ------- ----- -------- -------- ========
BALANCES,
December 31,
1997........... 3,750,000 2,489 2,250,000 3 -- -- -- (1,278) 1,214
Net loss........ (1,410) (1,410) $ (1,410)
========
Issuance of
Series B
convertible
preferred stock
at $0.48 per
share, net of
issuance costs
of $20......... 12,413,793 5,980 5,980
Exercise of
stock options.. 61,125 4 4
---------- ------- --------- -------- -------- ------- ----- -------- --------
BALANCES,
December 31,
1998........... 16,163,793 8,469 2,311,125 7 -- -- -- (2,688) 5,788
Net loss........ (13,489) (13,489) $(13,489)
Change in net
unrealized loss
from short-term
investments.... (21) (21) (21)
--------
Comprehensive
loss........... $(13,510)
========
Issuance of
Series C
convertible
preferred stock
at $3.33 per
share, net of
issuance costs
of $21......... 6,956,400 23,167 23,167
Issuance of
Series D
convertible
preferred stock
at $8.67 per
share, net of
issuance costs
of $50......... 2,309,994 19,970 19,970
Common stock
issued for
consulting
services....... 50,689 43 43
Exercise of
stock options
and stock
purchase
rights......... 5,188,187 1,935 (1,758) 177
Deferred stock
compensation... 16,605 (16,605) --
Amortization of
deferred stock
compensation... 4,973 4,973
---------- ------- --------- -------- -------- ------- ----- -------- --------
BALANCES,
December 31,
1999........... 25,430,187 $51,606 7,550,001 $ 18,590 $(11,632) $(1,758) $ (21) $(16,177) $ 40,608
========== ======= ========= ======== ======== ======= ===== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
@ROAD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(1,004) $(1,410) $(13,489)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 18 47 188
Loss on sale of property and equipment......... -- -- 6
Amortization of deferred stock compensation.... -- -- 4,973
Common stock issued for consulting services.... -- -- 43
Change in assets and liabilities:
Accounts receivable.......................... -- (62) (745)
Inventories.................................. (71) (166) (1,642)
Deferred product costs....................... -- (67) (1,809)
Prepaid expenses and other................... 1 (84) (110)
Accounts payable............................. 10 25 1,969
Accrued and other liabilities................ 28 33 1,279
Deferred revenue............................. -- 67 1,100
------- ------- --------
Net cash used in operating activities...... (1,018) (1,617) (8,237)
------- ------- --------
Cash flows from investing activities:
Purchase of property and equipment............... (62) (101) (1,621)
Proceeds from sale of property and equipment..... -- -- 35
Purchases of short-term investments.............. (500) -- (17,971)
Proceeds from maturities of short-term
investments..................................... 1,000 500 4,011
Purchase of restricted short-term investments.... -- -- (2,000)
Other assets..................................... -- -- (173)
------- ------- --------
Net cash provided by (used in) investing
activities................................ 438 399 (17,719)
------- ------- --------
Cash flows from financing activities:
Proceeds from sale of preferred stock............ -- 5,980 43,137
Proceeds from sale of common stock............... -- 4 177
------- ------- --------
Net cash provided by financing activities.. -- 5,984 43,314
------- ------- --------
Net increase (decrease) in cash and equivalents.... (580) 4,766 17,358
Cash and cash equivalents:
Beginning of year................................ 1,170 590 5,356
------- ------- --------
End of year...................................... $ 590 $ 5,356 $ 22,714
======= ======= ========
Supplemental disclosure of cash flow information--
Cash paid for interest............................ $ -- $ -- $ 25
======= ======= ========
Noncash financing activities--
Issuance of common stock for notes receivable.... $ -- $ -- $ 1,758
======= ======= ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1. Summary of Significant Accounting Policies
Organization--@Road, Inc. (the Company), was incorporated in July 1994 in
California and commenced operations on July 1, 1996. During 1999, the Company
completed the development of its service delivery platform and began
substantial sales and marketing efforts. The Company is a leading provider of
Internet based productivity enhancement services for companies with a mobile
workforce through the use of the proprietary global positioning system (GPS)
and wireless technologies.
Principles of Consolidation--The consolidated financial statements include
the company and its wholly-owned subsidiary. Intercompany accounts and
transactions are eliminated in consolidation.
Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash Equivalents--The Company considers all highly liquid debt instruments
purchased with an original maturity of 90 days or less to be cash equivalents.
Short-Term Investments--Short-term investments represent highly liquid debt
instruments purchased with a maturity date at purchase of greater than 90 days
and are stated at fair value. The differences between amortized cost (cost
adjusted for amortization of premiums and accretion of discounts which are
recognized as adjustments to interest income) and fair value representing
unrealized holding gains or losses are recorded as accumulated other
comprehensive loss within stockholders' equity. While the Company's intent is
to hold debt securities to maturity, they are classified as available-for-sale
because the sale of such securities may be required prior to maturity. Any
gains and losses on the sale of debt securities are determined on a specific
identification basis.
Restricted short-term investments consist of a certificate of deposit with
an original maturity of greater than 90 days which is held as collateral under
the Company's line of credit agreement (see Note 6). The certificate of deposit
is classified as an available-for-sale as the sale of such security may be
required prior to maturity. At December 31, 1999, the fair value of the
restricted short-term investment approximated cost.
Concentration of Credit Risk--Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of cash
equivalents, short-term investments and accounts receivable. The Company's cash
equivalents and short-term investments consist of checking and savings
accounts, money market accounts and highly liquid debt instruments with three
financial institutions. The Company sells its products primarily to companies
in the United States. The Company does not require collateral or other security
to support accounts receivable. To reduce credit risk, management performs
ongoing evaluations of its customers' financial condition.
Inventories--Inventories consist of raw materials, work in process and
finished goods, and are stated at the lower of cost (average cost) or market.
Property and Equipment--Property and equipment are stated at cost and
depreciated using the straight-line method over estimated useful lives of
approximately three to five years. Leasehold improvements are amortized over
the shorter of the lease term or their useful lives.
Long-Lived Assets--The Company evaluates long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. An impairment loss
F-7
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
would be recognized when the sum of the undiscounted future net cash flows
expected to result from the use of the asset and its eventual disposition is
less than its carrying amount.
Income Taxes--The Company accounts for income taxes under an asset and
liability approach. Deferred income taxes reflect the impact of temporary
differences between assets and liabilities recognized for financial reporting
purposes and such amounts recognized for income tax reporting purposes, net
operating loss carryforwards and other tax credits measured by applying
currently enacted tax laws. Valuation allowances are provided when necessary to
reduce deferred tax assets to an amount that is more likely than not to be
realized.
Revenue Recognition and Deferred Product Costs--The Company earns revenues
under service contracts, which generally provide service over periods from one
to three years, and from related products sold to customers (for which title
passes on shipment). Service revenue is recognized ratably over the minimum
service contract period, which commences upon product installation. Product
revenue is deferred at installation and is recognized ratably over the minimum
service contract period. Allowances for sales returns are recorded at the time
product revenue is recognized. Deferred revenue also includes customer payments
received prior to product installation. The Company defers the cost of products
sold at the time of shipment. Deferred product costs are amortized, beginning
after installation, ratably over the minimum service contract period.
Advertising Costs--All advertising costs are expensed as incurred.
Advertising costs, which are included in sales and marketing expenses, were
$4,000, $3,000 and $179,000 for 1997, 1998 and 1999, respectively.
Research and development expenses are charged to operations as incurred.
Such expenses include product development costs and costs related to the
Company's internally developed software systems, which have not met the
capitalization criteria of Statement of Position 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use (SOP 98-1). During
1999, the Company capitalized approximately $242,000 of costs related to
internally developed software systems in accordance with SOP 98-1.
Foreign Currency Transactions--The functional currency of the Company's
foreign subsidiary is the U.S. dollar. Accordingly, all monetary assets and
liabilities are translated at the current exchange rate at the end of the year,
nonmonetary assets and liabilities are translated at historical rates and
revenues and expenses are translated at average exchange rates in effect during
the period. Transaction gains and losses have not been significant to date.
Stock-Based Awards--The Company accounts for stock-based awards to employees
using the intrinsic value method in accordance with Accounting Principles Board
Opinion (APB) No. 25, Accounting for Stock Issued to Employees.
The Company accounts for equity instruments issued to nonemployees in
accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, Accounting for Stock-Based Compensation, and Emerging Issues
Task Force ("EITF") Issue No. 96-18, Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services, which requires that the fair value of such instruments be
recognized as an expense over the period in which the related services are
received.
Net Loss per Common Share--Basic net loss per common share excludes dilution
and is computed by dividing net loss by the weighted average number of common
shares outstanding for the period (excluding shares subject to repurchase).
Diluted net loss per common share was the same as basic net loss per common
share for all periods presented since the effect of any potentially dilutive
securities is excluded as they are anti-dilutive because of the Company's net
losses.
F-8
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
Unaudited Pro Forma Net Loss per Common Share--Pro forma basic and diluted
net loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding for the period (excluding shares
subject to repurchase) plus the weighted average number of common shares
resulting from the assumed conversion upon the closing of the planned initial
public offering of outstanding shares of convertible preferred stock.
Unaudited Pro Forma Information--The unaudited pro forma balance sheet
information assumes that as of December 31, 1999, the Company had issued
1,280,769 shares of Series D convertible preferred stock (see Note 13) and each
share of preferred stock had converted into one share of common stock upon
closing of an initial public offering.
Certain Significant Risks and Uncertainties--The Company participates in a
dynamic high-technology industry and believes that changes in any of the
following areas could have a material adverse effect on the Company's future
financial position, results of operations or cash flows: advances and trends in
new technologies and industry standards; competitive pressures in the form of
new products and services or price reductions on current products and services;
changes in the overall demand for products and services offered by the Company;
market acceptance of the Company's products and services; development of sales
channels; changes in third-party manufacturers; changes in key suppliers;
changes in certain strategic relationships or customer relationships;
litigation or claims against the Company based on intellectual property,
patent, product, regulatory or other factors; risks associated with necessary
components and the Company's ability to attract and retain employees necessary
to support its growth.
Comprehensive Loss--Statement of Financial Accounting Standards (SFAS) No.
130, Reporting Comprehensive Income requires that an enterprise report, by
major components and as a single total, the change in its net assets during the
period from nonowner sources. For the years ended December 31, 1997 and 1998,
comprehensive loss was equal to net loss. For the year ended December 31, 1999,
accumulated other comprehensive loss is comprised of unrealized losses on
short-term investments of $21,000.
Segment Reporting--Effective January 1, 1999, the Company adopted SFAS No.
131, Disclosures About Segments of an Enterprise and Related Information. In
1999, the Company operated in a single reportable segment and will evaluate
additional segment disclosure requirements as it expands its operations. The
Company had no significant revenues from customers outside of the United States
in 1999 and had no significant long-lived assets deployed outside the United
States as of December 31, 1999.
Recently Issued Accounting Standard--In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. This statement requires companies to record derivatives on
the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. SFAS No. 133 will be effective for the Company's fiscal
year ending December 31, 2001. Management believes that this statement will not
have a significant impact on the Company's financial position, results of
operations or cash flows.
Reclassifications--Certain reclassifications have been made to the 1997 and
1998 financial statement presentation to conform to the 1999 presentation.
These reclassifications had no effect on net loss or stockholders' equity.
F-9
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
2. Short-Term Investments
Short term investments include the following available-for-sale securities
at December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Unrealized Unrealized
Amortized Market Holding Holding
Cost Value Gains Losses
--------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial paper....................... $10,214 $10,215 $ 1 $ --
Corporate debt securities.............. 2,746 2,731 -- (15)
U.S. Government debt securities........ 1,000 993 -- (7)
------- ------- --- -----
Total................................ $13,960 $13,939 $ 1 $ (22)
======= ======= === =====
</TABLE>
3. Inventories
Inventories at December 31 consist of (in thousands):
<TABLE>
<CAPTION>
1998 1999
---- ------
<S> <C> <C>
Raw materials.................................................. $204 $1,095
Work in progress............................................... 21 338
Finished goods................................................. 13 447
---- ------
Total........................................................ $238 $1,880
==== ======
</TABLE>
4. Property and Equipment
Property and equipment at December 31 consist of (in thousands):
<TABLE>
<CAPTION>
1998 1999
---- ------
<S> <C> <C>
Computers and software....................................... $133 $1,603
Manufacturing and office equipment........................... 109 131
Furniture and fixtures....................................... -- 67
Leasehold improvements....................................... -- 19
---- ------
Total...................................................... 242 1,820
Accumulated depreciation and amortization.................... (68) (254)
---- ------
Property and equipment, net................................ $174 $1,566
==== ======
</TABLE>
5. Accrued Liabilities
Accrued liabilities at December 31 consist of (in thousands):
<TABLE>
<CAPTION>
1998 1999
---- ------
<S> <C> <C>
Accrued compensation and related benefits..................... $ 46 $ 924
Other......................................................... 54 421
---- ------
Total....................................................... $100 $1,345
==== ======
</TABLE>
F-10
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
6. Line of Credit
During 1999, the Company entered into a $2,000,000 revolving line of credit
agreement that expires in March 2000. The line of credit provides for issuance
of letters of credit of up to $2,000,000. Borrowings bear interest at the
restricted certificate of deposit rate plus 2% (6.4% at December 31, 1999) and
are collateralized by a restricted certificate of deposit (see Note 1). There
were no borrowings and letters of credit outstanding under this revolving line
of credit at December 31, 1999.
7. Stockholders' Equity
Preferred stock as of December 31, 1999 consists of (in thousands, except
share amounts):
<TABLE>
<CAPTION>
Outstanding
-------------------
Amount
(Net of Aggregate
Shares Issuance Liquidation
Designated Shares Costs) Preference
---------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Series A........................ 3,750,000 3,750,000 $ 2,489 $ 2,500
Series B........................ 12,413,793 12,413,793 5,980 6,000
Series C........................ 6,956,400 6,956,400 23,167 23,188
Series D........................ 3,807,693 2,309,994 19,970 20,020
---------- ---------- ------- -------
26,927,886 25,430,187 $51,606 $51,708
========== ========== ======= =======
</TABLE>
Convertible Preferred Stock
The significant terms of the convertible preferred stock are as follows:
. Each share is convertible into one share of common stock (subject to
adjustments for events of dilution). Shares will automatically be
converted upon a public offering of common stock yielding proceeds in
excess of $15,000,000 or upon the approval (by vote or written consent)
of at least 75% of the then outstanding Series A, Series B, Series C and
Series D, voting together as a class.
. Each share has the same voting rights as the number of shares of common
stock into which it is convertible.
. If and when declared by the Board of Directors, the holders of Series A,
Series B, Series C and Series D convertible preferred stock are entitled
to receive noncumulative dividends at the rate of $0.06, $0.043, $0.30
and $0.78 per share per annum on each outstanding share of Series A,
Series B, Series C and Series D convertible preferred stock,
respectively.
. In the event of liquidation, dissolution or winding up of the Company,
the preferred stockholders of Series A, Series B, Series C and Series D
shall receive an amount equal to $0.67, $0.48, $3.33 and $8.67 per share,
respectively, plus an amount equal to all declared but unpaid dividends
on each share. Any remaining assets will be distributed among the holders
of Series A, Series B, Series C and Series D preferred stock and common
stock, pro rata, based on the number of shares of common stock held by
each stockholder on an as-converted basis. In total, the holders of
Series A, Series B, Series C and Series D preferred stock shall not be
entitled to receive more than $2.00, $1.45, $10.00 and $26.00 per share,
respectively.
F-11
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
Common Stock
At December 31, 1999, the Company has reserved shares of common stock for
issuance as follows:
<TABLE>
<S> <C>
Conversion of preferred stock................................... 25,430,187
Issuance under stock option plan................................ 6,226,813
Issuance under stock purchase right............................. 375,000
----------
32,032,000
==========
</TABLE>
Stock Option Plan
Under the Company's 1996 Stock Option Plan (the Plan), the Board of
Directors is authorized to grant to employees, officers, directors and
consultants up to 11,326,125 shares of common stock. These options generally
expire ten years from the date of grant and generally vest in installments over
a four-year period.
Stock Purchase Rights
During 1999, the Company granted to employees purchase rights for 525,000
shares of common stock at $1.33 per share. Of the shares issuable under the
purchase rights, 150,000 of the shares are subject to repurchase by the Company
at the original issuance price; the repurchase right lapses over a thirty-three
month period.
A summary of option and stock purchase right activity is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
---------- --------
<S> <C> <C>
Outstanding, January 1, 1997 (none exercisable).......... 1,665,000 $0.07
Granted (weighted average fair value of $0.01 per
share).................................................. 97,500 0.07
Canceled................................................. (7,500) 0.07
----------
Outstanding, December 31, 1997 (583,188 exercisable at a
weighted average exercise price of $0.07)............... 1,755,000 0.07
Granted (weighted average fair value of $0.01 per
share).................................................. 627,000 0.07
Exercised................................................ (61,125) 0.07
Canceled................................................. (189,375) 0.07
----------
Outstanding, December 31, 1998 (1,062,483 exercisable at
a weighted average exercise price of $0.07)............. 2,131,500 0.07
Granted (weighted average fair value of $2.34 per
share).................................................. 7,572,575 0.55
Exercised................................................ (5,188,187) 0.37
Canceled................................................. (459,000) 0.09
----------
Outstanding, December 31, 1999........................... 4,056,888 $0.57
==========
</TABLE>
At December 31, 1999, 2,544,925 shares were available for future grant under
the Option Plan.
F-12
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
Additional information regarding options and stock purchase rights
outstanding as of December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Outstanding Vested
------------------------------------- ----------------
Weighted Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Life Exercise Number Exercise
Price Outstanding (Years) Price Vested Price
------------ ----------- ---------------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$0.07 2,032,063 8.33 $0.07 395,672 $0.07
0.67 786,950 9.69 0.67 49,700 0.67
1.33 1,237,875 9.87 1.33 388,500 1.33
--------- -------
$0.07--$1.33 4,056,888 9.06 $0.57 833,872 $0.69
========= =======
</TABLE>
Stock Compensation
During 1999, the Company issued 7,045,125 common stock options and stock
purchase rights to employees at a weighted average price of $0.59 per share,
which were at prices less than the fair value of its common stock. The weighted
average fair value of the common stock was $2.95 per share. Accordingly, the
Company recorded approximately $15,842,000 as the value of such options in
1999. Stock compensation of $4,436,000 was amortized to expense in fiscal 1999,
and at December 31, 1999, the Company had $11,406,000 in deferred stock
compensation related to such options.
During 1999, the Company issued nonstatutory common stock options to
consultants to purchase 147,200 shares of common stock of which options to
purchase 144,200 shares of common stock were outstanding at December 31, 1999.
Accordingly, the Company recorded $763,000 as the fair value of such options in
1999. Stock compensation of $537,000 was recognized as result of these options
in 1999. The fair value of the unvested portion of these options is being
amortized over the vesting period. The fair value attributable to the unvested
portion of these options is subject to adjustment based upon the future value
of the Company's common stock. The fair values of these options were determined
at the date of vesting using the methods specified by SFAS 123 with the
following weighted average assumptions during 1999: expected life, ten years;
risk free interest rate, 6%; volatility, 95%; and no dividends during the
expected term. Forfeitures are recognized as they occur.
Additional Stock Plan Information
As discussed in Note 1, the Company accounts for its stock-based awards
using the intrinsic value method in accordance with APB No. 25, Accounting for
Stock Issued to Employees, and its related interpretations. Accordingly, no
compensation expense has been recognized in the financial statements for
employee stock arrangements granted at fair market value.
SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123), requires
the disclosure of pro forma net income or loss had the Company adopted the fair
value method. Under SFAS 123, the fair value of stock-based awards to employees
is calculated through the use of option pricing models, even though such models
were developed to estimate the fair value of freely tradeable, fully
transferable options without vesting restrictions, which significantly differ
from the Company's stock option awards. These models also require subjective
assumptions, including expected time to exercise, which greatly affect the
calculated values. The Company's calculations were made using the minimum value
method with the following weighted average assumptions: expected life, five
years in 1997, 1998 and 1999; risk-free interest rate, 6% in 1997, 5% in 1998
F-13
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
and 6% in 1999; and no dividends during the expected term. The Company's
calculations are based on a single option valuation approach, and forfeitures
are recognized as they occur.
If the computed minimum values of the Company's stock-based awards to
employees had been amortized to expense over the vesting period of the awards
as specified under SFAS No. 123, loss attributable to common shareholders and
basic and diluted loss per share on a pro forma basis (as compared to such
items as reported) would have been (in thousands except per share amounts):
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Net loss:
As reported................................. $(1,004) $(1,410) $(13,489)
Pro forma................................... $(1,012) $(1,417) $(13,746)
Basic and diluted net loss per share:
As reported................................. $ (0.45) $ (0.62) $ (4.88)
Pro forma................................... $ (0.45) $ (0.62) $ (4.98)
</TABLE>
Receivable from Sales of Stock
At December 31, 1999, notes receivable from stockholders representing notes
receivable from certain officers and other employees of the Company, were
comprised of (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
Stock Purchased
------------------- Interest
Issue Date Amount Number Per Share Rate
---------- ------ --------- --------- --------
<S> <C> <C> <C> <C>
December 1999.......................... $814 610,500 $1.33 6.11%
December 1999.......................... $905 1,357,500 $0.67 6.11%
December 1999.......................... $ 39 577,500 $0.07 6.11%
</TABLE>
These full recourse notes are secured by common stock and are due five years
from the issue dates. The stock sold in connection with these notes and other
stock sales for cash are subject to repurchase by the Company at the original
issuance price; this right generally lapses over a four-year period subject to
continued employment. At December 31, 1999, approximately 4,046,000 shares of
common stock were subject to this purchase right.
F-14
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
8. Net Loss per Share
The following is a reconciliation of the numerators and denominators used in
computing basic and diluted net loss per share (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Net loss (numerator), basic and diluted........... $(1,004) $(1,410) $(13,489)
======= ======= ========
Shares (denominator):
Weighted average common shares outstanding...... 2,250 2,287 3,974
Weighted average common shares outstanding
subject to repurchase.......................... -- -- (1,211)
------- ------- --------
Shares used in computation, basic and diluted... 2,250 2,287 2,763
======= ======= ========
Net loss per share, basic and diluted............. $ (0.45) $ (0.62) $ (4.88)
======= ======= ========
Shares used in computation, basic and diluted..... 2,763
Weighted average preferred stock outstanding...... 20,119
--------
Shares used in computing pro forma per share
amounts on a converted basis..................... 22,882
========
Pro forma net loss per share on a converted basis,
basic and diluted................................ $ (0.59)
========
</TABLE>
For the above mentioned periods, the Company had securities outstanding
which could potentially dilute basic earnings per share in the future, but were
excluded from the computation of diluted net loss per share in the periods
presented, as their effect would have been antidilutive. Such outstanding
securities consist of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1997 1998 1999
--------- ---------- ----------
<S> <C> <C> <C>
Convertible preferred stock.............. 3,750,000 16,163,793 25,430,187
Shares of common stock subject to
repurchase.............................. -- -- 4,046,000
Outstanding options and stock purchase
rights.................................. 1,755,000 2,131,500 4,056,888
Weighted average exercise price of
options and stock purchase rights....... $ 0.07 $ 0.07 $ 0.57
========= ========== ==========
</TABLE>
9. Commitments and Contingencies
Lease Commitments
The Company leases its principal facilities under a noncancelable operating
lease expiring in December 2000 (see Note 12). Future minimum rental payments
under operating leases, net of sublease income, are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
2000............................................................ $280,000
2001............................................................ 45,000
2002............................................................ 42,000
--------
$367,000
========
</TABLE>
F-15
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
Rent expense was approximately $50,000, $51,000 and $225,000 (net of
sublease income of $0, $0, and $50,000) for 1997, 1998 and 1999, respectively.
Purchase Commitments
At December 31, 1999, the Company has noncancelable inventory purchase
commitments totaling approximately $720,000.
Contingencies
The Company has received a letter from the holder of two patents claiming
that the Company infringes the patents. The Company is in the process of
reviewing the patents; however, the ultimate outcome of this matter cannot be
determined at this time.
In addition, the Company is a defendant in a lawsuit and may be a defendant
in lawsuits and claims arising in the ordinary course of business in the
future. While the outcomes of such claims, lawsuits or other proceedings cannot
be predicted with certainty, management expects that such liability, to the
extent not provided by insurance or otherwise, will not have a material adverse
effect on the financial condition, results of operation or cash flows of the
Company.
10. Income Taxes
No income taxes were provided for any years presented due to the Company's
net losses.
The Company's effective tax rate differs from the expected benefit at the
federal statutory tax rate for the years ended December 31 as follows:
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate.... (35.0)% (35.0)% (35.0)%
State taxes, net of
federal benefit.......... (8.4) (8.1) (3.9)
Non-deductible stock
compensation charges..... -- -- 11.5
Research and development
credits.................. (3.7) (3.7) (0.7)
Other..................... (3.9) (4.2) (1.7)
Valuation allowance....... 51.0 51.0 29.8
----- ----- -----
Effective tax rate...... -- % -- % -- %
===== ===== =====
</TABLE>
Net deferred tax assets at December 31 consist of (in thousands):
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards..................... $ 1,167 $ 4,419
Credit carryforwards................................. 142 292
Accruals and reserves recognized in different
periods............................................. -- 614
------- -------
Total gross deferred tax assets before valuation
allowance......................................... 1,309 5,325
Valuation reserve...................................... (1,309) (5,325)
------- -------
Net deferred tax asset................................. $ -- $ --
======= =======
</TABLE>
At December 31, 1999, the Company has federal and state net operating loss
carryforwards of approximately $10,276,000 and $10,277,000, respectively,
expiring through 2019 and 2003, respectively.
At December 31, 1999, the Company also has research and development and
manufacturing investment credits of approximately $182,000 and $110,000
available to offset future federal and state income taxes,
F-16
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
respectively. The federal tax credit carryforward expires through 2019. The
state tax credit carryforward has no expiration.
Current federal and California tax law includes provisions limiting the
annual use of net operating loss and credit carryforwards in the event of
certain defined changes in stock ownership. The Company's capitalization
described herein may have resulted in such a change. Accordingly, the annual
use of the Company's net operating loss and credit carryforwards would be
limited according to these provisions. Management has not yet determined the
extent of such limitation. Such limitation may result in the loss of
carryforward benefits due to their expiration.
11. Related Party Transactions
In 1999 and 1998, the Company purchased approximately $512,000 and $21,000,
respectively, of inventory from a preferred stockholder. At December 31, 1999,
approximately $256,000 owed to the preferred stockholder was included in
accounts payable. At December 31, 1998, no amounts were payable to the
preferred stockholder.
12. Employee Benefit Plan
The Company sponsors a 401(k) Saving and Retirement Plan (the Plan) for all
employees who meet certain eligibility requirements. Participants may
contribute, on a pre-tax basis, between 1% and 15% of their annual
compensation, but not to exceed a maximum contribution amount pursuant to
Section 401(k) of the Internal Revenue Code. The Company is not required to
contribute, nor has it contributed, to the Plan for any of the years presented.
13. Subsequent Events
In January 2000, the Company sold 1,280,769 shares of Series D convertible
preferred stock to investors at $8.67 per share for proceeds of approximately
$11,100,000.
In January 2000, the Company entered into an additional non-cancelable
facilities operating lease expiring in 2005 requiring lease payments of
approximately $212,000 in 2000, $663,000 in 2001, $719,000 in 2002, $751,000 in
2003, $784,000 in 2004, and $66,000 in 2005.
In February 2000, the stockholders approved an increase in the number of
authorized shares to 75,000,000 and a three-for-two stock split of its common
and preferred stock outstanding. All share and per share information in the
accompanying consolidated financial statements have been adjusted to
retroactively give effect to the stock split for all periods presented.
In March 2000, the Company agreed, subject to certain conditions, to
purchase substantially all assets and certain related liabilities of
Differential Corrections, Inc. for cash of $4,010,000 and 78,923 shares of the
Company's Series D convertible preferred stock. The Company expects to complete
this purchase in April 2000.
In March 2000, the Board of Directors approved, subject to stockholder
approval, the following:
. Reincorporation of the Company in the state of Delaware with the
Company's name changed to At Road, Inc.
F-17
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
. An increase of authorized shares of common stock to 250,000,000 shares
and creation of newly undesignated preferred stock totaling 10,000,000
shares, contingent upon the approval of the reincorporation of the
Company in Delaware and the closing of the Company's initial public
offering.
. Adoption of the Company's 2000 Stock Option Plan (the 2000 Option Plan).
The 2000 Plan will become effective upon the closing of the Company's
initial public offering. A total of up to 2,000,000 shares will be
reserved for issuance under the 2000 Plan. In addition, up to 9,825,000
shares, if available for grant under the 1996 option plan will be granted
under the 2000 plan. The number of shares reserved under the plan will
automatically be increased on the first day of each of the fiscal years
beginning 2001 and ending 2010 in an amount equal to the lesser of
2,500,000 shares or four percent of the shares outstanding on the last
day of the preceding year.
. Adoption of the Company's 2000 Employee Stock Purchase Plan (the ESPP).
The ESPP will become effective upon the closing of the Company's initial
public offering. A total of 450,000 shares of common stock will be
reserved for issuance under the ESPP. The number of shares reserved for
issuance under the ESPP will automatically increase on the first day of
each year beginning in 2001 and ending 2010 by an amount equal to the
lesser of 900,000 shares or two percent of the total shares outstanding
on the last day of the preceding year. Under the ESPP, shares of common
stock will be sold to employees at a price not less than 85% of the lower
of fair market value at the beginning of the two-year offering period or
the end of the six month purchase periods.
. Adoption of the Company's 2000 Directors' Stock Option Plan (the
Directors' Plan). The Directors' Plan will become effective upon the
closing of the Company's initial public offering. A total of up to
1,200,000 shares of common stock will be reserved for issuance for the
initial grant of nonstatutory stock options to each nonemployee director
to purchase 40,000 shares of common stock at the fair market value at the
grant date, as well as additional option grants for 10,000 shares to be
issued each subsequent year.
On March 23, 2000, the Company agreed, subject to certain conditions, to
purchase substantially all the assets and certain related liabilities of Hynet
Technologies for 50,000 shares of the Company's common stock. The Company
expects to complete this purchase in May 2000.
* * * * *
F-18
<PAGE>
[@ROAD LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
Amount to
be Paid
----------
<S> <C>
SEC registration fee........................................... $27,627.60
NASD filing fee................................................ 10,965.00
Nasdaq National Market listing fee............................. *
Printing and engraving expenses................................ *
Legal fees and expenses........................................ *
Accounting fees and expenses................................... *
Blue Sky qualification fees and expenses....................... *
Transfer Agent and Registrar fees.............................. *
Miscellaneous fees and expenses................................ *
Total........................................................ $ *
</TABLE>
- --------
*to be filed by amendment
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act of 1933, as amended . Article six of
our certificate of incorporation, exhibit 3.2 hereto, and article six of our
bylaws, exhibit 3.3, provide for indemnification of our directors, officers,
employees and other agents to the maximum extent permitted by Delaware law. In
addition, we have entered into indemnification agreements, exhibit 10.1, with
our officers and directors. The indemnification agreements may require us to
obtain directors' and officers' insurance if available on reasonable terms. We
currently intend to purchase a policy for directors' and officers' insurance.
The underwriting agreement, exhibit 1.1, also provides for cross-
indemnification among At Road and the underwriters with respect to certain
matters, including matters arising under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
Since August 1996 we have sold and issued the following securities:
1. On July 15, 1996, we issued 3,750,000 shares of our series A
preferred stock at $0.667 per share to ten investors for an aggregate cash
consideration of $2,500,000.
2. On September 15, 1998 we issued 11,224,137 shares of our series B
preferred stock to ten investors, and on September 25 1998, we issued an
additional 1,189,656 shares of our series B preferred stock to two
investors, both at $0.483 per share for an aggregate cash consideration of
$6,000,000.
3. On June 3, 1999, we issued 3,270,000 shares of our series C preferred
stock to five investors, and on June 18, 1999, we issued an additional
3,686,400 shares of our series C preferred stock to 28 investors, both at
$3.33 per share for an aggregate cash consideration of $23,188,000.
4. On December 17, 1999, we issued 2,309,994 shares of our series D
preferred stock to 26 investors, on January 6, 2000, we issued 692,307
shares of our series D preferred stock to one investor, and on January 28,
2000 we issued an additional 588,462 shares of our series D preferred stock
to two
II-1
<PAGE>
investors, all issuances at $8.67 per share for an aggregate cash
consideration of $31,119,946. On April 7, 2000, we issued 76,923 shares of
our series D preferred stock to one investor as a portion of the
consideration for our acquisition of Differential Corrections. On April 7,
2000, we issued 2,000 shares of our series D preferred stock to one
investor as consideration for their consent to the assignment to us of
technology that we acquired in our acquisition of Differential Corrections.
5. From August 1996 to December 31, 1999, we granted 9,437,075 options
to purchase our common stock with a weighted average price of $0.39 to a
number of our employees, directors and consultants.
6. In December 1999, we granted an option to purchase 150,000 shares of
our common stock to our Chief Technology Officer and a right to purchase
375,000 shares of our common stock to our Chief Executive Officer each for
$1.33 per share, for aggregate consideration of $700,000.
7. In February 2000, we issued 375,000 shares of our common stock to our
Chief Executive Officer at $1.33 per share for a total of $500,000.
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such
Securities Act as transactions by an issuer not involving any public offering.
Certain issuances described in items 5 and 6 were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act.
The recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates issued in such transactions. All
recipients had adequate access, through their relationships with At Road, to
information about us.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1* Form of Underwriting Agreement dated , 2000.
3.1+ Amended and Restated Articles of Incorporation of the Registrant.
3.2+ Amended and Restated Certificate of Incorporation of the Registrant,
as proposed for reincorporation in Delaware.
3.3+ Amended and Restated Bylaws of the Registrant.
3.4+ Amended and Restated Bylaws of the Registrant, as proposed for
reincorporation in Delaware.
4.1* Specimen Stock Certificate.
5.1* Opinion of Venture Law Group regarding the legality of the common
stock being registered.
10.1**+ CDPD Value Added Reseller Agreement between the Registrant and AT&T
Wireless Data, Inc. dated September 30, 1997.
10.2**+ Form of Wireless Network Services Agreement and Form of Purchase
Agreement for Goods.
10.3**+ Product License and Collaboration Agreement between the Registrant and
Intel Corporation dated January 28, 2000.
10.4**+ Product Purchase Agreement between the Registrant and Novatel Wireless
Technologies, Inc. dated January 1, 2000.
10.5**+ Product Purchase Agreement between the Registrant and Novatel Wireless
Technologies, Inc. dated April 1, 2000.
10.6**+ Design and Purchase Contract between the Registrant and Philsar
Electronics, Inc. dated April 11, 1997.
10.7**+ Joint Marketing Agreement between the Registrant and Cellco
Partnership dated June 25, 1999 and Amendment No. 1 dated October 12,
1999.
10.8+ Sublease Agreement between the Registrant and Sterling Software
(Western), Inc. dated August 24, 1999.
10.9+ Lease between Renco Equities IV as landlord and SEEQ Technology, Inc.
as tenant and First Addendum, each dated January 13, 1995, and First
Amendment to Lease dated April 18, 1995.
10.10+ Sublease Agreement with LSI Logic Corporation dated January 25, 2000,
and Consent to Sublease with LSI Logic Corporation and Renco Equities
IV dated February 8, 2000.
Agreement between the Registrant and Elnet Technologies Ltd. dated
10.11+ November 16, 1999.
10.12 1996 Stock Option Plan.
10.13 2000 Stock Option Plan.
10.14 2000 Employee Stock Purchase Plan.
10.15 2000 Directors' Stock Option Plan.
10.16+ Form of Indemnification Agreement.
10.17+ Asset Purchase Agreement between the Registrant and Differential
Corrections, Inc. dated March 8, 2000.
10.18+ Asset Purchase Agreement between the Registrant and Hynet Technologies
dated March 23, 2000
10.19 Amended and Restated Rights Agreement between Registrant and certain
investors dated December 17, 1999.
21.1+ List of Subsidiaries.
23.1 Independent Auditors' Consent.
23.2* Consent of Venture Law Group.
24.1+ Power of Attorney.
27.1 Financial Data Schedule
</TABLE>
- --------
* To be supplied by amendment.
** Confidential treatment requested as to certain portions of this Exhibit.
+ Previously filed.
II-3
<PAGE>
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amandment No. 1 to Registration Statement on Form S-1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Fremont, State of California on May 1, 2000.
AT ROAD, INC.
/s/ Krish Panu
By: _________________________________
Krish Panu
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Krish Panu Chairman of the Board of May 1, 2000
______________________________________ Directors, President and
Krish Panu Chief Executive Officer
* Vice President, Finance May 1, 2000
______________________________________ and Administration and
Thomas Hoster Chief Financial Officer
* Director and Chief May 1, 2000
______________________________________ Technology Officer
Rodric C. Fan
* Director May 1, 2000
______________________________________
Kris Chellam
* Director May 1, 2000
______________________________________
Stuart Phillips
/s/ Andrew Sheehan Director May 1, 2000
______________________________________
Andrew Sheehan
* Director May 1, 2000
______________________________________
T. Peter Thomas
* Power of Attorney
/s/ Krish Panu
By: __________________________________
Krish Panu
</TABLE>
II-5
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Board of Directors and Stockholders of @Road, Inc.:
Our audits of the consolidated financial statements of @Road, Inc. and
subsidiary (the Company) for the years ended December 31, 1997, 1998, and 1999
also included the financial statement schedule of the Company, listed in Item
16(b) of this Registration Statement on Form S-1. The consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
San Jose, California
March 23, 2000
S-1
<PAGE>
SCHEDULE II
@ROAD, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1997, 1998, and 1999
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at and Write-offs
Beginning of Charges to and Balance at
Description Year Expenses Deductions End of Year
----------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1997
Accounts receivable allowance... $ -- $ -- $ -- $ --
===== ===== ===== =====
Year Ended December 31, 1998
Accounts receivable allowance... $ -- $ -- $ -- $ --
===== ===== ===== =====
Year Ended December 31, 1999
Accounts receivable allowance... $ -- $ 131 $ -- $ 131
===== ===== ===== =====
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1* Form of Underwriting Agreement dated , 2000.
3.1+ Amended and Restated Articles of Incorporation of the Registrant.
3.2+ Amended and Restated Certificate of Incorporation of the Registrant,
as proposed for reincorporation in Delaware.
3.3+ Amended and Restated Bylaws of the Registrant.
3.4+ Amended and Restated Bylaws of the Registrant, as proposed for
reincorporation in Delaware.
4.1* Specimen Stock Certificate.
5.1* Opinion of Venture Law Group regarding the legality of the common
stock being registered.
10.1**+ CDPD Value Added Reseller Agreement between the Registrant and AT&T
Wireless Data, Inc. dated September 30, 1997.
10.2**+ Form of Wireless Network Services Agreement and Form of Purchase
Agreement for Goods.
10.3**+ Product License and Collaboration Agreement between the Registrant and
Intel Corporation dated January 28, 2000.
10.4**+ Product Purchase Agreement between the Registrant and Novatel Wireless
Technologies, Inc. dated January 1, 2000.
10.5**+ Product Purchase Agreement between the Registrant and Novatel Wireless
Technologies, Inc. dated April 1, 2000.
10.6**+ Design and Purchase Contract between the Registrant and Philsar
Electronics, Inc. dated April 11, 1997.
10.7**+ Joint Marketing Agreement between the Registrant and Cellco
Partnership dated June 25, 1999 and Amendment No. 1 dated October 12,
1999.
10.8+ Sublease Agreement between the Registrant and Sterling Software
(Western), Inc. dated August 24, 1999.
10.9+ Lease between Renco Equities IV as landlord and SEEQ Technology, Inc.
as tenant and First Addendum, each dated January 13, 1995, and First
Amendment to Lease dated April 18, 1995.
10.10+ Sublease Agreement with LSI Logic Corporation dated January 25, 2000,
and Consent to Sublease with LSI Logic Corporation and Renco Equities
IV dated February 8, 2000.
Agreement between the Registrant and Elnet Technologies Ltd. dated
10.11+ November 16, 1999.
10.12 1996 Stock Option Plan.
10.13 2000 Stock Option Plan.
10.14 2000 Employee Stock Purchase Plan.
10.15 2000 Directors' Stock Option Plan.
10.16+ Form of Indemnification Agreement.
10.17+ Asset Purchase Agreement between the Registrant and Differential
Corrections, Inc. dated March 8, 2000.
10.18+ Asset Purchase Agreement between the Registrant and Hynet Technologies
dated March 23, 2000
10.19 Amended and Restated Rights Agreement between Registrant and certain
investors dated December 17, 1999.
21.1+ List of Subsidiaries.
23.1 Independent Auditors' Consent.
23.2* Consent of Venture Law Group.
24.1+ Power of Attorney.
27.1 Financial Data Schedule
</TABLE>
- --------
* To be supplied by amendment.
** Confidential treatment requested as to certain portions of this Exhibit.
+ Previously filed
<PAGE>
EXHIBIT 10.12
@ROAD, INC.
1996 STOCK OPTION PLAN
(as amended March 30, 200O)
1. Establishment, Purpose and Term of Plan.
---------------------------------------
1.1 Establishment. The @Road, Inc. 1996 Stock Option Plan (the
"Plan")is hereby established effective as of September ___, 1996 (the "Effective
Date").
1.2 Purpose. The purpose of the Plan is to advance the interests of
the Participating Company Group and its shareholders by providing an incentive
to attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.
1.3 Terms of Plan. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Options
shall be granted, if at all, within ten (10) years from the earlier of the date
the Plan is adopted by the Board or the date the Plan is duly approved by the
shareholders of the Company.
2. Definitions and Construction.
----------------------------
2.1 Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company. If
one or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).
(b) "Code" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "Committee" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted
-1-
<PAGE>
herein, including, without limitation, the power to amend or terminate the Plan
at any time, subject to the terms of the Plan and any applicable limitations
imposed by law.
(d) "Company" means @Road, Inc., a California corporation, or
any successor corporation thereto.
(e) "Consultant" means any person, including an advisor,
engaged by a Participating Company to render services other than as an Employee
or a Director.
(f) "Director" means a member of the Board or of the board of
directors of any other Participating Company.
(g) "Employee" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a Director's fee shall be sufficient to constitute
employment for purposes of the Plan.
(h) "Fair Market Value" means, as of any date, the value of a
share of stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein.
(i) "Incentive Stock Option" means an Option intended to be
(as set forth in the Option Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.
(j) "Nonstatutory Stock Option" means an Option not intended
to be (as set forth in the Option Agreement) or which does not qualify as an
Incentive Stock Option.
(k) "Option" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(l) "Option Agreement" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee and any shares acquired upon the exercise
thereof.
(m) "Optionee" means a person who has been granted one or
Options.
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<PAGE>
(n) "Parent Corporation" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(o) "Participating Company" means the Company or any Parent
Corporation or Subsidiary Corporation.
(p) "Participating Company Group" means, at any point in time,
all corporations collectively which are then Participating Companies.
(q) "Stock" means the common stock, without par value, of the
Company, as adjusted from time to time in accordance with Section 4.2.
(r) "Subsidiary Corporation" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
(s) "Ten Percent Owner Optionee" means an Optionee who, at the
time an Option is granted to the Optionee, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.
2.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
the term "or" shall include the conjunctive as well as the disjunctive.
3. Administration.
--------------
3.1 Administration by the Board. The Plan shall be administered by
the Board, including any duly appointed Committee of the Board (the
"Administrator"). All questions of interpretation of the Plan or of any Option
shall be determined by the Board, and such determinations shall be final and
binding upon all persons having an interest in the Plan or such Option. Any
officer of a Participating Company shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such matter,
right, obligation, determination or election.
3.2 Powers of the Board. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its sole discretion:
-3-
<PAGE>
(a) to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares of Stock to be subject
to each Option;
(b) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or
other property;
(d) to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the
Option, (vi) the effect of the Optionee's termination of employment or service
with the Participating Company Group on any of the foregoing, and (vii) all
other terms, conditions and restrictions applicable to the Option or such shares
not inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, or renew, or grant a new Option
in substitution for, any Option or to waive any restrictions or conditions
applicable to any Option or any shares acquired upon the exercise thereof
(g) to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an Optionee's
termination of employment or service with the Participating Company Group;
(h) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(i) to correct any defect, supply any omission or reconcile
any inconsistency in the Plan or any Option Agreement and to make all other
determinations
-4-
<PAGE>
and take such other actions with respect to the Plan or any Option as the Board
may deem advisable to the extent consistent with the Plan and applicable law.
4. Shares Subject to Plan.
----------------------
4.l Maximum Number Shares Issuable. Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan shall be 11,326,125 and shall consist of authorized but
unissued or reacquired shares of Stock or any combination thereof. If an
outstanding Option for any reason expires or is terminated or canceled or shares
of Stock acquired, subject to repurchase, upon the exercise of an Option are
repurchased by the Company, the shares of Stock allocable to the unexercised
portion of such Option, or such repurchased shares of Stock, shall again be
available for issuance under the Plan.
Notwithstanding the above, with respect to up to an aggregate of
9,825,000 shares of Stock (a) reserved and available for grant under the terms
of this Plan, (b) subject to Options granted under the Plan that become
available for resale under the Plan as a result of cancellations of such Options
and (c) sold under the Plan that are repurchased by the Company pursuant to any
repurchase right which the Company may have, such shares of Stock shall not be
available for resale under the Plan, but shall be treated as though transferred
to, and shall thereafter be available for sale under, the Company's 2000 Stock
Option Plan.
4.2 Adjustments for Changes in Capital Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Options and in the exercise price per share
of any outstanding Options. If a majority of the shares which are of the same
class as the shares that are subject to outstanding Options are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event, as defined in Section 8.1) shares of another corporation (the "New
Shares"), the Board may unilaterally amend the outstanding Options to provide
that such Options are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the exercise price per share of,
the outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded up or down to the nearest whole number, as determined by the
Board, and in no event may the exercise price of any Option be decreased to an
amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.
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<PAGE>
5. Eligibility and Option Limitations.
---------------------------------
5.l Persons Eligible for Options. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees" shall include prospective Employees to whom Options are granted in
connection with written offers of employment with the Participating Company
Group, and "Consultants" shall include prospective Consultants to whom Options
are granted in connection with written offers of engagement with the
Participating Company Group. Eligible persons may be granted more than one (1)
Option.
5.2 Option Grant Restrictions. Any person who is not an Employee on
the effective date of the grant of an Option to such person may be granted only
a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1.
5.3 Fair Market Value Limitation. To the extent that the aggregate
Fair Market Value of stock with respect to which options designated as Incentive
Stock Options are exercisable by an Optionee for the first time during any
calendar year (under all stock option plans of the Participating Company Group,
including the Plan) exceeds One Hundred Thousand Dollars ($100,000), the portion
of such options which exceeds such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of stock shall be determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section 5.3, the Optionee may designate which portion of such Option the
Optionee is exercising and may request that separate certificates representing
each such portion be issued upon the exercise of the Option. In the absence of
such designation, the Optionee shall be deemed to have exercised the Incentive
Stock Option portion of the Option first.
6. Terms and Conditions of Options. Options shall be evidenced by Option
-------------------------------
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
-6-
<PAGE>
6.1 Exercise Price. The exercise price for each Option shall be
established in the sole discretion of the Board, provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Option granted
to a Ten Percent Owner Optionee shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.
6.2 Exercise Period. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) no Option granted to a prospective Employee or prospective Consultant
may become exercisable prior to the date on which such person commences Service
with a Participating Company.
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company of shares of Stock owned by the
Optionee having a Fair Market Value (as determined by the Company without regard
to any restrictions on transferability applicable to such stock by reason of
federal or state securities laws or agreements with an underwriter for the
Company) not less than the exercise price, (iii) by the assignment of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System)(a
"Cashless Exercise"), (iv) by the Optionee's promissory note in a form approved
by the Company, (v) by such other consideration as may be approved by the Board
from time to time to the extent permitted by applicable law, or (vi) by any
combination thereof, The Board may at any time or
-7-
<PAGE>
from time to time, by adoption of or by amendment to the standard forms of
Option Agreement described in Section 7, or by other means, grant Options which
do not permit all of the foregoing forms of consideration to be used in payment
of the exercise price or which otherwise restrict one or more forms of
consideration.
(b) Tender of Stock. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company of shares of Stock unless such shares either have been owned by
the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(c) Cashless Exercise. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.
(d) Payment by Promissory Note. No promissory note shall be
permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is granted. The Board shall
have the authority to permit or require the Optionee to secure any promissory
note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject
to the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.
6.4 Tax Withholding. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its sole discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Company
shall have no
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<PAGE>
obligation to deliver shares of Stock or to release shares of stock from an
escrow established pursuant to the Option Agreement until the Participating
Company Group's tax withholding obligations have been satisfied by the Optionee.
6.5 Repurchase Rights. Shares issued under the Plan may be subject to
a right of first refusal, one or more repurchase options, or other conditions
and restrictions as determined by the Board in its sole discretion at the time
the Option is granted. The Company shall have the right to assign at any time
any repurchase right it may have, whether or not such right is then exercisable,
to one or more persons as may be selected by the Company. Upon request by the
Company, each Optionee shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.
7. Standard Forms of Option Agreement.
----------------------------------
7.1 Incentive Stock Options. Unless otherwise provided by the Board
at the time the Option is granted, an Option designated as an "Incentive Stock
Option" shall comply with and be subject to the terms and conditions set forth
in the form of Immediately Exercisable Incentive Stock Option Agreement adopted
by the Board concurrently with its adoption of the Plan and as amended from time
to time.
7.2 Nonstatutory Stock Options. Unless otherwise provided by the
Board at the time the Option is granted, an Option designated as a "Nonstatutory
Stock Option" shall comply with and be subject to the terms and conditions set
forth in the form of Immediately Exercisable Nonstatutory Stock Option Agreement
adopted by the Board concurrently with its adoption of the Plan and as amended
from time to time.
7.3 Standard Term Options. Except as otherwise provided in Section
6.2 or by the Board in the grant of an Option, any Option granted hereunder
shall have a term of ten (10) years from the effective date of grant of the
Option.
7.4 Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of any of the standard forms of Option Agreement
described in this Section 7 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement shall be in
accordance with the terms of the Plan. Such authority shall include, but not by
way of limitation, the authority to grant Options which are not immediately
exercisable.
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<PAGE>
8. Transfer of Control.
-------------------
8.1 Merger or Sale of Assets. In the event of a proposed sale of all
or substantially all of the Company's assets or a merger of the Company with or
into another corporation where the successor corporation issues its securities
to the Company's shareholders, each outstanding Option shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, in which case such Option shall terminate upon the consummation of the
merger or sale of assets. For purposes of this Section 8.1, an Option shall be
considered assumed, without limitation, if, at the time of issuance of the stock
or other consideration upon such merger or sale of assets, each holder of an
Option would be entitled to receive upon exercise of the Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as such holder would have been entitled to receive upon the occurrence of such
transaction if the holder had been, immediately prior to such transaction, the
holder of the number of Shares of Common Stock covered by the Option at such
time (after giving effect to any adjustments in the number of Shares covered by
the Option as provided for in this Section 8.1).
9. Provision of Information. At least annually, copies of the Company's
------------------------
balance sheet and income statement for the just completed fiscal year shall be
made available to each Optionee and purchaser of shares of Stock upon the
exercise of an Option. The Company shall not be required to provide such
information to persons whose duties in connection with the Company assure them
access to equivalent information.
10. Nontransferability of Options: During the lifetime of the Optionee, an
-----------------------------
Option shall be exercisable only by the Optionee or the Optionee's guardian or
legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
11. Transfer of Company's Rights. In the event any Participating Company
----------------------------
assigns, other than by operation of law, to a third person, other than another
Participating Company, any of the Participating Company's rights to repurchase
any shares of Stock acquired upon the exercise of an Option, the assignee shall
pay to the assigning Participating Company the value of such right as determined
by the Company in the Company's sole discretion. Such consideration shall be
paid in cash. In the event such repurchase right is exercisable at the time of
such assignment, the value of such right shall be not less than the Fair Market
Value of the shares of Stock which may be repurchased under such right (as
determined by the Company) minus the repurchase price of such shares. The
requirements of this Section 11 regarding the minimum consideration to be
-10-
<PAGE>
received by the assigning Participating Company shall not inure to the benefit
of the Optionee whose shares of Stock are being repurchased. Failure of a
Participating Company to comply with the provisions of this Section 11 shall
not constitute a defense or otherwise prevent the exercise of the repurchase
right by the assignee of such right.
12. Indemnification. In addition to such other rights of indemnification as
---------------
they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board is
delegated shall be indemnified by the Company against all reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.
13. Termination or Amendment of Plan. The Board may terminate or amend the
--------------------------------
Plan at any time. However, subject to changes in the law or other legal
requirements that would permit otherwise, without the approval of the Company's
shareholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no expansion in the class of persons
eligible to receive Nonstatutory Stock Options. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Option or any
unexercised portion thereof, without the consent of the Optionee, unless such
termination or amendment is required to enable an Option designated as an
Incentive Stock Option to qualify as an Incentive Stock Option or is
necessary to comply with any applicable law or government regulation.
14. Shareholder Approval. The Plan or any increase in the maximum number
--------------------
of shares of Stock issuable thereunder as provided in Section 4.1 (the "Maximum
Shares") shall be approved by the shareholders of the Company within twelve (12)
months of the date of adoption thereof by the Board, Options granted prior to
shareholder approval of the Plan or in excess of the Maximum Shares previously
approved by the
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<PAGE>
shareholders shall become exercisable no earlier than the date of shareholder
approval of the Plan or such increase in the Maximum Shares, as the case may be,
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing @Road, Inc. 1996 Stock Option Plan was duly adopted by the Board
on September ____1996.
-----------------------------------
Secretary
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<PAGE>
EXHIBIT 10.13
@ROAD, INC.
2000 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 2000 Stock Option Plan are
--------------------
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants and
to promote the success of the Company's business. Options granted under the
Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined
by the Administrator at the time of grant of an option and subject to the
applicable provisions of Section 422 of the Code and the regulations promulgated
thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or its Committee appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Affiliate" means an entity other than a Subsidiary (as defined
---------
below) which, together with the Company, is under common control of a third
person or entity.
(c) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any Stock Exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options are granted
under the Plan, as such laws, rules, regulations and requirements shall be in
place from time to time.
(d) "Board" means the Board of Directors of the Company.
-----
(e) "Change of Control" means a sale of all or substantially all of
-----------------
the Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
----
(g) "Committee" means one or more committees or subcommittees of the
---------
Board appointed by the Board to administer the Plan in accordance with Section 4
below.
(h) "Common Stock" means the Common Stock of the Company.
------------
(i) "Company" means @Road, Inc., a Delaware corporation.
-------
<PAGE>
(j) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent, Subsidiary or Affiliate to render services
and is compensated for such services, and any director of the Company whether
compensated for such services or not.
(k) "Continuous Service Status" means the absence of any interruption
-------------------------
or termination of service as an Employee or Consultant. Continuous Service
Status as an Employee or Consultant shall not be considered interrupted in the
case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence
approved by the Administrator, provided that such leave is for a period of not
more than ninety (90) days, unless reemployment upon the expiration of such
leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its Parents,
Subsidiaries, Affiliates or their respective successors. A change in status
from an Employee to a Consultant or from a Consultant to an Employee will not
constitute an interruption of Continuous Service Status.
(l) "Corporate Transaction" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation and includes a
Change of Control.
(m) "Director" means a member of the Board.
--------
(n) "Employee" means any person employed by the Company or any Parent,
--------
Subsidiary or Affiliate, with the status of employment determined based upon
such factors as are deemed appropriate by the Administrator in its discretion,
subject to any requirements of the Code or the Applicable Laws. The payment by
the Company of a director's fee to a Director shall not be sufficient to
constitute "employment" of such Director by the Company.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(p) "Fair Market Value" means, as of any date, the fair market value
-----------------
of the Common Stock, as determined by the Administrator in good faith on such
basis as it deems appropriate and applied consistently with respect to
Participants. Whenever possible, the determination of Fair Market Value shall
be based upon the closing price for the Shares as reported in the Wall Street
-----------
Journal for the applicable date.
- -------
(q) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable Option Agreement.
(r) "Listed Security" means any security of the Company that is
---------------
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
(s) "Named Executive" means any individual who, on the last day of the
---------------
Company's fiscal year, is the chief executive officer of the Company (or is
acting in such
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<PAGE>
capacity) or among the four most highly compensated officers of the Company
(other than the chief executive officer). Such officer status shall be
determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(t) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable Option
Agreement.
(u) "Option" means a stock option granted pursuant to the Plan.
------
(v) "Option Agreement" means a written document, the form(s) of which
----------------
shall be approved from time to time by the Administrator, reflecting the terms
of an Option granted under the Plan and includes any documents attached to or
incorporated into such Option Agreement, including, but not limited to, a notice
of stock option grant and a form of exercise notice.
(w) "Option Exchange Program" means a program approved by the
-----------------------
Administrator whereby outstanding Options are exchanged for Options with a lower
exercise price or are amended to decrease the exercise price as a result of a
decline in the Fair Market Value of the Common Stock.
(x) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(y) "Optionee" means an Employee or Consultant who receives an Option.
--------
(z) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code, or any successor provision.
(aa) "Participant" means any holder of one or more Options, or the
-----------
Shares issuable or issued upon exercise of such Options, under the Plan.
(bb) "Plan" means this 2000 Stock Option Plan.
----
(cc) "Reporting Person" means an officer, Director, or greater than
----------------
ten percent stockholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under
the Exchange Act.
(dd) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as amended from time to time, or any successor provision.
(ee) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(ff) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(gg) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
-3-
<PAGE>
(hh) "Ten Percent Holder" means a person who owns stock representing
------------------
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be sold under the Plan
is 2,000,000 Shares of Common Stock, plus (i) up to an aggregate of 6,500,000
Shares that (a) are reserved and available for issuance under the Company's 1996
Stock Option Plan, (b) return to the 1996 Stock Option Plan upon cancellation of
outstanding options issued under that plan and (c) were Shares issued under the
1996 Stock Option Plan that the Company repurchases when the holder thereof
terminates his or her service relationship with the Company and (ii) an annual
increase on the first day of each of the Company's fiscal years beginning in
2001 and ending in 2010 equal to the lesser of (a) 2,500,000 Shares, (b) four
(4%) percent of the Shares outstanding on the last day of the immediately
preceding fiscal year, or (c) such lesser number of Shares as the Board shall
determine. Notwithstanding the above, the maximum aggregate number of Shares
that may be sold under the Plan during its term (as set forth in Section 6
below) is 36,825,000.
The Shares may be authorized, but unissued, or reacquired Common Stock. If
an award should expire or become unexercisable for any reason without having
been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares that were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
In addition, any Shares of Common Stock which are retained by the Company upon
exercise of an award in order to satisfy the exercise or purchase price for such
award or any withholding taxes due with respect to such exercise or purchase
shall be treated as not issued and shall continue to be available under the
Plan. Shares issued under the Plan and later repurchased by the Company
pursuant to any repurchase right which the Company may have shall not be
available for future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) General. The Plan shall be administered by the Board or a
-------
Committee, or a combination thereof, as determined by the Board. The Plan may
be administered by different administrative bodies with respect to different
classes of Participants and, if permitted by the Applicable Laws, the Board may
authorize one or more officers to make awards under the Plan.
(b) Committee Composition. If a Committee has been appointed pursuant
---------------------
to this Section 4, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) and remove all members of a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan in
accordance with the requirements of Rule 16b-3 or Section 162(m) of the Code, to
the extent permitted or required by such provisions.
-4-
<PAGE>
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(p) of the Plan, provided that such determination shall
be applied consistently with respect to Participants under the Plan;
(ii) to select the Employees and Consultants to whom Options may
from time to time be granted;
(iii) to determine whether and to what extent Options are
granted;
(iv) to determine the number of Shares of Common Stock to be
covered by each award granted;
(v) to approve the form(s) of agreement(s) used under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder, which terms and
conditions include but are not limited to the exercise or purchase price, the
time or times when awards may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option, Optioned Stock or restricted
stock issued upon exercise of an Option, based in each case on such factors as
the Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 10(c) instead of Common Stock;
(viii) to implement an Option Exchange Program on such terms and
conditions as the Administrator in its discretion deems appropriate, provided
that no amendment or adjustment to an Option that would materially and adversely
affect the rights of any Optionee shall be made without the prior written
consent of the Optionee;
(ix) to adjust the vesting of an Option held by an Employee or
Consultant as a result of a change in the terms or conditions under which such
person is providing services to the Company;
(x) to construe and interpret the terms of the Plan and awards
granted under the Plan, which constructions, interpretations and decisions shall
be final and binding on all Participants;
(xi) to make any adjustment or amendment to the Plan or to an
outstanding award with or without a Participant's consent if such adjustment or
amendment is necessary to avoid the Company's incurring adverse accounting
charges; and
-5-
<PAGE>
(xii) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to Participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
5. Eligibility.
-----------
(a) Recipients of Grants. Nonstatutory Stock Options may be granted
--------------------
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees, provided that Employees of Affiliates shall not be eligible to
receive Incentive Stock Options.
(b) Type of Option. Each Option shall be designated in the Option
--------------
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
(c) ISO $100,000 Limitation. Notwithstanding any designation under
-----------------------
Section 5(b), to the extent that the aggregate Fair Market Value of Shares with
respect to which Options designated as Incentive Stock Options are exercisable
for the first time by any Optionee during any calendar year (under all plans of
the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options
shall be treated as Nonstatutory Stock Options. For purposes of this Section
5(c), Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of the Shares subject to an
Incentive Stock Option shall be determined as of the date of the grant of such
Option.
(d) No Employment Rights. The Plan shall not confer upon any
--------------------
Participant any right with respect to continuation of an employment or
consulting relationship with the Company, nor shall it interfere in any way with
such Participant's right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without Cause.
6. Term of Plan. The Plan shall become effective upon its adoption by the
------------
Board of Directors. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided that the term shall be no more than ten years
from the date of grant thereof or such shorter term as may be provided in the
Option Agreement and provided further that, in the case of an Incentive Stock
Option granted to a person who at the time of such grant is a Ten Percent
Holder, the term of the Option shall be five years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
8. Limitation on Grants to Employees. Subject to adjustment as provided
---------------------------------
in Section 13 below, the maximum number of Shares that may be subject to Options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be 2,500,000, provided that this Section 8 shall apply only after such
time, if any, as the Common Stock becomes a Listed Security.
-6-
<PAGE>
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be such price as is determined by
the Administrator and set forth in the Option Agreement, but shall be subject to
the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who at the time of grant is a
Ten Percent Holder, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant; or
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to a person who is at the time of grant is a Ten
Percent Holder, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant if required by the Applicable
Laws and, if not so required, shall be such price as is determined by the
Administrator;
(B) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to any other eligible person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant if required by the Applicable Laws and, if not so required,
shall be such price as is determined by the Administrator.
(C) granted on or after the date, if any, on which the
Common Stock becomes a Listed Security to any eligible person, the per share
Exercise Price shall be such price as determined by the Administrator provided
that if such eligible person is, at the time of the grant of such Option, a
Named Executive of the Company, the per share Exercise Price shall be no less
than 100% of the Fair Market Value on the date of grant if such Option is
intended to qualify as performance-based compensation under Section 162(m) of
the Code.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.
(b) Permissible Consideration. The consideration to be paid for the
-------------------------
Shares to be issued upon exercise of an Option, including the method of payment,
shall be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash; (2) check; (3) delivery of Optionee's promissory note with such
recourse, interest, security and redemption provisions as the Administrator
determines to be appropriate (subject to the provisions of Section 153 of the
-7-
<PAGE>
Delaware General Corporation Law); (4) cancellation of indebtedness; (5) other
Shares that have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which the Option is exercised,
provided that in the case of Shares acquired, directly or indirectly, from the
Company, such Shares must have been owned by the Optionee for more than six
months on the date of surrender (or such other period as may be required to
avoid the Company's incurring an adverse accounting charge); (6) delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and a securities broker approved by the Company shall require to
effect exercise of the Option and prompt delivery to the Company of the sale or
loan proceeds required to pay the exercise price and any applicable withholding
taxes; (7) any combination of the foregoing methods of payment; or (8) such
other consideration and method of payment for the issuance of Shares to the
extent permitted under the Applicable Laws. In making its determination as to
the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company and the Administrator may, in its sole discretion, refuse to accept a
particular form of consideration at the time of any Option exercise.
10. Exercise of Option.
------------------
(a) General.
-------
(i) Exercisability. Any Option granted hereunder shall be
--------------
exercisable at such times and under such conditions as determined by the
Administrator, consistent with the term of the Plan and reflected in the Option
Agreement, including vesting requirements and/or performance criteria with
respect to the Company and/or the Optionee; provided however that, if required
by the Applicable Laws, any Option granted prior to the date, if any, upon which
the Common Stock becomes a Listed Security shall become exercisable at the rate
of at least 20% per year over five years from the date the Option is granted. In
the event that any of the Shares issued upon exercise of an Option (which
exercise occurs prior to the date, if any, upon which the Common Stock becomes a
Listed Security) should be subject to a right of repurchase in the Company's
favor, such repurchase right shall, if required by the Applicable Laws, lapse at
the rate of at least 20% per year over five years from the date the Option is
granted. Notwithstanding the above, in the case of an Option granted to an
officer, Director or Consultant of the Company or any Parent, Subsidiary or
Affiliate of the Company, the Option may become fully exercisable, or a
repurchase right, if any, in favor of the Company shall lapse, at any time or
during any period established by the Administrator.
(ii) Minimum Exercise Requirements. An Option may not be
-----------------------------
exercised for a fraction of a Share. The Administrator may require that an
Option be exercised as to a minimum number of Shares, provided that such
requirement shall not prevent an Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
(iii) Procedures for and Results of Exercise. An Option shall
--------------------------------------
be deemed exercised when written notice of such exercise has been given to the
Company in accordance with the terms of the Option by the person entitled to
exercise the Option and the Company has received full payment for the Shares
with respect to which the Option is exercised.
-8-
<PAGE>
Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan,
provided that the Administrator may, in its sole discretion, refuse to accept
any form of consideration at the time of any Option exercise.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(iv) Rights as Stockholder. Until the issuance of the Shares (as
---------------------
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 13 of the Plan.
(b) Termination of Employment or Consulting Relationship. Except as
----------------------------------------------------
otherwise set forth in this Section 10(b), the Administrator shall establish and
set forth in the applicable Option Agreement the terms and conditions upon which
an Option shall remain exercisable, if at all, following termination of an
Optionee's Continuous Service Status, which provisions may be waived or modified
by the Administrator at any time. To the extent that the Optionee is not
entitled to exercise an Option at the date of his or her termination of
Continuous Service Status, or if the Optionee (or other person entitled to
exercise the Option) does not exercise the Option to the extent so entitled
within the time specified in the Option Agreement or below (as applicable), the
Option shall terminate and the Optioned Stock underlying the unexercised portion
of the Option shall revert to the Plan. In no event may any Option be exercised
after the expiration of the Option term as set forth in the Option Agreement
(and subject to Section 7).
The following provisions (1) shall apply to the extent an Option
Agreement does not specify the terms and conditions upon which an Option shall
terminate upon termination of an Optionee's Continuous Service Status, and (2)
establish the minimum post-termination exercise periods that may be set forth in
an Option Agreement:
(i) Termination other than Upon Disability or Death or for
------------------------------------------------------
Cause. In the event of termination of an Optionee's Continuous Service Status,
- -----
such Optionee may exercise an Option for 30 days following such termination to
the extent the Optionee was entitled to exercise it at the date of such
termination. No termination shall be deemed to occur and this Section 10(b)(i)
shall not apply if (i) the Optionee is a Consultant who becomes an Employee, or
(ii) the Optionee is an Employee who becomes a Consultant.
(ii) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Service Status as a result of his or her disability
(including a disability within the meaning of Section 22(e)(3) of the Code),
such Optionee may exercise an Option at any time within six (6) months following
such termination to the extent the Optionee was entitled to exercise it at the
date of such termination.
-9-
<PAGE>
(iii) Death of Optionee. In the event of the death of an
-----------------
Optionee during the period of Continuous Service Status since the date of grant
of the Option, or within thirty (30) days following termination of Optionee's
Continuous Service Status, the Option may be exercised by Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance at any time within twelve months following the date of death, but
only to the extent of the right to exercise that had accrued at the date of
death or, if earlier, the date the Optionee's Continuous Service Status
terminated.
(c) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares an Option previously granted under the Plan
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Taxes.
-----
(a) As a condition of the exercise of an Option granted under the
Plan, the Participant (or in the case of the Participant's death, the person
exercising the Option) shall make such arrangements as the Administrator may
require for the satisfaction of any applicable federal, state, local or foreign
withholding tax obligations that may arise in connection with the exercise of
the Option and the issuance of Shares. The Company shall not be required to
issue any Shares under the Plan until such obligations are satisfied. If the
Administrator allows the withholding or surrender of Shares to satisfy a
Participant's tax withholding obligations under this Section 11 (whether
pursuant to Section 11(c), (d) or (e), or otherwise), the Administrator shall
not allow Shares to be withheld in an amount that exceeds the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option.
(c) This Section 11(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of Participant
other than an Employee (or in the case of an Employee where the next payroll
payment is not sufficient to satisfy such tax obligations, with respect to any
remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws, the Participant shall be deemed to
have elected to have the Company withhold from the Shares to be issued upon
exercise of the Option that number of Shares having a Fair Market Value
determined as of the applicable Tax Date (as defined below) equal to the amount
required to be withheld. For purposes of this Section 11, the Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined under the Applicable Laws (the "Tax
---
Date").
- ----
(d) If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option by surrendering to the Company Shares that have a Fair Market Value
determined as of the applicable Tax Date equal
-10-
<PAGE>
to the amount required to be withheld. In the case of shares previously acquired
from the Company that are surrendered under this Section 11(d), such Shares must
have been owned by the Participant for more than six (6) months on the date of
surrender (or such other period of time as is required for the Company to avoid
adverse accounting charges).
(e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 11(c) or (d) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Administrator.
Any election by a Participant under Section 11(d) above must be made on or prior
to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option is exercised but such
Participant shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. Non-Transferability of Options.
------------------------------
(a) General. Except as set forth in this Section 12, Options may not
--------
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent or distribution. The
designation of a beneficiary by an Optionee will not constitute a transfer. An
Option may be exercised, during the lifetime of the holder of an Option, only by
such holder or a transferee permitted by this Section 12.
(b) Limited Transferability Rights. Notwithstanding anything else in
------------------------------
this Section 12, prior to the date, if any, on which the Common Stock becomes a
Listed Security, the Administrator may in its discretion grant Nonstatutory
Stock Options that may be transferred by instrument to an inter vivos or
testamentary trust in which the Options are to be passed to beneficiaries upon
the death of the trustor (settlor) or by gift to "Immediate Family" (as defined
below), on such terms and conditions as the Administrator deems appropriate.
Following the date, if any, on which the Common Stock becomes a Listed Security,
the Administrator may in its discretion grant transferable Nonstatutory Stock
Options pursuant to Option Agreements specifying the manner in which such
Nonstatutory Stock Options are transferable. "Immediate Family" means any
----------------
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, and shall include adoptive relationships.
13. Adjustments Upon Changes in Capitalization, Merger or Certain Other
-------------------------------------------------------------------
Transactions.
- ------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of Shares of Common Stock covered by
each outstanding Option, the numbers of Shares set forth in Sections 3(a) and 8
above, and the number of Shares of Common Stock that have been authorized for
issuance under the Plan but as to which no Options have yet been granted or that
have been returned to the Plan upon cancellation
-11-
<PAGE>
or expiration of an Option, as well as the price per Share of Common Stock
covered by each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued Shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination,
recapitalization or reclassification of the Common Stock, or any other increase
or decrease in the number of issued Shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Administrator, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Shares of Common Stock subject to an
Option.
(b) Dissolution or Liquidation. In the event of the dissolution or
--------------------------
liquidation of the Company, each Option will terminate immediately prior to the
consummation of such action, unless otherwise determined by the Administrator.
(c) Corporate Transaction. In the event of a Corporate Transaction,
---------------------
each outstanding Option shall be assumed or an equivalent option or right shall
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation (the "Successor Corporation"), unless the Successor
---------------------
Corporation does not agree to assume the award or to substitute an equivalent
option or right, in which case such Option shall terminate upon the consummation
of the transaction.
For purposes of this Section 13(c), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon a Corporate Transaction or a Change of Control, as the case
may be, each holder of an Option would be entitled to receive upon exercise of
the award the same number and kind of shares of stock or the same amount of
property, cash or securities as such holder would have been entitled to receive
upon the occurrence of the transaction if the holder had been, immediately prior
to such transaction, the holder of the number of Shares of Common Stock covered
by the award at such time (after giving effect to any adjustments in the number
of Shares covered by the Option as provided for in this Section 13); provided
that if such consideration received in the transaction is not solely common
stock of the Successor Corporation, the Administrator may, with the consent of
the Successor Corporation, provide for the consideration to be received upon
exercise of the award to be solely common stock of the Successor Corporation
equal to the Fair Market Value of the per Share consideration received by
holders of Common Stock in the transaction.
(d) Certain Distributions. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
-12-
<PAGE>
14. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator,
provided that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Authority to Amend or Terminate. The Board may at any time amend,
-------------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation (other than an adjustment pursuant to Section 13 above) shall
be made that would materially and adversely affect the rights of any Optionee
under any outstanding grant, without his or her consent. In addition, to the
extent necessary and desirable to comply with the Applicable Laws, the Company
shall obtain stockholder approval of any Plan amendment in such a manner and to
such a degree as required.
(b) Effect of Amendment or Termination. No amendment or termination
----------------------------------
of the Plan shall materially and adversely affect Options already granted,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee or holder and the
Company.
(c) Accounting Issues. Notwithstanding anything else to the contrary
-----------------
in this Section 15, the Administrator may at any time amend or adjust the Plan
or an outstanding award issued under the Plan without the consent of the
affected Participant(s) if such amendment or adjustment is necessary to avoid
the Company's incurring adverse accounting charges.
16. Conditions Upon Issuance of Shares. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such compliance determined
by the Company in consultation with its legal counsel. As a condition to the
exercise of an Option, the Company may require the person exercising the award
to represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by law.
17. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Agreements. Options shall be evidenced by Option Agreements in such
----------
form(s) as the Administrator shall from time to time approve.
-13-
<PAGE>
19. Stockholder Approval. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted. Such
stockholder approval shall be obtained in the manner and to the degree required
under the Applicable Laws.
20. Information and Documents to Optionees and Purchasers. Prior to the
-----------------------------------------------------
date, if any, upon which the Common Stock becomes a Listed Security and if
required by the Applicable Laws, the Company shall provide financial statements
at least annually to each Optionee and to each individual who acquired Shares
pursuant to the Plan, during the period such Optionee or purchaser has one or
more Options outstanding, and in the case of an individual who acquired Shares
pursuant to the Plan, during the period such individual owns such Shares. The
Company shall not be required to provide such information if the issuance of
Options under the Plan is limited to key employees whose duties in connection
with the Company assure their access to equivalent information.
-14-
<PAGE>
EXHIBIT 10.14
@ROAD, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitute the provisions of the 2000 Employee Stock Purchase
Plan of @ROAD, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
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Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
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(a) "Board" means the Board of Directors of the Company.
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(b) "Code" means the Internal Revenue Code of 1986, as amended.
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(c) "Common Stock" means the Common Stock of the Company.
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(d) "Company" means @ROAD, Inc., a Delaware corporation.
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(e) "Compensation" means total compensation, including commissions,
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payments for overtime, shift premium, incentive compensation, incentive
payments, bonuses and other compensation.
(f) "Continuous Status as an Employee" means the absence of any
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interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the Administrator,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company and its Designated Subsidiaries.
(g) "Contributions" means all amounts credited to the account of a
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participant pursuant to the Plan.
(h) "Corporate Transaction" means a sale of all or substantially all
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of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(i) "Designated Subsidiaries" means the Subsidiaries which have been
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designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan; provided however that the Board shall only have the
discretion to designate Subsidiaries if
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the issuance of options to such Subsidiary's Employees pursuant to the Plan
would not cause the Company to incur adverse accounting charges.
(j) "Employee" means any person, including an Officer, who is
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customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
(l) "Offering Date" means the first business day of each Offering
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Period of the Plan.
(m) "Offering Period" means a period of twenty-four (24) months
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commencing on February 1 and August 1 of each year, except for the first
Offering Period as set forth in Section 4(a).
(n) "Officer" means a person who is an officer of the Company within
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the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "Plan" means this Employee Stock Purchase Plan.
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(p) "Purchase Date" means the last day of each Purchase Period of the
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Plan.
(q) "Purchase Period" means a period of six (6) months within an
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Offering Period, except for the first Purchase Period as set forth in Section
4(b).
(r) "Purchase Price" means with respect to a Purchase Period an amount
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equal to 85% of the Fair Market Value (as defined in Section 7(b) below) of a
Share of Common Stock on the Offering Date or on the Purchase Date, whichever is
lower; provided, however, that in the event (i) of any increase in the number of
Shares available for issuance under the Plan as a result of a stockholder-
approved amendment to the Plan, and (ii) all or a portion of such additional
Shares are to be issued with respect to one or more Offering Periods that are
underway at the time of such increase ("Additional Shares"), and (iii) the Fair
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Market Value of a Share of Common Stock on the date of such increase (the
"Approval Date Fair Market Value") is higher than the Fair Market Value on the
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Offering Date for any such Offering Period, then in such instance the Purchase
Price with respect to Additional Shares shall be 85% of the Approval Date Fair
Market Value or the Fair Market Value of a Share of Common Stock on the Purchase
Date, whichever is lower.
(s) "Share" means a share of Common Stock, as adjusted in accordance
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with Section 19 of the Plan.
(t) "Subsidiary" means a corporation, domestic or foreign, of which
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not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
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3. Eligibility.
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(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or of any subsidiary of the Company, or (ii) if such
option would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of the Fair Market Value (as defined in Section 7(b) below) of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods and Purchase Periods.
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(a) Offering Periods. The Plan shall be implemented by a series of
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Offering Periods of approximately twenty-four (24) months duration, with new
Offering Periods commencing on or about February 1 and August 1 of each year (or
at such other time or times as may be determined by the Board of Directors).
The first Offering Period shall commence on the beginning of the effective date
of the Registration Statement on Form S-1 for the initial public offering of the
Company's Common Stock (the "IPO Date") and continue until July 31, 2002. The
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Plan shall continue until terminated in accordance with Section 20 hereof. The
Board of Directors of the Company shall have the power to change the duration
and/or the frequency of Offering Periods with respect to future offerings
without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected.
(b) Purchase Periods. Each Offering Period shall consist of four (4)
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consecutive Purchase Periods of approximately six (6) months duration. The last
day of each Purchase Period shall be the "Purchase Date" for such Purchase
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Period. A Purchase Period commencing on February 1 shall end on the next July
31. A Purchase Period commencing on August 1 shall end on the next January 31.
The first Purchase Period shall commence on the IPO Date and shall end on
January 31, 2001. The Board of Directors of the Company shall have the power to
change the duration and/or frequency of Purchase Periods with respect to future
purchases without stockholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Purchase Period to be
affected.
5. Participation.
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(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's
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payroll office prior to the applicable Offering Date, unless a later time for
filing the subscription agreement is set by the Board for all eligible Employees
with respect to a given Offering Period. The subscription agreement shall set
forth the percentage of the participant's Compensation (subject to Section 6(a)
below) to be paid as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll paid
following the Offering Date and shall end on the last payroll paid on or prior
to the last Purchase Period of the Offering Period to which the subscription
agreement is applicable, unless sooner terminated by the participant as provided
in Section 10.
6. Method of Payment of Contributions.
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(a) A participant shall elect to have payroll deductions made on each
payday during the Offering Period in an amount not less than one percent (1%)
and not more than twenty percent (20%) of such participant's Compensation on
each payday during the Offering Period. All payroll deductions made by a
participant shall be credited to his or her account under the Plan. A
participant may not make any additional payments into such account.
(b) A participant may discontinue his or her participation in the Plan
as provided in Section 10, or, on one occasion only during a Purchase Period may
increase and on one occasion only during a Purchase Period may decrease the rate
of his or her Contributions with respect to the Offering Period by completing
and filing with the Company a new subscription agreement authorizing a change in
the payroll deduction rate. The change in rate shall be effective as of the
beginning of the next calendar month following the date of filing of the new
subscription agreement, if the agreement is filed at least ten (10) business
days prior to such date and, if not, as of the beginning of the next succeeding
calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b), a participant's payroll
deductions may be decreased by the Company to 0% at any time during a Purchase
Period. Payroll deductions shall re-commence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10. In addition, a
participant's payroll deductions may be decreased by the Company to 0% at any
time during a Purchase Period in order to avoid unnecessary payroll
contributions as a result of application of the maximum share limit set forth in
Section 7(a), or as a result of the limitations set forth in Section 3(b), in
which case payroll deductions shall re-commence at the rate provided in such
participant's subscription agreement at the beginning of the next Purchase
Period, unless terminated by the participant as provided in Section 10.
7. Grant of Option.
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(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase Date a number of Shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Purchase Date and retained in the
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participant's account as of the Purchase Date by the applicable Purchase Price;
provided however that the maximum number of Shares an Employee may purchase
during each Purchase Period shall be 2,700 Shares (subject to any adjustment
pursuant to Section 19 below), and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 13.
(b) The fair market value of the Company's Common Stock on a given
date (the "Fair Market Value") shall be determined by the Board in its
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discretion based on the closing sales price of the Common Stock for such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market or, if such
price is not reported, the mean of the bid and asked prices per share of the
Common Stock as reported by Nasdaq or, in the event the Common Stock is listed
on a stock exchange, the Fair Market Value per share shall be the closing sales
price on such exchange on such date (or, in the event that the Common Stock is
not traded on such date, on the immediately preceding trading date), as reported
in The Wall Street Journal. For purposes of the Offering Date under the first
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Offering Period under the Plan, the Fair Market Value of a share of the Common
Stock of the Company shall be the Price to Public as set forth in the final
prospectus filed with the Securities and Exchange Commission pursuant to Rule
424 under the Securities Act of 1933, as amended.
8. Exercise of Option. Unless a participant withdraws from the Plan as
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provided in Section 10, his or her option for the purchase of Shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full Shares subject to the option will be purchased at the
applicable Purchase Price with the accumulated Contributions in his or her
account. No fractional Shares shall be issued. The Shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the Purchase Date. During his or her lifetime, a participant's
option to purchase Shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Purchase Date of each
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Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, the Shares purchased upon exercise of his or her option. No
fractional Shares shall be purchased; any payroll deductions accumulated in a
participant's account which are not sufficient to purchase a full Share shall be
retained in the participant's account for the subsequent Purchase Period or
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 below. Any other amounts left over in a participant's account after
a Purchase Date shall be returned to the participant.
10. Voluntary Withdrawal; Termination of Employment.
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(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of Shares will be made during the Offering
Period.
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(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 15, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. Automatic Withdrawal. If the Fair Market Value of the Shares on any
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Purchase Date of an Offering Period is less than the Fair Market Value of the
Shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of Shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period. Participants shall automatically be
withdrawn as of July 31, 2000 from the Offering Period beginning on the IPO Date
and re-enrolled in the Offering Period beginning on August 1, 2000 if the Fair
Market Value of the Shares on the IPO Date is greater than the Fair Market Value
of the Shares on July 31, 2000, unless a participant notifies the Administrator
prior to July 31, 2000 that he or she does not wish to be withdrawn and re-
enrolled.
12. Interest. No interest shall accrue on the Contributions of a
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participant in the Plan.
13. Stock.
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(a) Subject to adjustment as provided in Section 19, the maximum
number of Shares which shall be made available for sale under the Plan shall be
450,000 Shares, plus an annual increase on the first day of each of the
Company's fiscal years beginning in 2001 and ending in 2010 equal to the lesser
of (i) 900,000 Shares, (ii) two (2%) percent of the Shares outstanding on the
last day of the immediately preceding fiscal year, or (iii) such lesser number
of Shares as is determined by the Board. If the Board determines that, on a
given Purchase Date, the number of shares with respect to which options are to
be exercised may exceed (i) the number of shares of Common Stock that were
available for sale under the Plan on the Offering Date of the applicable
Offering Period, or (ii) the number of shares available for sale under the Plan
on such Purchase Date, the Board may in its sole discretion provide (x) that the
Company shall make a pro rata allocation of the Shares of Common Stock available
for purchase on such Offering Date or Purchase Date, as applicable, in as
uniform a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising
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<PAGE>
options to purchase Common Stock on such Purchase Date, and continue all
Offering Periods then in effect, or (y) that the Company shall make a pro rata
allocation of the shares available for purchase on such Offering Date or
Purchase Date, as applicable, in as uniform a manner as shall be practicable and
as it shall determine in its sole discretion to be equitable among all
participants exercising options to purchase Common Stock on such Purchase Date,
and terminate any or all Offering Periods then in effect pursuant to Section 20
below. The Company may make pro rata allocation of the Shares available on the
Offering Date of any applicable Offering Period pursuant to the preceding
sentence, notwithstanding any authorization of additional Shares for issuance
under the Plan by the Company's stockholders subsequent to such Offering Date.
(b) The participant shall have no interest or voting right in Shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Board, or a committee named by the Board, shall
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supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan.
15. Designation of Beneficiary.
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(a) A participant may file a written designation of a beneficiary who
is to receive any Shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such Shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such Shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such Shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
16. Transferability. Neither Contributions credited to a participant's
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account nor any rights with regard to the exercise of an option or to receive
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws
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of descent and distribution, or as provided in Section 15) by the participant.
Any such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds in accordance with Section 10.
17. Use of Funds. All Contributions received or held by the Company under
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the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
18. Reports. Individual accounts will be maintained for each participant
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in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of Contributions,
the per Share Purchase Price, the number of Shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization; Corporate Transactions.
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(a) Adjustment. Subject to any required action by the stockholders of
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the Company, the number of Shares covered by each option under the Plan which
has not yet been exercised and the number of Shares which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the maximum number of shares of
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Common Stock which may be purchased by a participant in a Purchase Period, the
number of shares of Common Stock set forth in Section 13(a) above, and the price
per Share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of Shares of Common Stock effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company; provided however that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an option.
(b) Corporate Transactions. In the event of a dissolution or
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liquidation of the Company, any Purchase Period and Offering Period then in
progress will terminate immediately prior to the consummation of such action,
unless otherwise provided by the Board. In the event of a Corporate Transaction,
each option outstanding under the Plan shall be assumed or an equivalent option
shall be substituted by the successor corporation or a parent or Subsidiary of
such successor corporation. In the event that the successor corporation refuses
to assume or substitute for outstanding options, each Purchase Period and
Offering Period then in progress shall be shortened and a new Purchase Date
shall be set (the "New Purchase Date"), as of which date any Purchase Period and
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Offering Period then in progress will terminate. The New Purchase Date shall be
on or before the date of consummation of the transaction and the Board shall
notify each participant in writing, at least ten (10) days prior to the New
Purchase Date, that
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the Purchase Date for his or her option has been changed to the New Purchase
Date and that his or her option will be exercised automatically on the New
Purchase Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 10.
For purposes of this Section 19, an option granted under the Plan shall be
deemed to be assumed, without limitation, if, at the time of issuance of the
stock or other consideration upon a Corporate Transaction, each holder of an
option under the Plan would be entitled to receive upon exercise of the option
the same number and kind of shares of stock or the same amount of property, cash
or securities as such holder would have been entitled to receive upon the
occurrence of the transaction if the holder had been, immediately prior to the
transaction, the holder of the number of Shares of Common Stock covered by the
option at such time (after giving effect to any adjustments in the number of
Shares covered by the option as provided for in this Section 19); provided
however that if the consideration received in the transaction is not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the successor corporation or its parent
equal in Fair Market Value to the per Share consideration received by holders of
Common Stock in the transaction.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per Share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of Shares of its outstanding Common Stock, and
in the event of the Company's being consolidated with or merged into any other
corporation.
20. Amendment or Termination.
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(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 19, no such termination of the Plan may
affect options previously granted, provided that the Plan or an Offering Period
may be terminated by the Board on a Purchase Date or by the Board's setting a
new Purchase Date with respect to an Offering Period and Purchase Period then in
progress if the Board determines that termination of the Plan and/or the
Offering Period is in the best interests of the Company and the stockholders or
if continuation of the Plan and/or the Offering Period would cause the Company
to incur adverse accounting charges as a result of a change after the effective
date of the Plan in the generally accepted accounting rules applicable to the
Plan. Except as provided in Section 19 and in this Section 20, no amendment to
the Plan shall make any change in any option previously granted which adversely
affects the rights of any participant. In addition, to the extent necessary to
comply with Rule 16b-3 under the Exchange Act, or under Section 423 of the Code
(or any successor rule or provision or any applicable law or regulation), the
Company shall obtain stockholder approval in such a manner and to such a degree
as so required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be
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entitled to change the Offering Periods and Purchase Periods, limit the
frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order 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, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to the
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Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
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respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan; Effective Date. The Plan shall become effective upon
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the IPO Date. It shall continue in effect for a term of twenty (20) years
unless sooner terminated under Section 20.
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@ROAD, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
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New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the @ROAD,
Inc. 2000 Employee Stock Purchase Plan (the "Plan") for the Offering Period
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______________, ____ to _______________, ____, and subscribe to purchase shares
of the Company's Common Stock in accordance with this Subscription Agreement and
the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 20% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Purchase
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can increase or decrease the rate of my Contributions on one
occasion only with respect to any increase and one occasion only with respect to
any decrease during any Purchase Period by completing and filing a new
Subscription Agreement with such increase or decrease taking effect as of the
beginning of the calendar month following the date of filing of the new
Subscription Agreement, if filed at least ten (10) business days prior to the
beginning of such month. Further, I may change the rate of deductions for
future Offering Periods by filing a new Subscription Agreement, and any such
change will be effective as of the beginning of the next Offering Period. In
addition, I acknowledge that, unless I discontinue my participation in the Plan
as provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
<PAGE>
5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "@ROAD, Inc. 2000 Employee Stock Purchase Plan."
I understand that my participation in the Plan is in all respects subject to the
terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
____________________________________
____________________________________
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) ________________________________________
(First) (Middle) (Last)
____________________________ ________________________________________
(Relationship) (Address)
8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after the
------------------------------------------------------------------------
date of any such disposition, and I will make adequate provision for federal,
- -----------------------------------------------------------------------------
state or other tax withholding obligations, if any, which arise upon the
- ------------------------------------------------------------------------
disposition of the Common Stock. The Company may, but will not be obligated to,
- -------------------------------
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the option, or (2) 15% of the fair market value of the
-2-
<PAGE>
shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is subject to
----------------------------------------------------------------------
change. I further understand that I should consult a tax advisor concerning the
- ------
tax implications of the purchase and sale of stock under the Plan.
10. In connection with the initial public offering of the Company's
securities and upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, I agree not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any securities of the Company, however or whenever I acquired them, without
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed 180 days) from the effective date of
such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be
requested by the underwriters at the time of the public offering.
11. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE: ____________________________
SOCIAL SECURITY #: ____________________
DATE: _________________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
_______________________________________
(Signature)
_______________________________________
(Print name)
-3-
<PAGE>
@ROAD, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
--------------------
I, __________________________, hereby elect to withdraw my participation in
the @ROAD, Inc. 2000 Employee Stock Purchase Plan (the "Plan") for the Offering
----
Period that began on _________ ___, _____. This withdrawal covers all
Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:___________________ ___________________________________
Signature of Employee
___________________________________
Social Security Number
-1-
<PAGE>
EXHIBIT 10.15
@ROAD, INC.
2000 DIRECTORS' STOCK OPTION PLAN
---------------------------------
1. Purposes of the Plan. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Change of Control" means a sale of all or substantially all of
-----------------
the Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Common Stock" means the Common Stock of the Company.
------------
(e) "Company" means @Road, Inc., a Delaware corporation.
-------
(f) "Continuous Status as a Director" means the absence of any
-------------------------------
interruption or termination of service as a Director.
(g) "Corporate Transaction" means a dissolution or liquidation of the
---------------------
Company, a sale of all or substantially all of the Company's assets, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation.
(h) "Director" means a member of the Board.
--------
(i) "Employee" means any person, including any officer or Director,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
<PAGE>
(k) "Fair Market Value" means the closing price of the Common Stock as
-----------------
reported on the Nasdaq National Market or a stock exchange on which the Shares
are listed (or, in the event that the Common Stock is not traded on such date,
on the immediately preceding trading date), as reported in The Wall Street
---------------
Journal, or if there is a public market for the Common Stock but the Common
- -------
Stock is not traded on the Nasdaq National Market or on a stock exchange, the
fair market value per Share shall be the mean of the bid and asked prices of the
Common Stock in the over-the-counter market on the date of grant, as reported in
The Wall Street Journal (or, if not so reported, as otherwise reported by a
- ------------------------
source deemed reliable by the Administrator).
(l) "Option" means a stock option granted pursuant to the Plan. All
------
options shall be nonstatutory stock options (i.e., options that are not intended
to qualify as incentive stock options under Section 422 of the Code).
(m) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(n) "Optionee" means an Outside Director who receives an Option.
--------
(o) "Outside Director" means a Director who is not an Employee.
----------------
(p) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(q) "Plan" means this 2000 Directors' Stock Option Plan.
----
(r) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(s) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the number of Shares that are available to be sold under the Plan is
1,200,000 Shares of Common Stock. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares that were subject thereto
shall, unless the Plan has been terminated, become available for future grant
under the Plan. In addition, any Shares of Common Stock that are retained by
the Company upon exercise of an Option in order to satisfy the exercise price
for such Option, or any withholding taxes due with respect to such exercise,
shall be treated as not issued and shall continue to be available under the
Plan. If Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
-2-
<PAGE>
4. Administration of and Grants of Options under the Plan.
------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
--------------------
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each individual who becomes an Outside Director after the
effective date of this Plan, whether through election by the stockholders of the
Company or appointment by the Board of Directors to fill a vacancy, shall be
automatically granted an Option to purchase 40,000 Shares (the "First Option").
------------
(iii) Each Outside Director shall thereafter be automatically granted
an Option to purchase 10,000 Shares on the date of each Annual Meeting of the
Company's stockholders immediately following which such Outside Director is
serving on the Board, provided that, on such date, he or she shall have served
on the Board for at least six (6) months prior to the date of such Annual
Meeting (the "Annual Option").
-------------
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, in the event that a grant would cause the number of Shares subject to
outstanding Options plus the number of Shares previously purchased upon exercise
of Options to exceed the Pool, then each such automatic grant shall be for that
number of Shares determined by dividing the total number of Shares remaining
available for grant by the number of Outside Directors receiving an Option on
the automatic grant date. Any further grants shall then be deferred until such
time, if any, as additional Shares become available for grant under the Plan
through action of the stockholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any grant of an Option made before the Company has obtained stockholder
approval of the Plan in accordance with Section 17 hereof shall be conditioned
upon obtaining such stockholder approval of the Plan in accordance with Section
17 hereof.
(vi) The terms of each First Option granted hereunder shall be as
follows:
(1) the First Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Section 9
below;
-3-
<PAGE>
(2) the exercise price per Share shall be 100% of the fair market
value per Share on the date of grant of the First Option, determined in
accordance with Section 8 hereof; and
(3) the First Option shall become vested and exercisable as to
1/4th of the Shares subject to the Option on the 12 month anniversary of the
date of grant and as to 1/48th of the Shares subject to the Option at the end of
each month thereafter.
(vii) The terms of each Annual Option granted hereunder shall be as
follows:
(1) the Annual Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Section 9
below;
(2) the exercise price per Share shall be 100% of the fair market
value per Share on the date of grant of the Annual Option, determined in
accordance with Section 8 hereof; and
(3) the Annual Option shall become vested and exercisable as to
1/12th of the Shares subject to the Option at the end of each month after the
date of grant.
(c) Powers of the Board. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per Share of Options to be granted, which exercise price
shall be determined in accordance with Section 8 of the Plan; (iii) to interpret
the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to
the Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the Chief Executive
-----------------------------------
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, such officer may suspend the Optionee's right to
exercise any option pending a determination by the Board (excluding the Outside
Director accused of such misconduct). If the Board (excluding the Outside
Director accused of such misconduct) determines an Optionee has committed an act
of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any Company
customer to breach a contract with the Company or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Optionee
-4-
<PAGE>
nor his or her estate shall be entitled to exercise any Option whatsoever. In
making such determination, the Board of Directors (excluding the Outside
Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee's behalf at a
hearing before the Board or a committee of the Board.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) above. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective on the
----------------------------
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating to the Company's initial public offering of securities. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 13 of the Plan.
7. Term of Options. The term of each Option shall be ten (10) years from
---------------
the date of grant thereof unless an Option terminates sooner pursuant to Section
9 below.
8. Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be 100% of the Fair Market Value
per Share on the date of grant of the Option.
(b) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option shall be exercised (which, if acquired from the Company, shall have been
held more than six months), delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect exercise of the Option and prompt delivery
to the Company of the sale or loan proceeds required to pay the exercise price,
or any combination of such methods of payment and/or any other consideration or
method of payment as shall be permitted under applicable corporate law.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) above; provided however that no Options shall be exercisable prior to
stockholder approval of the Plan in accordance with Section 17 below has been
obtained.
An Option may not be exercised for a fraction of a Share.
-5-
<PAGE>
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(b) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be
issued to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. If an Outside
----------------------------------------------
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (to the extent
he or she was entitled to exercise) within the time specified above, the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan.
(c) Disability of Optionee. Notwithstanding Section 9(b) above, in
----------------------
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within twelve (12)
months from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he or she does
not exercise such Option (to the extent he or she was entitled to exercise)
within the time specified above, the Option shall terminate and the Shares
underlying the unexercised portion of the Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee (i)
-----------------
during the term of the Option who is, at the time of his or her death, a
Director of the Company and who shall have been in Continuous Status as a
Director since the date of grant of the Option, or (ii) three (3) months after
the termination of Continuous Status as a Director, the Option may be exercised,
at any time within twelve (12) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of death or the date of termination, as applicable.
Notwithstanding the foregoing, in no event may the Option be
-6-
<PAGE>
exercised after its term set forth in Section 7 has expired. To the extent that
an Optionee was not entitled to exercise the Option at the date of death or
termination or if he or she does not exercise such Option (to the extent he or
she was entitled to exercise) within the time specified above, the Option shall
terminate and the Shares underlying the unexercised portion of the Option shall
revert to the Plan.
10. Nontransferability of Options. The Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred or disposed of in any manner other than (a)
by will or by the laws of descent or distribution; (b) pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder); (c)
by gift to the Optionee's Family; or (d) by gift or in exchange for an interest
in such entity to (i) a trust in which Optionee and/or Optionee's Family have
more than fifty percent of the beneficial interest, (ii) a foundation in which
Optionee and/or Optionee's Family control the management of assets, or (iii) any
other entity in which Optionee and/or Optionee's Family own more than fifty
percent of the voting interests. For purposes of this Section 10, Optionee's
"Family" shall include any child, stepchild, grandchild, parent, stepparent,
- -------
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law; daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, and any person sharing the employee's
household (other than a tenant or employee). The designation of a beneficiary
by an Optionee does not constitute a transfer. An Option may be exercised
during the lifetime of an Optionee only by the Optionee or a transferee
permitted by this Section.
11. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the stockholders of
----------
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of Shares of Common Stock set forth in Sections 4(b)(ii) and
(iii) above, and the number of Shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock (including any such change in the number of Shares of Common
Stock effected in connection with a change in domicile of the Company) or any
other increase or decrease in the number of issued Shares of Common Stock
effected without receipt of consideration by the Company; provided however that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
(b) Corporate Transactions. In the event of a Corporate Transaction,
----------------------
each outstanding Option shall be assumed or an equivalent option shall be
substituted by the successor corporation or a Parent or Subsidiary of such
successor corporation, unless the successor
-7-
<PAGE>
corporation does not agree to assume the outstanding Options or to substitute
equivalent options, in which case the Options shall terminate upon the
consummation of the transaction; provided however that in the event of any
transaction that qualifies as a Change of Control and notwithstanding whether or
not outstanding Options are assumed, substituted for or terminated in connection
with the transaction, the vesting of each outstanding Option shall accelerate in
full such that each Optionee shall have the right to exercise his or her Option
as to all of the Optioned Stock, including Shares as to which the Option would
not otherwise be exercisable, immediately prior to consummation of the
transaction.
For purposes of this Section 11(b), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon such Corporate Transaction, each Optionee would be entitled
to receive upon exercise of an Option the same number and kind of shares of
stock or the same amount of property, cash or securities as the Optionee would
have been entitled to receive upon the occurrence of such transaction if the
Optionee had been, immediately prior to such transaction, the holder of the
number of Shares of Common Stock covered by the Option at such time (after
giving effect to any adjustments in the number of Shares covered by the Option
as provided for in this Section 11); provided however that if such consideration
received in the transaction was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon
exercise of the Option to be solely common stock of the successor corporation or
its Parent equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction.
(c) Certain Distributions. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this
-8-
<PAGE>
Plan had not been amended or terminated, unless mutually agreed otherwise
between the Optionee and the Board, which agreement must be in writing and
signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the legal requirements relating to the administration
of stock option plans under applicable U.S. state corporate laws, U.S. federal
and applicable state securities laws, the Code, any stock exchange or Nasdaq
rules or regulations to which the Company may be subject and the applicable laws
of any other country or jurisdiction where Options are granted under the Plan,
as such laws, rules, regulations and requirements shall be in place from time to
time (the "Applicable Laws"). Such compliance shall be determined by the
---------------
Company in consultation with its legal counsel.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
17. Stockholder Approval. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the stockholders of the Company.
Such stockholder approval shall be obtained in the manner and to the degree
required under the Applicable Laws.
-9-
<PAGE>
@ROAD, INC.
2000 DIRECTORS' STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
((Optionee))
You have been granted an option to purchase Common Stock of @Road, Inc.
(the "Company") as follows:
-------
Date of Grant ((GrantDate))
Vesting Commencement Date ((VestingStartDate))
Exercise Price per Share ((ExercisePrice))
Total Number of Shares Granted ((SharesGranted))
Total Exercise Price ((TotalExercisePrice))
Expiration Date ((ExpirDate))
Vesting/Exercise Schedule This Option shall vest and become
exerciseable, according to the
following schedule: [conform to
option plan]
Termination Period This Option may be exercised for 90
days after termination of Optionee's
Continuous Status as a Director, or
such longer period as may be
applicable upon death or Disability of
Optionee as provided in the Plan, but
in no event later than the Expiration
Date as provided above.
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 2000 Directors' Stock Option Plan and the
Nonstatutory Stock Option Agreement, all of which are attached and made a part
of this document.
OPTIONEE: @ROAD, INC.:
___________________________ By: ______________________________
((Optionee))
Title: ___________________________
-2-
<PAGE>
@ROAD, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
-----------------------------------
1. Grant of Option. The Board of Directors of the Company hereby grants
---------------
to the Optionee named in the Notice of Stock Option Grant (the "Optionee")
--------
attached to this Agreement an option (the "Option") to purchase a number of
------
Shares, as set forth in the Notice of Stock Option Grant, at the exercise price
per share set forth in the Notice of Stock Option Grant (the "Exercise Price"'),
--------------
subject to the terms and conditions of the 2000 Directors' Stock Option Plan
(the "Plan"), which is incorporated herein by reference. Capitalized terms not
----
defined herein shall have the meanings ascribed to such terms in the Plan. In
the event of a conflict between the terms and conditions of the Plan and the
terms and conditions of this Nonstatutory Stock Option Agreement, the terms and
conditions of the Plan shall prevail.
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting/Exercise Schedule set out in the Notice of Stock
Option Grant and the applicable provisions of the Plan and this Nonstatutory
Stock Option Agreement. In the event of Optionee's death, disability or other
termination of Optionee's service as a Director, the exercisability of the
Option is governed by the applicable provisions of the Plan and this
Nonstatutory Stock Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
--------- ---------------
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
----------------
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
<PAGE>
(c) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares acquired
directly or indirectly from the Company, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (ii) in any case which
have a Fair Market Value on the date of surrender equal to the aggregate
Exercise Price of the Exercised Shares.
4. Non-Transferability of Option. This Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred or disposed of in any manner other than (a)
by will or by the laws of descent or distribution; (b) pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder); (c)
by gift to the Optionee's Family; or (d) by gift or in exchange for an interest
in such entity to (i) a trust in which Optionee and/or Optionee's Family have
more than fifty percent of the beneficial interest, (ii) a foundation in which
Optionee and/or Optionee's Family control the management of assets, or (iii) any
other entity in which Optionee and/or Optionee's Family own more than fifty
percent of the voting interests. For purposes of this Section 10, Optionee's
"Family" shall include any child, stepchild, grandchild, parent, stepparent,
- -------
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law; daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, and any person sharing the employee's
household (other than a tenant or employee). The designation of a beneficiary
by an Optionee does not constitute a transfer. An Option may be exercised
during the lifetime of an Optionee only by the Optionee or a transferee
permitted by this Section 4 and Section 10 of the Plan. The terms of the Plan
and this Nonstatutory Stock Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Nonstatutory Stock Option
Agreement.
6. Tax Consequences. Set forth below is a brief summary of certain
----------------
federal and California tax consequences relating to this Option under the law in
effect as of the date of grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS OR
HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option. Since this Option does not qualify as an
---------------------
incentive stock option under Section 422 of the Code, the Optionee may incur
regular federal and California income tax liability upon exercise. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price.
(b) Disposition of Shares. If the Optionee holds the Option Shares
---------------------
for more than one year, gain realized on disposition of the Shares will be
treated as long-term capital gain
-2-
<PAGE>
for federal and California income tax purposes. Long-term capital gain will be
taxed for federal income tax and alternative minimum tax purposes at a maximum
rate of 20% if the Shares are held more than one year after exercise.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Nonstatutory Stock Option Agreement.
Optionee has reviewed the Plan and this Nonstatutory Stock Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Nonstatutory Stock Option Agreement and fully understands all
provisions of the Plan and Nonstatutory Stock Option Agreement. Optionee hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan and
Nonstatutory Stock Option Agreement.
@ROAD, INC.
_____________________________ By: _____________________________
((Optionee))
Title: __________________________
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Nonstatutory Stock Option Agreement. In
consideration of the Company's granting his or her spouse the right to purchase
Shares as set forth in the Plan and this Nonstatutory Stock Option Agreement,
the undersigned hereby agrees to be irrevocably bound by the terms and
conditions of the Plan and this Nonstatutory Stock Option Agreement and further
agrees that any community property interest shall be similarly bound. The
undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the
undersigned with respect to any amendment or exercise of rights under the Plan
or this Nonstatutory Stock Option Agreement.
_________________________________
Spouse of Optionee
-3-
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
To: @Road, Inc.
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
--------------------------------------------
This is official notice that the undersigned ("Optionee") intends to
--------
exercise Optionee's option to purchase __________ shares of @Road, Inc. Common
Stock, under and pursuant to the Company's 2000 Directors' Stock Option Plan and
the Nonstatutory Stock Option Agreement dated _______________, as follows:
Grant Number: __________________________
Date of Purchase: __________________________
Number of Shares: __________________________
Purchase Price: __________________________
Method of Payment of
Purchase Price: __________________________
Social Security No.: __________________________
The shares should be issued as follows:
Name: __________________________
Address: __________________________
__________________________
__________________________
Signed: __________________________
Date: __________________________
-4-
<PAGE>
EXHIBIT 10.19
@ROAD, INC.
AMENDED AND RESTATED RIGHTS AGREEMENT
First Closing:
December 17, 1999
Second Closing:
January 6, 2000
Third Closing:
January 28, 2000
<PAGE>
@ROAD, INC.
AMENDED AND RESTATED RIGHTS AGREEMENT
This Amended and Restated Rights Agreement (the "Agreement") is made and
---------
entered into as of December 17, 1999, by and among @Road, Inc., a California
corporation (the "Company"), Rod Fan (the "Founder") and the investors
------- -------
identified on Exhibit A attached hereto (the "Investors").
--------- ---------
RECITALS
WHEREAS, the Founder has purchased shares of the Company's Common Stock
pursuant to a Common Stock Purchase Agreement, dated July 15, 1994 (the
"Founder's Shares");
----------------
WHEREAS, the Company and certain of the Investors have entered into a
Series A Preferred Stock Purchase Agreement dated July 15, 1996 (the "Series A
--------
Purchase Agreement"), pursuant to which the Company sold, and such Investors
- ------------------
acquired, shares of the Company's Series A Preferred Stock (the "Series A
--------
Shares");
- ------
WHEREAS, the Company and certain of the Investors have entered into a
Series B Preferred Stock Purchase Agreement dated September 15, 1998 (the
"Series B Purchase Agreement"), pursuant to which the Company sold, and such
---------------------------
Investors acquired, shares of the Company's Series B Preferred Stock (the
"Series B Shares");
---------------
WHEREAS, the Company and certain of the Investors have entered into a
Series C Preferred Stock Purchase Agreement dated June 18, 1998 (the "Series C
--------
Purchase Agreement"), pursuant to which the Company sold, and such Investors
- ------------------
acquired, shares of the Company's Series C Preferred Stock (the "Series C
--------
Shares");
- ------
WHEREAS, the Company and the Investors are entering into a Series D
Preferred Stock Purchase Agreement of even date herewith (the "Series D Purchase
-----------------
Agreement"), pursuant to which the Company shall sell, and the Investors shall
- ---------
acquire, shares of the Company's Series D Preferred Stock (the "Series D
--------
Shares"); and
- ------
WHEREAS, the Company and certain of the Investors have entered into an
Amended and Restated Rights Agreement (the "Existing Rights Agreement") dated
-------------------------
June 18, 1999;
WHEREAS, the Company and certain of the Investors wish to amend and restate
the Existing Rights Agreement in its entirety as set forth below and grant the
Investors and the Founder the registration rights, information rights and other
rights provided herein, subject to execution of this agreement by such
Investors;
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
Section 1. Termination of Prior Rights. Upon execution of this Agreement
---------------------------
by the Company and the holders of at least sixty percent (60%) of the
outstanding Registrable Securities (as defined in the Existing Rights
Agreement), the Existing Rights Agreement is hereby amended and restated in its
entirety pursuant to Section 2 of the Existing Rights Agreement to read as set
forth in this Agreement, and the Investors hereby waive any further rights
(including without limitation, the Right of First Offer in Section 4.4 of the
Existing Rights Agreement and all related notice requirements relating to (A)
the issuance of Series D Preferred Stock to the Investors acquiring Series D
Preferred Stock or (B) the issuance of capital stock or options pursuant to
Section 4.4(d)(i)) under the Existing Rights Agreement, whether accrued before
or after the date hereof.
Section 2. Amendment. Except as expressly provided herein, neither this
---------
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that any provision hereof may be amended, waived, discharged or
terminated upon the written consent of (a) the Company, and (b) the holders of
sixty percent (60%) of the outstanding Registrable Securities (as defined
below), not including the Founder's Stock, as determined on the basis of assumed
conversion of all Series A, Series B, Series C, and Series D Shares into
Registrable Securities; provided that if such amendment has the effect of
--------
affecting the Founder's Stock (i) in a manner different than securities issued
to the Investors and (ii) in a manner adverse to the interests of the holder of
the Founder's Stock, then such amendment shall require the consent of the holder
of a majority of the Founder's Stock.
Section 3. Registration Rights.
-------------------
3.1 Definitions. As used in this Agreement:
-----------
(a) The terms "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Act"), and the
---
subsequent declaration or ordering of the effectiveness of such registration
statement.
(b) The term "Registrable Securities" means:
----------------------
(i) the Founder's Shares; provided, however, that for the
-------- -------
purposes of Section 3.2 or 3.12, the Founder's Stock shall not be deemed
Registrable Securities and the Founders shall not be deemed a Holder, as defined
below;
(ii) the shares of Common Stock issuable or issued upon
conversion of the Series A, Series B, Series C, and Series D Shares (the shares
of Common Stock referred to in clauses (i), (ii) and (iii) hereof are
collectively referred to hereafter as the "Stock"); and
-----
-2-
<PAGE>
(iii) any other shares of Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, the Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his or her rights under this Agreement are not assigned;
provided, however, that Common Stock or other securities shall only be treated
- -------- -------
as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale.
(c) The number of shares of "Registrable Securities then
---------------------------
outstanding" shall be determined by the number of shares of Common Stock
- -----------
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(d) The term "Holder" means any holder of outstanding Registrable
------
Securities who acquired such Registrable Securities in a transaction or series
of transactions not involving any registered public offering.
(e) The term "Form S-3" means such form under the Act as in
--------
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission ("SEC") which permits
---
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
3.2 Requested Registration.
----------------------
(a) If the Company receives at any time after the earlier of (i)
three (3) years after the date hereof, or (ii) six (6) months after the
effective date of the first registration statement for a public offering of
securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction), a written
request from the Holders of a majority of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of at least thirty percent (30%) of the Registrable
Securities then outstanding (or a lesser percent if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$10,000,000), then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 3.2(b), use its best efforts to effect as soon
as practicable, and in any event within ninety (90) days of the receipt of such
request, the registration under the Act of all Registrable Securities which the
Holders request to be registered in a written request given within twenty (20)
days of the mailing of such notice by the Company in accordance with Section
5.5.
-3-
<PAGE>
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
- --------------------
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 3.2 and the Company
shall include such information in the written notice referred to in subsection
3.2(a). In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
3.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 3.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder and the securities of
all other shareholders and the Company are excluded entirely.
(c) In addition, the Company shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this Section 3.2:
(i) After the Company has effected two (2) registrations
pursuant to this Section 3.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 3.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(iii) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 3.12 below; or
(iv) If the registration request is subsequently withdrawn
at the request of the Holders of a majority of the Registrable Securities to be
registered.
(d) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 3.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not
-4-
<PAGE>
more than ninety (90) days after receipt of the request of the Initiating
Holders; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period.
3.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
Common Stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
either to the sale of securities to participants in a Company stock option,
stock purchase or similar plan or to a SEC Rule 145 transaction, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 5.5, the Company shall,
subject to the provisions of Section 3.8, use its best efforts to cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
3.4 Obligations of the Company. Whenever required under this Section
--------------------------
3 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in
-5-
<PAGE>
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting registration
of Registrable Securities pursuant to this Section 3, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 3, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters and reasonably satisfactory to a majority in interest of the
Holders requesting registration, if any, and to the Holders requesting
registration of Registrable Securities.
3.5 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 3 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
3.6 Expenses of Demand Registration. All expenses (other than
-------------------------------
underwriting discounts and commissions) incurred in connection with
registrations, filings or qualifications pursuant to Section 3.2, including
(without limitation), all registration, filing and qualification fees, printers
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one special counsel for the selling
Holders, shall be borne by the Company; provided, however, that the Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 3.2 if
-6-
<PAGE>
the registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to be registered (in which case all
participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to one
demand registration pursuant to Section 3.2; provided further, however, that if
at the time of such withdrawal, the Holders have learned of a material adverse
change in the condition, business, or prospects of the Company from that known
to the Holders at the time of their request, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
Section 3.2.
3.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 3.3 for each Holder (which right may be assigned as provided
in Section 3.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
special counsel for the selling Holders, relating or apportionable thereto, but
excluding underwriting discounts and commissions relating to Registrable
Securities.
3.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 3.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. Notwithstanding any
other provision of the Agreement, if the underwriter determines in good faith
that marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall (i) reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting,
or (ii) reduce the amount of securities of the selling Holders included in the
registration below twenty percent (20%) of the total amount of securities
included in such registration, unless such offering is an initial offering and
such registration does not include shares of any other selling shareholders, in
which event any or all of the Registrable Securities of the Holders may be
excluded in accordance with the immediately preceding sentence, nor shall (iii)
any securities held by the Founder be included if any securities held by any
selling Holder are excluded. For purposes of the preceding provisions
concerning apportionment, for any selling shareholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and shareholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
shareholder," and any pro rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder," as defined in this sentence.
-7-
<PAGE>
3.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.
3.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 3:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
--------
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
---------
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law; and the Company will pay as
incurred to each such Holder, underwriter or controlling person, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage, liability, or action arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
such Holder or underwriter and stated to be specifically for use therein; and
provided further that the indemnity agreement contained in this subsection
3.10(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case to a Holder, underwriter or controlling
person for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case
-8-
<PAGE>
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this subsection 3.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 3.10(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided that in no event shall any indemnity under this subsection
3.10(b) exceed the net proceeds received by such Holder in the offering in which
such Violation arises.
(c) Promptly after receipt by an indemnified party under this
Section 3.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 3.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 3.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
3.10.
(d) If the indemnification provided for in this Section 3.10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations, provided, that in no event shall any contribution by a selling
Holder under this Subsection 3.10(d) exceed the net proceeds from the offering
received by such selling Holder, except in the case of willful misconduct or
fraud by such Holder. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and
-9-
<PAGE>
opportunity to correct or prevent such statement or omission and no person or
entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section
3.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 3, and otherwise.
3.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
-10-
<PAGE>
3.12 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 3.12, (i) if
Form S-3 is not available for such offering by the Holders; (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000; (iii) if the
Company shall furnish to the Holders a certificate signed by the president of
the Company stating that in the good faith judgment of the Board of Directors of
the Company it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than ninety (90) days after
receipt of the request of the Holder or Holders under this Section 3.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period; (iv) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 3.12; or (v)
in any particular jurisdiction in which the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 3.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and
reasonable legal fees (including the reasonable fees and disbursements of one
special counsel for the selling Holders), shall be borne by the Company.
Registrations effected pursuant to this Section 3.12 shall not be counted as
demands for registration or registrations effected pursuant to Section 3.2 or
3.3.
3.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder to a transferee or assignee of at least 15% of such
securities, provided the Company is, within a
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<PAGE>
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and provided, further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act. The foregoing 15% limitation shall not apply, however,
to transfers by a Holder to shareholders, subsidiaries, partners or retired
partners, members or retired members of the Holder (including spouses and
ancestors, lineal descendants and siblings of such partners or spouses who
acquire Registrable Securities by gift, will or intestate succession) if all
such transferees or assignees agree in writing to appoint a single
representative as their attorney in fact for the purpose of receiving any
notices and exercising their rights under this Section 3.
3.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under this Section 3, unless
under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of his securities will not reduce the amount of the Registrable Securities of
the Holders which is included or (b) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of either of the dates set forth in subsection 3.2(a) or within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 3.2.
3.15 "Market Stand-Off" Agreement. The Holder hereby agrees that
----------------------------
during the one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and such underwriter, sell or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any Common
Stock of the Company held by it at any time during such period except Common
Stock included in such registration; provided, however, that such agreement
shall be applicable only to the first such registration statement of the Company
which covers Common Stock (or other securities) to be sold on its behalf to the
public in an underwritten offering and directors, officers and 1% shareholders
are also subject to similar agreements. To enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Registrable
Securities of the Holder (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
3.16 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 3 after the earlier of (i)
five (5) years following the consummation of the Company's sale of its Common
Stock in an initial, firm commitment underwritten offering of its securities (an
"IPO") or (ii) except for the exercise of rights under Section 3.3 in connection
---
with firm commitment underwritten offerings of the Company's Common Stock, such
time as the Company first becomes subject to the reporting requirements of
Section 12, 13 or 15(d) of the 1934 Act and such Holder is able to dispose of
all of its Registrable Securities in one three-month period pursuant to the
provisions of Rule 144 or another similar exemption without registration.
-12-
<PAGE>
Section 4. Additional Rights.
-----------------
4.1 Delivery of Financial Statements.
--------------------------------
(a) The Company shall deliver to each Holder of at least 100,000
shares of Registrable Securities, as soon as practicable, but in any event
within ninety (90) days after the end of each fiscal year of the Company, an
income statement for such fiscal year, a balance sheet of the Company as of the
end of such year, and statements of income and cash flows for such year, such
year-end financial reports to be in reasonable detail, prepared in accordance
with generally accepted accounting principles ("GAAP"), and audited and
----
certified by independent public accountants of nationally recognized standing
selected by the Company.
(b) The Company shall deliver to each Holder of at least 100,000
shares of Registrable Securities, so long as any shares of Preferred Stock are
outstanding:
(i) within forty-five (45) days of the end of each of the
first three quarters of each fiscal year, an unaudited income statement and
schedule as to the sources and application of funds and balance sheet and
comparison to budget for and as of the end of such quarter, in reasonable
detail;
(ii) within thirty (30) days of the end of each month, an
unaudited income statement and schedule as to the sources and application of
funds and balance sheet and comparison to budget for and as of the end of such
month, in reasonable detail; and
(iii) as soon as practicable, but in any event within thirty
(30) days prior to the end of each fiscal year, a budget and business plan for
the next fiscal year, prepared on a monthly basis, including balance sheets and
sources and applications of funds statements for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company.
4.2 Inspection. The Company shall permit each Holder of at least
----------
100,000 shares of Registrable Securities, at such Holder's expense, to visit and
inspect the Company's properties, to examine its books of account and records
and to discuss the Company's affairs, finances and accounts with its officers,
all at such reasonable times as may be requested by such Holder; provided,
however, that the Company shall not be obligated pursuant to this Section 4.2 to
provide access to any information which it considers to be a trade secret or
similar confidential information.
4.3 Termination of Information and Inspection Covenants and
-------------------------------------------------------
Additional Rights. The covenants and rights set forth in Sections 4.1, 4.2, 4.4
- -----------------
and 4.6 shall terminate as to the Holders and Investors and be of no further
force or effect immediately upon the consummation of an IPO, or when the Company
first becomes subject to the reporting requirements of Section 12, 13 or 15(d)
of the 1934 Act, whichever event shall first occur.
4.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 4.4, the Company hereby grants to each Major Investor
(as hereinafter defined) a right of
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<PAGE>
first offer with respect to future sales by the Company of its Shares (as
hereinafter defined). For purposes of this Section 4.4, a "Major Investor" shall
--------------
mean any person who holds, in the aggregate, at least 375,000 shares of Series
A, Series B, Series C, or Series D Preferred Stock (or the Common Stock issued
upon conversion thereof). For purposes of this Section 4.4, a Major Investor
includes any general partners, members and affiliates of a Major Investor. A
Major Investor who chooses to exercise the right of first offer may designate as
purchasers under such right itself or its partners, members or affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
------
each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to offer
------
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within 10 calendar days after delivery of the Notice, the
Major Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Major Investor bears to the total number of shares
of Common Stock then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities).
(c) The Company may, during the 45-day period following the
expiration of the period provided in subsection 4.4(b) hereof, offer the
remaining unsubscribed portion of the Shares to any person or persons at a price
not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 60 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 4.4 shall not be
applicable (i) to the issuance or sale of shares of Common Stock (or options
therefor) to employees, consultants and directors, pursuant to plans or
agreements approved by the Board of Directors for the primary purpose of
soliciting or retaining their services, inclusive of 1,500,000 shares issued to
Rod Fan and his nominees and other shares outstanding on the date hereof, or
(ii) to or after consummation of a bona fide, firmly underwritten public
offering of shares of Common Stock, registered under the Act pursuant to a
registration statement, or (iii) to the issuance of securities pursuant to the
conversion or exercise of outstanding convertible or exercisable securities, or
(iv) to the issuance of securities in connection with a bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock or
-14-
<PAGE>
otherwise, or (v) to the issuance of securities to financial institutions or
lessors in connection with commercial credit arrangements, equipment financings,
or similar transactions, or (vi) to the issuance or sale of the Series D
Preferred Stock, or (vii) to the issuance of securities that, with unanimous
approval of the Board of Directors of the Company, are not offered to any
existing shareholder of the Company.
4.5 Assignment of Information and Participation Rights. The rights
--------------------------------------------------
set forth in this Section 4 may be assigned by a Holder to a transferee or
assignee of at least 375,000 shares of such securities provided the Company is,
within a reasonable time after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. The foregoing 375,000 share limitation
shall not apply, however, to transfers by a Holder to shareholders, partners or
retired partners, members or retired members of the Holder (including spouses
and ancestors, lineal descendants and siblings of such partners or spouses who
acquire Registrable Securities by gift, will or intestate succession) if all
such transferees or assignees agree in writing to appoint a single
representative as their attorney in fact for the purpose of receiving any
notices and exercising their rights under this Section 4.
Section 5. Miscellaneous.
-------------
5.1 Assignment. Subject to the provisions of Section 3.13 hereof,
----------
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
5.2 Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
5.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California in the United States of America as
applied to agreements among California residents entered into and to be
performed entirely within California.
5.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.5 Notices. Unless otherwise provided, any notice required or
-------
permitted by this Agreement shall be in writing and shall be deemed delivered
upon delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or on
Exhibit A hereto or as subsequently modified by written notice.
- ---------
-15-
<PAGE>
5.6 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
5.7 Effect of Amendment or Waiver. Investors and their respective
-----------------------------
successors and assigns acknowledge that any amendment by the operation of
Section 2 hereof will have the right and power to diminish or eliminate all
rights pursuant to this Agreement.
5.8 Rights of Holders. Each Holder of Registrable Securities shall
-----------------
have the absolute right to exercise or refrain from exercising any right or
rights that such Holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such Holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
5.9 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement, or by law or otherwise afforded to any Holder, shall be
cumulative and not alternative.
5.10 Attorney's Fees. If any action at law or in equity is necessary
---------------
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements
(including all fees, costs and expenses of appeals) in addition to any other
relief to which such party may be entitled.
5.11 Additional Parties. The Investors agree that, upon delivery of
------------------
counterpart signature pages to this Agreement, any additional persons who become
"Purchasers" under the Series D Purchase Agreement at any "Additional Purchaser
Closing" as such term is described in the Purchase Agreement shall become
"Investors" under this Agreement without further action by any other Investor.
[Signature Pages Follow]
-16-
<PAGE>
The parties hereto have executed this Amended and Restated Rights Agreement
as of the day and year first above written.
COMPANY:
@ROAD, INC.
By: /s/ Krish Panu
----------------------------------
Name: Krish Panu
Title: Chief Executive Officer and
President
Address: 47370 Fremont Boulevard
Fremont, CA 94538
FOUNDER: INVESTORS:
/s/ ROD FAN
- -----------------
Rod Fan
[SIGNATURE PAGE TO AMENDED AND RESTATED RIGHTS AGREEMENT]
<PAGE>
EXHIBIT A
---------
Schedule of Investors
Calvin Lee U.S. Venture Partners V, L.P.
12-2 Nei Huan South Rd. 2180 Sand Hill Road, Suite 300
N.E.P.Z. Kaoshiung Menlo Park, CA 94025
Taiwan, ROC
Orient Semiconductor Electronics, Ltd. USVP V International, L.P.
c/o Calvin Lee 2180 Sand Hill Road, Suite 300
12-2 Nei Huan South Rd. Menlo Park, CA 94025
N.E.P.Z. Kaoshiung
Taiwan, ROC
OSE, Inc. 2180 Associates Fund V, L.P.
c/o Edmond Tseng 2180 Sand Hill Road, Suite 300
2700 Augstine Dr., #140 Menlo Park, CA 94025
Santa Clara, CA 95054
Compudata, Inc. USVP V Entrepreneur Partners, L.P.
46500 Fremont Blvd., Suite 710 2180 Sand Hill Road, Suite 300
Fremont, CA 94538 Menlo Park, CA 94025
Roger Koo Institutional Venture Partners VIII,
45183 Cogar Circle L.P.
Fremont, CA 94539 3000 Sand Hill Road
Menlo Park, CA 94025
Chen-Shu Chen IVM Investment Fund VIII, LLC
c/o Rod Fan 3000 Sand Hill Road
323 Lower Vintners Circle Menlo Park, CA 94025
Fremont, CA 94539
Edmond Tseng IVM Investment Fund VIII-A, LLC
1453 Tartarian Way 3000 Sand Hill Road
San Jose, CA 95129 Menlo Park, CA 94025
Chinq-Ping Jeng IVP Founders Fund I, L.P.
1318 Vanna Court 3000 Sand Hill Road
San Jose, CA 95131 Menlo Park, CA 94025
Thomas A. Majeski IVP Broadband Fund, L.P.
15231 Skyview Dr. 3000 Sand Hill Road
San Jose, CA 95132 Menlo Park, CA 94025
<PAGE>
Danny Te-Yi Chang VLG Investments 1998
45530 Cheyenne Place 2800 Sand Hill Road
Fremont, CA 94539 Menlo Park, CA 94025
Ho-Sheng Chien Tae Hea Nahm
855 Oracle Oak Place c/o Venture Law Group
Sunnyvale, CA 94086 2800 Sand Hill Road
Menlo Park CA 94025
Admirals, L.P. Crimson Asia Capital Ltd., L.P.
Galleon Management c/o W.S. Walker & Company
135 E. 57th St., 26th Floor Caledonian House, P. O. Box 265
New York, NY 10022 George Town, Grand Cayman
Cayman Islands
ABS Capital Partners III, L.P. Crimson Investments, Ltd. L.P.
ABS Capital Partners c/o W.S. Walker & Company
1 South Street, 25/th/ Floor Caledonian House, P. O. Box 265
Baltimore, MD 21202 George Town, Grand Cayman
Attn: Steve Bailey Cayman Islands
With a copy to:
ABS Capital Partners Mentor Venture Partners, L.P.
101 California St., 47/th/ Floor c/o Kenneth L. Hausman
San Francisco, CA 94111 2500 Sand Hill Road Suite 110
Attn: Andy Sheehan Menlo Park, CA 94025
Arbor Company Jeffrey A. Morris Property Trust
c/o D. James Guzy c/o The Jeffrey A. Morris Group
Arbor Company 2500 Sand Hill Road Suite 240
P.O Box 128 Menlo Park, CA 94025
Glenbrode, NV 89413
AP Venture Partners I Kris Chellam
c/o Norm Hall 14506 Chester Ave.
435 Tasso St., Ste. 305 Saratoga, CA 95070
Palo Alto, CA 94301
The Marren Trust Ronald Antipa
John Marren, Trustee C/o Alex Brown Partners
325 Roblar Ave. 101 California St., 46/th/ Floor
Hillsborough, CA 94010 San Francisco, CA 94111
Manuel H. Mere The Schifrin 1990 Revocable Trust
6041 W. Walbrook Arieh Schifrin and Ruth Schifrin,
San Jose, CA 95129 Trustors
1922 Laver Ct.
Los Altos, CA, 94024
-2-
<PAGE>
Bayview Investors, Ltd. Neptune Capital Management, L.L.C.
Attn: Jennifer Sherrill Gulbir Madan
555 California St., Suite 2600 237 Park Avenue, Suite 900
San Francisco, CA 94104 New York, NY 10017
Neptune Explorer Partners, L.P. Neptune Explorer Fund, Ltd.
Gulbir Madan Gulbir Madan
237 Park Avenue, Suite 900 237 Park Avenue, Suite 900
New York, NY 10017 New York, NY 10017
Patricia Holliday Jordan Bruce A. Walicek
400 E. 52/nd/ St., #2D 7064 Wooded Lake Dr.
New York, NY 10022 San Jose, CA 95120
Sonny Gulati VLG Investments 1999
555 California St., #2200 2800 Sand Hill Road
San Francisco, CA 94104 Menlo Park, CA 94025
Patrick R. Barry CNA Trust Company, TTEE VLG 401(k)
178 El Dorado Retirement Plan FBO
Palo Alto, CA 94306 Sanjay K. Khare
3080 S. Bristol St., 2/nd/ Floor
Costa Mesa, CA 92626
Andrea E. Chavez James D. Fay
3230 Jacksa St. c/o Venture Law Group
San Francisco, CA 94118 2800 Sand Hill Road
Menlo Park, CA 94025
Shaun Andrikopoulos Avantika Nehru Medan
111 Cole c/o Neptune Capital Management
San Francisco, CA 94117 237 Park Avenue, Suite 900
New York, NY 10017
Dan Niles Krishna Shankar
299 Santa Paula Ave. 950 Corte Del Sol
San Francisco, CA 94127 Fremont, CA 94539
B.J. Shanker Chad W. Keck
967 Galindo Ct. 410 Walsh Road
Milpitas, CA 95035 Atherton, CA 94027
John O. Barr Brian Modoff
380 Shelbourne Terrace 1 La Strada
Ridgewood, NJ 07450 Burlingame, CA 94010
-3-
<PAGE>
Kumar Ramalingam John Rossi
3637 Meadow Lane 270 Eleanor Drive
Sacramento, CA 95864 Woodside, CA 94062
Sirios Capital Partners, L.P. Sirios Capital Partners II, L.P.
75 Park Plaza 75 Park Plaza
Boston MA, 02116 Boston MA, 02116
Sirios Overseas Fund LTD Sirios/QP Partners, L.P.
75 Park Plaza 75 Park Plaza
Boston MA, 02116 Boston MA, 02116
Rob Certilman U.S. Venture Partners VII, L.P.
780 Middle Country Road 2180 Sand Hill Road, Suite 300
St. James, NY 11780 Menlo Park, CA 94025
Intel Corporation Robert Hinckley
2200 Mission College Blvd. 79 Cresent Dr.
M/S SC4-203 Palo Alto, CA 94301
Santa Clara, CA 95052-8119
-4-
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-33282 of @Road, Inc. on Form S-1 of our report dated March 23, 2000
appearing in the Prospectus, which is part of the Registration Statement and of
our report dated March 23, 2000 relating to the financial statement schedule
appearing elsewhere in this Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
San Jose, California
April 26, 2000
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