<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CELLNET DATA SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2951096
(State of incorporation) (I.R.S. Employer Identification No.)
125 SHOREWAY ROAD
SAN CARLOS, CA 94070
(Address, including zip code, of Registrant's principal executive offices)
------------------------
1992 INCENTIVE STOCK PLAN
1994 STOCK PLAN
1996 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the plan)
------------------------
JOHN M. SEIDL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CELLNET DATA SYSTEMS, INC.
125 SHOREWAY ROAD
SAN CARLOS, CA 94070
(415) 508-6000
(Name, address, and telephone number, including area code, of agent for service)
------------------------
COPY TO:
TREVOR J. CHAPLICK, ESQ.
WILSON, SONSINI, GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(415) 493-9300
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock $.001 par value............... 4,190,478 shares $ 4.2386(1) $ 17,761,760(1) $ 5,383
Common Stock $.001 par value............... 1,200,000 shares $ 11.951(2) $ 14,341,200(2) $ 4,346
</TABLE>
(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee on the basis, as to an aggregate of 4,190,478 shares, of
100% of the average of the high and low prices reported in the NASDAQ
National Market System on November 12, 1996.
(2) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee on the basis, as to an aggregate of 1,200,000 shares, of
85% of the average of the high and low prices reported in the NASDAQ
National Market System on November 12, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CELLNET DATA SYSTEMS, INC.
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Registration Statement
the following documents and information heretofore filed by CellNet Data
Systems, Inc. (the "Company") with the Securities and Exchange Commission:
(1) The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A filed on September 26, 1996.
(2) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996 filed on November 14, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934 (the "1934 Act") on or after the
date of this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference in this Registration Statement and to be part hereof
from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
On the filing date of this Registration Statement, certain members of
counsel to the Registrant, Wilson Sonsini Goodrich & Rosati, Professional
Corporation and investment partnerships of which such persons are partners,
beneficially own 23,428 shares of the Company's Common Stock.
ITEM 6. 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 (the "Securities
Act"). Further, in accordance with the Delaware General Corporation Law, the
Company's Restated Certificate of Incorporation provides for the indemnification
of directors to the fullest extent permissable under Delaware law. Article 6 of
the Bylaws of the Company provides for indemnification of officers, directors,
employees and certain agents to the maximum extent permitted by the Delaware
General Corporation Law. Persons covered by this indemnification provision
include any current or former directors, officers, employees and other agents of
the Company, as well as persons who serve at the request of the Company as
directors, officers, employees or agents of another enterprise.
In addition, the Company has entered into contractual agreements with
certain directors and officers of the Company designated by the Board to
indemnify such individuals to the full extent permitted by law. These agreements
also resolve certain procedural and substantive matters that are not covered, or
are covered in less detail, in the Bylaws or by the Delaware General Corporation
Law.
II-1
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the Delaware General Corporation Law, the Company's
Certificate of Incorporation, the foregoing Bylaw provisions or the Company's
indemnification agreements, the Company has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in a successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Company will,
unless in the opinion of its counsel the question has already 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 Securities Act and will be governed by the final adjudication
of such issue.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------
<C> <S>
4.1 1992 Incentive Stock Plan.
4.2 1994 Stock Plan.
4.3 1996 Employee Stock Purchase Plan.
5.1 Opinion of counsel as to legality of securities being registered (see
page II-7).
23.1 Consent of counsel (contained in Exhibit 5.1).
23.2 Independent Auditors' Consent (see page II-8).
24.1 Power of Attorney (see pages II-5 and II-6 of the Registration
Statement).
99.1 Consolidated Financial Statements.
</TABLE>
ITEM 9. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or
II-2
<PAGE>
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement 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.
C. Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-8 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of San Carlos, State of California, on November 15, 1996.
CELLNET DATA SYSTEMS, INC.
By: /s/ JOHN M. SEIDL
-----------------------------------------
John M. Seidl
PRESIDENT AND CHIEF EXECUTIVE OFFICER
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul G. Manca and David L. Perry and each of
them, as his attorney-in-fact, with full power of substitution in each, for him
in any and all capacities to sign any amendments to this Registration Statement
on Form S-8, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact, or his substitutes, may
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ JOHN M. SEIDL Officer (Principal
- ------------------------------ Executive Officer) and November 15, 1996
John M. Seidl Director
Senior Vice President of
/s/ PAUL G. MANCA Finance and Chief
- ------------------------------ Financial Officer November 15, 1996
Paul G. Manca (Principal Financial and
Accounting Officer)
/s/ PAUL M. COOK
- ------------------------------ Director November 15, 1996
Paul M. Cook
/s/ NEAL M. DOUGLAS
- ------------------------------ Director November 15, 1996
Neal M. Douglas
/s/ WILLIAM C. EDWARDS
- ------------------------------ Director November 15, 1996
William C. Edwards
/s/ WILLIAM HART
- ------------------------------ Director November 15, 1996
William Hart
/s/ BRIAN KWAIT
- ------------------------------ Director November 15, 1996
Brian Kwait
/s/ NANCY E. PFUND
- ------------------------------ Director November 15, 1996
Nancy E. Pfund
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ PAUL J. SALEM
- ------------------------------ Director November 15, 1996
Paul J. Salem
/s/ HENRY B. SARGENT
- ------------------------------ Director November 15, 1996
Henry B. Sargent
</TABLE>
II-6
<PAGE>
EXHIBIT 5.1
November 15, 1996
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
RE: REGISTRATION STATEMENT ON FORM S-8
Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on or about November 13, 1996 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 6,000,000 post-split shares of your
Common Stock which are to be issued pursuant to the 1992 Stock Option Plan,
3,000,000 post-split shares of your Common Stock which are to be issued pursuant
to the 1994 Stock Plan and 1,200,000 post-split shares of your Common Stock
(collectively, the "Shares") which are to be issued pursuant to the 1996
Employee Stock Purchase Plan (collectively, the "Plans"). As your legal counsel,
we have examined the proceedings taken and are familiar with the proceedings
proposed to be taken by you in connection with the sale and issuance of the
Shares under the Plans.
It is our opinion that, when issued and sold in the manner referred to in
the Plans and pursuant to the agreements which accompany the Plans, the Shares
will be legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including any Prospectus constituting a part thereof,
and any amendments thereto.
Sincerely yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/Wilson Sonsini Goodrich & Rosati, P.C.
II-7
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of CellNet Data
Systems, Inc. on Form S-8 of our report dated February 9, 1996 (April 11, 1996,
as to the last sentence of the second paragraph of Note 5 and October 31, 1996
as to Note 10), appearing in Exhibit 99.1, which is part of this Registration
Statement.
DELOITTE & TOUCHE LLP
San Jose, California
November 13, 1996
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------
<C> <S> <C>
4.1 1992 Incentive Stock Plan
4.2 1994 Stock Plan
4.3 1996 Employee Stock Purchase Plan
5.1 Opinion of Counsel as to legality of securities being registered (see
page II-7 of the Registration Statement).
23.1 Consent of Counsel (contained in Exhibit 5.1 hereto).
23.2 Independent Auditors' Consent (see page II-8 of the Registration
Statement).
24.1 Power of Attorney (see pages II-5 and II-6 of the Registration
Statement).
99.1 Consolidated Financial Statements
</TABLE>
<PAGE>
EXHIBIT 4.1
CELLNET DATA SYSTEMS, INC.
1992 INCENTIVE STOCK PLAN
(AMENDED JULY, 1994)
This Plan is effective immediately following the filing of the Amended and
Restated Articles of Incorporation of the Company dated September 17, 1992 with
the Office of the Secretary of State authorizing a recapitalization of the
Company (the "Recapitalization").
1. PURPOSES OF THE PLAN. The purposes of this Incentive Stock Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either "incentive stock options," as
defined in Section 422A of the Internal Revenue Code of 1986, or "nonstatutory
stock options," at the discretion of the Board and as reflected in the terms of
the written option agreement. The Board may also grant Stock Purchase Rights
under this Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.
(b) "CODE" shall mean the Internal Revenue Code of 1986.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean CellNet Data Systems, Inc., a Delaware
corporation.
(e) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.
(f) "CONSULTANT" shall mean any person who is engaged by the Company
or any subsidiary to render consulting services and is compensated for such
consulting services, and any director of the Company whether compensated for
such services or not; provided that if and in the event the Company registers
any class of any equity security pursuant to Section 12 of the Exchange Act, the
term Consultant shall thereafter not include directors who are not compensated
for their services or are paid only a director's fee by the Company.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Board; provided that such leave is for a period
<PAGE>
of not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(h) "EMPLOYEE" shall mean any person, including officers and
directors, 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 to
constitute "employment" by the Company.
(i) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422A of the Code.
(k) "NONSTATUTORY STOCK OPTION" shall mean an option not intended to
qualify as an Incentive Stock Option.
(l) "OPTION" shall mean a stock option granted pursuant to the Plan.
(m) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
(n) "OPTIONEE" shall mean an Employee or Consultant who receives an
Option.
(o) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.
(p) "PLAN" shall mean this 1992 Incentive Stock Plan.
(q) "PURCHASER" shall mean an Employee or Consultant who exercises a
Stock Purchase Right.
(r) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(s) "STOCK PURCHASE RIGHT" shall mean a right, other than an Option,
to purchase Common Stock pursuant to the Plan.
(t) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 425(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares which may be optioned and/or
sold under the Plan is 3,000,000 post-split shares of Common Stock, after giving
effect to the Recapitalization. The Shares may be authorized, but unissued, or
reacquired Common Stock.
-2-
<PAGE>
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. Repurchased shares shall not become available for
future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board of
Directors of the Company.
(i) Subject to subparagraph (ii), the Board of Directors may
appoint a Committee consisting of not less than two members of the Board of
Directors or one or more officers of the Company to administer the Plan on
behalf of the Board of Directors, subject to such terms and conditions as the
Board of Directors may prescribe. Once appointed, the Committee shall continue
to serve until otherwise directed by the Board of Directors. From time to time
the Board of Directors may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies however caused, or remove
all members of the Committee and thereafter directly administer the Plan.
Members of the Board who either are eligible for Options or Stock Purchase
Rights or have been granted Options or Stock Purchase Rights may vote on any
matters affecting the administration of the Plan or the grant of any Options or
Stock Purchase Rights pursuant to the Plan, except that no such member shall act
upon the granting of an Option or Stock Purchase Right to himself, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board during which action is taken with respect to the granting of Options
or Stock Purchase Rights to him.
(ii) Notwithstanding the foregoing subparagraph (i), if and in
the event the Company registers any class of any equity security pursuant to
Section 12 of the Exchange Act, from the effective date of such registration
until six months after the termination of such registration, any grants of
Options or Stock Purchase Rights to directors shall only be made by the Board of
Directors; provided, however, that if a majority of the Board of Directors is
eligible to participate in this Plan or any other stock option or other stock
plan of the Company or any of its affiliates, or has been eligible at any time
within the preceding year, any grants of Options or Stock Purchase Rights to
directors must be made by, or only in accordance with the recommendation of, a
Committee consisting of three or more persons, who may but need not be directors
or employees of the Company, appointed by the Board of Directors and having full
authority to act in the matter, none of whom is eligible to participate in this
Plan or any other stock option or other stock plan of the Company or any of its
affiliates, or has been eligible at any time within the preceding year. Any
Committee administering the Plan with respect to grants to officers who are not
also directors shall conform to the requirements of the preceding sentence.
Once appointed, the Committee shall continue to serve until otherwise directed
by the Board of Directors. Subject to the foregoing, from time to time the
Board of Directors may increase the size of the Committee and appoint additional
members thereof, remove members (with or
-3-
<PAGE>
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(b) POWERS OF THE BOARD. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, in accordance with Section 422A of the Internal Revenue Code of 1986,
Nonstatutory Stock Options, or Stock Purchase Rights; (ii) 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; (iii) to determine the exercise price
per share of Options or Stock Purchase Rights to be granted, which exercise
price shall be determined in accordance with Section 8(a) of the Plan; (iv) to
determine the Employees or Consultants to whom, and the time or times at which,
Options or Stock Purchase Rights shall be granted and the number of shares to be
represented by each Option or Stock Purchase Right; (v) to interpret the Plan;
(vi) to prescribe, amend and rescind rules and regulations relating to the Plan;
(vii) to determine the terms and provisions of each Option or Stock Purchase
Right granted (which need not be identical) and, with the consent of the holder
thereof, modify or amend each Option or Stock Purchase Right; (viii) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option or Stock Purchase Right previously granted
by the Board; and (ix) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees,
Purchasers and any other holders of any Options or Stock Purchase Rights granted
under the Plan.
5. ELIGIBILITY.
(a) Options and Stock Purchase Rights may be granted only to
Employees or Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Stock
Purchase Right may, if he is otherwise eligible, be granted an additional Option
or Options or Stock Purchase Right or Rights.
(b) No Incentive Stock Option may be granted to an Employee which,
when aggregated with all other Incentive Stock Options granted to such Employee
by the Company or any Parent or Subsidiary, would result in Shares having an
aggregate fair market value (determined for each Share as of the date of grant
of the Option covering such Share) in excess of $100,000 becoming first
available for purchase upon exercise of one or more Incentive Stock Options
during any calendar year.
(c) Section 5(b) of the Plan shall apply only to an Incentive Stock
Option evidenced by an "Incentive Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall qualify as an
Incentive Stock Option. Section 5(b) of the Plan shall not apply to any Option
evidenced by a "Nonstatutory Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall be a
nonstatutory stock option.
-4-
<PAGE>
(d) The Plan shall not confer upon any Optionee, Purchaser or holder
of a Stock Purchase Right any right with respect to continuation of employment
or consulting relationship with the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment or consulting
relationship at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option or Stock Purchase Right shall be such price as is
determined by the Board, but shall be subject to the following:
(i) In the case of any Incentive Stock Option granted to any
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 any Nonstatutory Stock Option, other than an
Incentive Stock Option, or any Stock Purchase Right, the per Share exercise
price shall be no less than 85% of the fair market value per Share on the date
of grant.
(iii) In the case of any Option granted to any person who, at the
time of the grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
fair market value per Share on the date of grant.
(iv) In the case of any Option or Stock Purchase Right granted on
or after the effective date of registration of any class of equity security of
the Company pursuant to Section 12 of the Exchange Act and prior to six months
after the termination of such registration, the per Share exercise price shall
be no less than 100% of the fair market value per Share on the date of grant.
(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices of the Common Stock for the date of grant of the Option or Stock
Purchase Right, as reported in The Wall Street Journal (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) System) or, in the event the Common Stock is listed
on a stock exchange, the fair market value per Share shall be the closing price
on such exchange on the date of grant of the Option or Stock Purchase Right, as
reported in The Wall Street Journal.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option or Stock Purchase Right, including the method of payment,
shall be determined by the Board and may consist entirely of cash, check,
promissory note, other shares of Common Stock which (i) either have been owned
by the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company and (ii) have a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option or Stock Purchase Right shall be exercised, or any combination of such
methods of payment, or such other consideration and method of payment for the
issuance of Shares to the extent permitted under Sections 408 and 409 of the
California General Corporation Law.
-5-
<PAGE>
8. OPTIONS.
(a) TERM OF OPTION. The term of each Incentive Stock Option shall be
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Incentive Stock Option Agreement. The term of each Nonstatutory
Stock Option shall be ten (10) years and one (1) day from the date of grant
thereof or such shorter term as may be provided in the Nonstatutory Stock Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, (a) if the Option is an Incentive Stock Option, the term of the
Option shall be five (5) years from the date of grant thereof or shorter time as
may be provided in the Stock Option Agreement, or (b) if the Option is a
Nonstatutory Stock Option, the term of the Option shall be five (5) years and
one (1) day from the date of grant thereof or such shorter time as may be
provided in the Nonstatutory Stock Option Agreement.
(b) EXERCISE OF OPTION.
(i) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may be exercisable over a period of time or may be immediately
exercisable as determined by the Board and may grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
Optionee's employment with the Company for any reason (including death or
disability). The purchase price for shares repurchased pursuant to the
repurchase option shall be the original price paid by the Optionee and may be
paid by cancellation of any indebtedness of the Optionee to the Company. The
repurchase option shall lapse at such a rate as the Board may determine.
Notwithstanding any other provisions of this Plan, no Option may be
exercised after the expiration of the term of the Option as set forth in the
Stock Option Agreement.
An Option may not be exercised for a fraction of a Share.
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, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 7(c) 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. No adjustment will be made for a
dividend or other right
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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 shall 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.
(ii) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. If an
Employee ceases to serve as an Employee or Consultant (as the case may be), he
may, but only within thirty (30) days (or such other period of time, not
exceeding three (3) months in the case of an Incentive Stock Option or six (6)
months in the case of a Nonstatutory Stock Option, as is determined by the
Board, with such determination in the case of an Incentive Stock Option being
made at the time of grant of the Option) after the date he ceases to be an
Employee or Consultant (as the case may be) of the Company, exercise his Option
to the extent that he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(iii) DISABILITY OF OPTIONEE. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee as a
result of his or her disability, Optionee may, but only within six (6) months
from the date of such termination (and in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination; provided, however, that if such disability is not a "disability" as
such term is defined in Section 22(e)(3) of the Code, in the case of an
Incentive Stock Option such Incentive Stock Option shall automatically convert
to a Nonstatutory Stock Option on the day three months and one day following
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(iv) DEATH OF OPTIONEE. In the event of the death of an
Optionee:
(A) during the term of the Option who is at the time of his
death an Employee or Consultant of the Company and who shall have been
in Continuous Status as an Employee or Consultant since the date of
grant of the Option, the Option may be exercised, at any time within
twelve (12) months following the date of death (but in no event later
than the date of expiration of the term of this Option as set forth in
Section 8(a) above), 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 would have
accrued had the Optionee continued living and remained in Continuous
Status as an Employee or Consultant six (6) months after the date of
death, subject to the limitation set forth in Section 5(b); or
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(B) within thirty (30) days (or such other period of time
not exceeding three (3) months as is determined by the Board at the
time of grant of the Option) after the termination of Continuous
Status as an Employee, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than
the date of expiration of the term of this Option as set forth in
Section 8(a) above), 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 termination.
9. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. After the Board of Directors determines that
it will offer an Employee or Consultant the right to purchase Shares under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions relating to the offer, including the number of Shares that such
person shall be entitled to purchase, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Board of Directors or its Committee made the determination to
grant the Stock Purchase Right. The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the Board of
Directors.
(b) ISSUANCE OF SHARES. Forthwith after payment therefor, the Shares
purchased shall be duly issued; provided, however, that the Board may require
that the Purchaser make adequate provision for any Federal and State withholding
obligations of the Company as a condition to such purchase.
(c) REPURCHASE OPTION. Unless the Board of Directors or its
Committee determines otherwise, the Employee Stock Restriction Agreement shall
grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the Purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the Employee Stock Restriction Agreement shall be the
original price paid by the Purchaser and may be paid by cancellation of any
indebtedness of the Purchaser to the Company. The repurchase option shall lapse
at such a rate as the Board of Directors may determine.
(d) OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Board of Directors.
(e) RIGHTS AS A SHAREHOLDER. 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 the shares as to which
a Stock Purchase Right has been exercised, no right to vote or to receive
dividends or any other rights as a stockholder shall exist with respect to
shares of Common Stock subject to a Stock Purchase Right, notwithstanding the
exercise of a Stock
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Purchase Right. 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.
(f) SHARES AVAILABLE UNDER THE PLAN. Exercise of a Stock Purchase
Right in any manner shall result in a decrease in the number of Shares that
thereafter shall be available, both for purposes of the Plan and for sale under
the Stock Purchase Right, by the number of Shares as to which the Stock Purchase
Right is exercised. Shares repurchased by the Company pursuant to Section 9(c)
hereof shall not be available for reissuance under the Plan.
10. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee or holder of a Stock Purchase Right, only by such Optionee or holder of
a Stock Purchase Right.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and Stock Purchase Right, and
the number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Options or Stock Purchase Rights have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option or Stock Purchase Right, as well as the price per share of Common
Stock covered by each such outstanding Option or Stock Purchase Right, 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, 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 or Stock Purchase Right.
In the event of the proposed dissolution or liquidation of the Company, any
outstanding Options or Stock Purchase Rights shall terminate immediately prior
to the consummation of such proposed action, unless otherwise provided by the
Board. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, Options and Stock Purchase Rights shall be assumed or equivalent
options or rights shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation. With respect to any Option or Stock
Purchase Right issued and granted prior to January 4, 1992, in the event that
such successor corporation refuses to assume such Option or Stock Purchase Right
or to substitute an equivalent option or stock purchase right, the Board shall,
in lieu of such assumption or substitution, provide for the Optionee to have the
right to exercise such Option or Stock Purchase
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Right as to all of the Common Stock subject to such Option or Stock Purchase
Right, including Shares as to which such Option or Stock Purchase Right would
not otherwise be exercisable. If the Board makes an Option or Stock Purchase
Right fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the Optionee or holder of a
Stock Purchase Right that the Option or Stock Purchase Right shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Stock Purchase Right will terminate upon the expiration of such
period.
12. TIME OF GRANTING OPTIONS OR STOCK PURCHASE RIGHTS. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Board makes the determination granting such Option or Stock Purchase
Right. Notice of the determination shall be given to each Employee to whom an
Option or Stock Purchase Right 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, the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 17 of the
Plan:
(i) any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 11 of the
Plan;
(ii) any change in the designation of the class of Employees or
Consultants eligible to be granted Options or Stock Purchase Rights;
or
(iii) any material increase in the benefits accruing to
participants under the Plan.
(b) SHAREHOLDER APPROVAL. If any amendment requiring shareholder
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity security by the Company under Section 12 of
the Exchange Act, such shareholder approval shall be solicited as described in
Section 17(a) of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Board and the Optionee, Purchaser or
holder of a Stock Purchase Right, which agreement must be in writing and signed
by the Company and the Optionee, Purchaser or holder of the Stock Purchase
Right.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase
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Right and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, 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 or Stock Purchase Right, the
Company may require the person exercising such Option or Stock Purchase Right 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 relevant provisions of
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.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. OPTION AND STOCK PURCHASE AGREEMENTS. Options shall be evidenced by
written Stock Option Agreements in such form as the Board shall approve. Upon
the exercise of Stock Purchase Rights, a Purchaser shall execute an Employee
Stock Restriction Agreement in such form as the Board of Directors shall
approve.
17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve months before or after
the date the Plan is adopted. If such shareholder approval is obtained at a
duly held shareholders' meeting, it may be obtained by the affirmative vote of
the holders of a majority of the issued and outstanding shares of the Company.
If and in the event that the Company registers any class of any equity security
pursuant to Section 12 of the Exchange Act, the approval of such shareholders of
the Company shall be:
(a) (1) solicited substantially in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder, or
(2) solicited after the Company has furnished in writing to the holders entitled
to vote substantially the same information concerning the Plan as that which
would be required by the rules and regulations in effect under Section 14(a) of
the Exchange Act at the time such information is furnished; and
(b) obtained at or prior to the first annual meeting of shareholders
held subsequent to the first registration of any class of equity securities of
the Company under Section 12 of the Exchange Act.
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If such shareholder approval is obtained by written consent, it must be
obtained by the unanimous written consent of all shareholders of the Company.
18. INFORMATION TO OPTIONEES AND HOLDERS OF STOCK PURCHASE RIGHTS. The
Company shall provide to each Optionee and each holder of a Stock Purchase
Right, during the period for which such Optionee or holder of a Stock Purchase
Right has one or more Options or Stock Purchase Rights outstanding, copies of
all annual reports. The Company shall not be required to provide such
information if the issuance of Options and Stock Purchase Rights under the Plan
is limited to key employees whose duties in connection with the Company assure
their access to equivalent information.
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EXHIBIT 4.2
CELLNET DATA SYSTEMS, INC.
1994 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries 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. Stock Purchase Rights may
also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company.
(f) "COMPANY" means CellNet Data Systems, Inc., a Delaware
corporation, or any successor corporation.
(g) "CONSULTANT" means any person who is engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any Director of the Company whether
compensated for such services or not. If the Company registers any class of any
equity security pursuant to the Exchange Act, the term Consultant shall
thereafter not include Directors who are not compensated for their services or
are paid only a Director's fee by the Company.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that the
employment or consulting relationship with the Company, any Parent or Subsidiary
is not interrupted or terminated. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options,
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no such leave may exceed 90 days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract, including Company policies. If
reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 91st day of such leave any Incentive Stock Option
held by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option.
(i) "DIRECTOR" means a member of the Board of Directors of the
Company.
(j) "EMPLOYEE" means any person, including Officers and Directors,
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 to constitute
"employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination and reported in THE WALL STREET JOURNAL or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "OPTION" means a stock option granted pursuant to the Plan.
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(q) "OPTIONED STOCK" means the Common Stock subject to an Option or a
Stock Purchase Right.
(r) "OPTIONEE" means an Employee or Consultant who receives an Option
or Stock Purchase Right.
(s) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(t) "PLAN" means this 1994 Stock Plan.
(u) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant
to a grant of a Stock Purchase Right under Section 11 below.
(v) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(w) "STOCK PURCHASE RIGHT" means a right to purchase Common Stock
pursuant to Section 11 below.
(x) "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 12 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 1,500,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, and the original purchaser of such Shares did
not receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
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4. ADMINISTRATION OF THE PLAN.
(a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a Committee appointed by the Board.
(b) PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE COMPANY
BECOMES SUBJECT TO THE EXCHANGE ACT.
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers and Employees who are neither Directors nor Officers.
(ii) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS.
With respect to grants of Options and Stock Purchase Rights to Employees who are
also Officers or Directors of the Company, the Plan shall be administered by
(A) the Board if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a discretionary plan, or
(B) a Committee designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as to permit the Plan to comply with
Rule 16b-3 with respect to a plan intended to qualify thereunder as a
discretionary plan. Once appointed, 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 the 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 the Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(iii) ADMINISTRATION WITH RESPECT TO OTHER EMPLOYEES AND
CONSULTANTS. With respect to grants of Options and Stock Purchase Rights to
Employees or Consultants who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock option
plans, if any, of applicable corporate and securities laws, of the Code, and of
any applicable stock exchange (the "Applicable Laws"). Once appointed, 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 the
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 the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(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, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority in its discretion:
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(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of Shares to be covered by each
such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock Purchase
Rights.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to an Optionee's Incentive Stock Options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
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(b), Incentive Stock
Options shall be taken into account in the
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order in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuation of his or her
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 1,000,000
Shares.
(ii) The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
(iii) If an Option or Stock Purchase Right is cancelled in
the same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 12), the cancelled Option
shall be counted against the limit set forth in Section 5(d)(i). For this
purpose, if the exercise price of an Option is reduced, such reduction will be
treated as a cancellation of the Option and the grant of a new Option.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof. In the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
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(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
(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 to a person who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any other person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) 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). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
a 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 (6) any combination of the foregoing methods of payment. 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.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan, but in no case at a rate of less than 20% per year over five (5)
years from the date the Option is granted.
An Option may not be exercised for a fraction of a Share.
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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, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) hereof. 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, receive dividends or any other rights
as a shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued)
such stock certificate promptly upon exercise of the Option. No adjustment
shall 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 12
hereof.
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 EMPLOYMENT OR CONSULTING RELATIONSHIP. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the ninety-first (91st)
day following such change of status) or from Consultant to Employee), such
Optionee may, but only within such period of time as is determined by the
Administrator, of at least thirty (30) days, with such determination in the case
of an Incentive Stock Option not exceeding three (3) months after the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise his or her Option to
the extent that the Optionee was entitled to exercise it at the date of such
termination. To the extent that the Optionee was not entitled to exercise the
Option at the date of such termination, or if the Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(c) DISABILITY OF OPTIONEE. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but only within twelve (12) months from the
date of such termination (and in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise the Option
to the extent otherwise entitled to exercise it at the date of such termination.
If such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall automatically cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option on
the day three months and one day following such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of termination,
or if the Optionee does not exercise such Option to the extent so entitled
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
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(d) DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant) 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 that the Optionee was entitled to exercise the Option on the date of
death. If, at the time of death, the Optionee was not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall immediately revert to the Plan. If, after the Optionee's death,
the Optionee's estate or a person who acquires the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) RULE 16b-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the offeree receives the written documents describing the offer. The
offer shall be accepted by execution of a Restricted Stock purchase agreement in
the form determined by the Administrator. Shares purchased pursuant to the
grant of a Stock Purchase Right shall be referred to herein as "Restricted
Stock."
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall
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lapse at such rate as the Administrator may determine, but in no case at a rate
of less than 20% per year over five years from the date of purchase.
(c) OTHER PROVISIONS. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, 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, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The 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 or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the Option or Stock Purchase Right
shall terminate immediately prior to the consummation of such proposed action.
(c) MERGER. In the event of a merger of the Company with or into
another corporation, each outstanding Option or Stock Purchase Right 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. If, in
such event, an Option or Stock Purchase Right is not assumed or substituted, the
Option or Stock Purchase Right shall terminate as of the date of the closing of
the merger. For the purposes of this paragraph, the Option or Stock Purchase
Right shall be considered
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assumed if, following the merger, the Option or Stock Purchase Right confers
the right to purchase or receive, for each Share of Optioned Stock subject to
the Option or Stock Purchase Right immediately prior to the merger, the
consideration (whether stock, cash, or other securities or property) received in
the merger by holders of Common Stock for each Share held on the effective date
of the transaction (and if the holders are offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares). If such consideration received in the merger is 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 the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, 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
merger.
13. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option or Stock Purchase Right is so granted within a reasonable time
after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, 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.
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As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right 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 relevant
provisions of law.
16. RESERVATION OF SHARES. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Administrator shall approve from time to
time.
18. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
19. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide to
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options or Stock Purchase Rights outstanding, and, in the case
of an individual who acquires Shares pursuant to the Plan, during the period
such individual owns such Shares, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.
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EXHIBIT 4.3
CELLNET DATA SYSTEMS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock Purchase
Plan of CellNet Data Systems, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean CellNet Data Systems, Inc. and any
Designated Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight time gross earnings,
exclusive of payments for overtime, commissions, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment is at least twenty (20)
hours per week. For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "ENROLLMENT DATE" shall mean the first day of each Offering
Period.
(i) "EXERCISE DATE" shall mean the last day of each Offering Period.
<PAGE>
(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems
reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "OFFERING PERIOD" shall mean a period of approximately six (6)
months, commencing on the first Trading Day on or after May 1 and terminating on
the last Trading Day in the period ending the following October 31, or
commencing on the first Trading Day on or after November 1 and terminating on
the last Trading Day in the period ending the following April 30, during which
an option granted pursuant to the Plan may be exercised. The first Offering
Period shall begin on or after May 1, 1997. The duration of Offering Periods
may be changed pursuant to Section 4 of this Plan.
(l) "PLAN" shall mean this Employee Stock Purchase Plan.
(m) "PURCHASE PRICE" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(o) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which 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.
(p) "TRADING DAY" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
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3. ELIGIBILITY.
(a) Any Employee (as defined in Section 2(g)), who shall be employed
by the Company on a given Enrollment Date shall be eligible to participate in
the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
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 such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after May 1 and November 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 19 hereof. The first Offering Period shall begin on or after May 1,
1997. The Board shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) 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
thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
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(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof. A participant's subscription agreement
shall remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at such time during any
Offering Period which is scheduled to end during the current calendar year (the
"Current Offering Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan in a prior Offering Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Offering Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Offering Period which is scheduled to
end in the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than five
hundred (500) shares of the Company's Common Stock, and provided further that
such purchase shall be subject to the limitations set forth in Sections 3(b) and
12 hereof. Exercise of the option shall occur as provided in Section 8 hereof,
unless the participant has withdrawn pursuant to Section 10 hereof. The Option
shall expire on the last day of the Offering Period.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
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account. 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
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof) for any reason, he or she shall be deemed to have elected
to withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option shall be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 14 hereof, and
such participant's option shall be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.
(c) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. STOCK.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 600,000 shares, subject
to adjustment upon changes
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in capitalization of the Company as provided in Section 18 hereof. If, on a
given Exercise Date, the number of shares with respect to which options are to
be exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. ADMINISTRATION.
(a) ADMINISTRATIVE BODY. The Plan shall be administered by the Board
or a committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
(b) RULE 16B-3 LIMITATIONS. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. DESIGNATION OF BENEFICIARY.
(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 an Exercise Date
on which the option is exercised but prior to delivery to such participant 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 exercise of the
option. 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
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
-6-
<PAGE>
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.
15. TRANSFERABILITY. Neither payroll deductions credited to a
participant's 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 of descent and
distribution or as provided in Section 14 hereof) 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 from an Offering Period in accordance with Section 10 hereof.
16. USE OF FUNDS. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. REPORTS. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the Reserves, as well as the price per share and
the number of shares 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 of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of 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) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) MERGER OR ASSET SALE. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Offering Period then in progress shall be
shortened by setting a new Exercise Date (the "New
-7-
<PAGE>
Exercise Date"). The New Exercise Date shall be before the date of the
Company's proposed sale or merger. The Board shall notify each participant in
writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.
19. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 18 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as 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 entitled to change the Offering 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.
20. NOTICES. All notices or other communications by a participant to the
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.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
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 Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, 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.
-8-
<PAGE>
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.
22. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
-9-
<PAGE>
EXHIBIT A
---------
CELLNET DATA SYSTEMS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in the
CellNet Data Systems, Inc. 1996 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 10%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):___________
.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be treated
for federal income tax purposes as having received ordinary income at the
time of such disposition in an amount equal to the excess of the fair
market value of the shares at the time such shares were purchased by me
over the price which I paid for the shares. I HEREBY AGREE TO NOTIFY THE
COMPANY IN WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY DISPOSITION OF
SHARES 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
<PAGE>
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 sale or early disposition of
Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year holding period, I understand that I will be
treated for federal income tax purposes as having received income only at
the time of such disposition, and that such income will be taxed as
ordinary 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, or (2) 15%
of the fair market value of the shares on the first day of the Offering
Period. The remainder of the gain, if any, recognized on such disposition
will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) _______________________________________________________
(First) (Middle) (Last)
_________________________ __________________________________________________
Relationship
__________________________________________________
(Address)
Employee's Social
Security Number: __________________________________________________
Employee's Address: __________________________________________________
__________________________________________________
__________________________________________________
-2-
<PAGE>
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: __________________ _______________________________________________
Signature of Employee
_______________________________________________
Spouse's Signature (If beneficiary other than spouse)
-3-
<PAGE>
EXHIBIT B
---------
CELLNET DATA SYSTEMS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the CellNet Data
Systems, Inc. 1996 Employee Stock Purchase Plan which began on ___________
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
____________________________________
____________________________________
____________________________________
Signature:
____________________________________
Date: _______________________________
<PAGE>
EXHIBIT 99.1
CELLNET DATA SYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (unaudited)................. F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and the six
months ended June 30, 1995 and 1996 (unaudited).......................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1993, 1994 and
1995 and the six months ended June 30, 1996 (unaudited).................................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and the six
months ended June 30, 1995 and 1996 (unaudited).......................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
CellNet Data Systems, Inc.:
We have audited the accompanying consolidated balance sheets of CellNet Data
Systems, Inc. and subsidiaries (the "Company") as of December 31, 1994 and 1995,
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1995. 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 CellNet Data Systems, Inc. and
subsidiaries at December 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
San Jose, California
February 9, 1996
(April 11, 1996 as to the last sentence of the
second paragraph of Note 5 and
October 31, 1996 as to Note 10)
F-2
<PAGE>
CELLNET DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------ JUNE 30, JUNE 30,
1994 1995 1996 1996
-------- -------- ----------- ------------
(UNAUDITED) (UNAUDITED)
(NOTE 1)
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents............. $ 12,503 $ 48,018 $ 70,730 $ 71,921
Short-term investments................ 12,005 95,779 32,237 32,237
Accounts receivable................... 703 2,118 1,904 1,904
Prepaid expenses and other............ 248 940 886 886
-------- -------- ----------- ------------
Total current assets................ 25,459 146,855 105,757 106,948
Network Components and Inventory........ 2,146 11,664 12,569 12,569
Networks in Progress.................... 1,333 12,602 29,850 29,850
Property--net........................... 2,871 7,539 9,129 9,129
Debt Issuance Costs--net................ -- 5,646 5,348 5,348
-------- -------- ----------- ------------
Total assets.......................... $ 31,809 $184,306 $ 162,653 $ 163,844
-------- -------- ----------- ------------
-------- -------- ----------- ------------
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable...................... $ 2,050 $ 7,241 $ 6,329 $ 6,329
Accrued compensation and related
benefits............................ 402 1,353 735 735
Accrued liabilities................... 889 981 990 990
Current portion of capital leases..... 384 280 296 296
-------- -------- ----------- ------------
Total current liabilities: 3,725 9,855 8,350 8,350
-------- -------- ----------- ------------
Senior Discount Notes--13%.............. -- 182,528 194,720 194,720
-------- -------- ----------- ------------
Capital Lease Obligations--net.......... 162 540 497 497
-------- -------- ----------- ------------
Commitments and Contingencies (Notes 1
and 9)
Series CC Redeemable Convertible
Preferred Stock--$.001 par value;
3,215,768 shares designated and
outstanding and none on a pro forma
basis; aggregate liquidation value of
$31,000,000........................... 29,486 29,486 29,486 --
-------- -------- ----------- ------------
Stockholders' Equity (deficit):
Convertible preferred stock--$.001 par
value; 15,000,000 shares authorized;
shares outstanding, 1994: 9,008,518;
1995: 9,136,675; 1996: 9,137,078; no
shares outstanding on a pro forma
basis; aggregate liquidation value
of $27,812,000...................... 25,990 27,195 27,196 --
Common stock--$.001 par value;
50,000,000 shares authorized; shares
outstanding: 1994, 2,716,166; 1995,
5,034,262; 1996, 5,209,472 and
33,924,958 on a pro forma basis..... 26,790 27,608 27,636 88,484
Notes receivable from sale of common
stock............................... (284) (866) (866) (866)
Warrants.............................. 10 2,984 2,984 9
Accumulated deficit................... (54,065) (95,021) (127,334) (127,334)
Net unrealized loss on short-term
investments......................... (5) (3) (16) (16)
-------- -------- ----------- ------------
Total stockholders' deficit......... (1,564) (38,103) (70,400) (39,723)
-------- -------- ----------- ------------
Total liabilities and stockholders'
deficit............................... $ 31,809 $184,306 $ 162,653 $ 163,844
-------- -------- ----------- ------------
-------- -------- ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CELLNET DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ------------------
1993 1994 1995 1995 1996
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales......................... $ 1,757 $ 1,447 $ 1,663 $ 938 $ 127
Network service revenues.............. -- -- 35 -- 244
Other revenues........................ -- 204 428 353 49
------- -------- -------- -------- --------
Total revenues...................... 1,757 1,651 2,126 1,291 420
------- -------- -------- -------- --------
Costs and expenses:
Cost of product sales................. 1,840 1,191 1,294 598 109
Cost of network operations............ -- -- 3,835 1,333 3,374
Research and development.............. 5,262 9,693 22,380 6,735 13,009
Marketing and sales................... 1,447 3,257 4,201 1,946 2,924
General and administrative............ 1,450 2,583 6,805 2,874 5,412
------- -------- -------- -------- --------
Total costs and expenses............ 9,999 16,724 38,515 13,486 24,828
------- -------- -------- -------- --------
Loss from operations.................... (8,242) (15,073) (36,389) (12,195) (24,408)
Other income (expense):
Interest income....................... 66 555 4,590 860 3,458
Interest expense...................... (198) (101) (9,320) (754) (11,264)
Other--net............................ (16) (13) 166 (31) (97)
------- -------- -------- -------- --------
Total other income (expense)............ (148) 441 (4,564) 75 (7,903)
------- -------- -------- -------- --------
Loss before income taxes................ (8,390) (14,632) (40,953) (12,120) (32,311)
Provision for income taxes.............. 1 2 3 1 2
------- -------- -------- -------- --------
Net loss................................ $(8,391) $(14,634) $(40,956) $(12,121) $(32,313)
------- -------- -------- -------- --------
------- -------- -------- -------- --------
Pro forma net loss per share............ $ (1.22) $ (0.37) $ (0.94)
-------- -------- --------
-------- -------- --------
Shares used in computing pro forma net
loss per share........................ 33,497 32,817 34,483
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CELLNET DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NET
CONVERTIBLE NOTES UNREALIZED
PREFERRED STOCK COMMON STOCK RECEIVABLE LOSS ON
------------------ ------------------ FROM SALE ACCUMULATED SHORT-TERM
SHARES AMOUNT SHARES AMOUNT OF STOCK WARRANTS DEFICIT INVESTMENTS TOTAL
--------- ------- --------- ------- ---------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 1,
1993................... 4,244,858 $4,181 895,492 $26,616 $-- $ 9 $ (31,040) -$- $ (234)
Sales of Series AA
preferred stock (less
issuance costs of
$8).................... 755,142 747 -- -- -- -- -- -- 747
Exercise of stock
options................ -- -- 886,618 46 -- -- -- -- 46
Conversion of
subordinated debt
($3,242) and accrued
interest ($32) into
Series BB preferred
stock and warrants..... 689,190 3,274 -- -- -- -- -- -- 3,274
Sale of Series BB
preferred stock and
warrants (less issuance
costs of $504)......... 2,748,020 12,549 -- -- -- -- -- -- 12,549
Sales of Series BB
preferred stock for
notes receivable....... 52,635 250 -- -- (250) -- -- -- --
Sale of common stock
(less issuance costs of
$1).................... -- -- 400,400 19 -- -- -- -- 19
Sale of stock warrants... -- -- -- -- -- 1 -- -- 1
Net loss................. -- -- -- -- -- -- (8,391) -- (8,391)
--------- ------- --------- ------- ----- -------- ----------- --- --------
BALANCES, December 31,
1993................... 8,489,845 21,001 2,182,510 26,681 (250) 10 (39,431) -- 8,011
Exercise of stock options
and restricted stock
purchase............... -- -- 533,656 109 (100) -- -- -- 9
Sale of Series DD
preferred stock (net of
issuance costs of
$10)................... 518,673 4,989 -- -- -- -- -- -- 4,989
Collection of notes
receivable............. -- -- -- -- 66 -- -- -- 66
Net unrealized loss on
short-term
investments............ -- -- -- -- -- -- -- (5) (5)
Net loss................. -- -- -- -- -- -- (14,634) -- (14,634)
--------- ------- --------- ------- ----- -------- ----------- --- --------
BALANCES, December 31,
1994................... 9,008,518 25,990 2,716,166 26,790 (284) 10 (54,065) (5) (1,564)
Sale of Series DD
preferred stock (net of
issuance costs of
$31)................... 128,157 1,205 -- -- -- -- -- -- 1,205
Exercise of stock options
and restricted stock
purchases.............. -- -- 2,318,096 818 (628) -- -- -- 190
Common stock warrants
issued in connection
with senior discount
notes.................. -- -- -- -- -- 2,974 -- -- 2,974
Collection of notes
receivable............. -- -- -- -- 46 -- -- -- 46
Net unrealized gain on
short-term
investments............ -- -- -- -- -- -- -- 2 2
Net loss................. -- -- -- -- -- -- (40,956) -- (40,956)
--------- ------- --------- ------- ----- -------- ----------- --- --------
BALANCES, December 31,
1995................... 9,136,675 27,195 5,034,262 27,608 (866) 2,984 (95,021) (3) (38,103)
Exercise of stock options
and warrants*.......... 403 1 175,210 28 -- -- -- -- 29
Net unrealized loss on
short-term
investments*........... -- -- -- -- -- -- -- (13) (13)
Net loss*................ -- -- -- -- -- -- (32,313) -- (32,313)
--------- ------- --------- ------- ----- -------- ----------- --- --------
BALANCES, June 30,
1996*.................. 9,137,078 $27,196 5,209,472 $27,636 $(866) $2,984 $(127,334) $(16) $(70,400)
--------- ------- --------- ------- ----- -------- ----------- --- --------
--------- ------- --------- ------- ----- -------- ----------- --- --------
</TABLE>
- ------------------------------
*Unaudited
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CELLNET DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (8,391) $ (14,634) $ (40,956) $ (12,121) $ (32,313)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization............................. 699 992 2,295 917 2,257
Amortization of discount on 13% senior notes.............. -- -- 9,665 -- 12,192
Amortization of debt issuance costs....................... -- -- 256 17 298
Deferred rent............................................. (115) (43) (46) 22 21
Loss (gain) on disposition of property.................... 1 2 57 14 (15)
Changes in:
Accounts receivable..................................... (293) (282) (1,415) 208 214
Prepaid expenses and other.............................. (93) (126) (692) (668) 54
Network components and inventory........................ (574) (1,260) -- -- --
Accounts payable........................................ 348 1,389 5,191 2,394 (912)
Accrued compensation and related benefits............... -- -- 951 268 (618)
Accrued liabilities..................................... (673) (676) 138 496 (12)
--------- --------- --------- --------- ---------
Net cash used for operating activities................ (9,091) (14,638) (24,556) (8,453) (18,834)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Network components and inventory............................ -- -- (9,518) (3,597) (905)
Networks in progress........................................ -- (1,333) (11,269) (2,467) (17,482)
Purchase of property........................................ (535) (2,436) (6,222) (3,009) (3,478)
Other assets................................................ 73 -- -- -- --
Purchase of short-term investments.......................... (2,962) (12,548) (285,802) (41,890) (263,980)
Proceeds from sales and maturities of short-term
investments............................................... -- 3,500 202,030 14,317 327,522
--------- --------- --------- --------- ---------
Net cash provided by (used for) investing
activities.......................................... (3,424) (12,817) (110,781) (36,646) 41,677
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of senior discount notes and related stock
warrants.................................................. -- -- 175,837 125,894 --
Cash paid for debt issuance costs........................... -- -- (5,902) (4,034) --
Subordinated debt borrowings................................ 3,242 350 -- -- --
Repayment of debt obligations............................... (403) (511) (524) (313) (160)
Proceeds from sale of preferred stock....................... 13,296 34,122 1,205 1,205 1
Proceeds from sale of common stock.......................... 66 9 190 14 28
Collection of notes receivable from sale of common stock.... -- 66 46 46 --
--------- --------- --------- --------- ---------
Net cash provided by (used for) financing
activities.......................................... 16,201 34,036 170,852 122,812 (131)
--------- --------- --------- --------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS......................... 3,686 6,581 35,515 77,713 22,712
CASH AND CASH EQUIVALENTS, Beginning of period................ 2,236 5,922 12,503 12,503 48,018
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, End of period...................... $ 5,922 $ 12,503 $ 48,018 $ 90,216 $ 70,730
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of subordinated debt and accrued interest into
preferred stock........................................... $ 3,274 $ 353 $ -- $ -- $ --
Acquisition of property under capital leases................ $ 17 $ 232 $ 798 $ 348 $ 133
Sale of common stock for notes receivable................... $ 250 $ 100 $ 628 $ 200 $ --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................... $ 166 $ 101 $ 113 $ 44 $ 56
Cash paid for income taxes.................................. $ 1 $ 2 $ 3 $ 1 $ 2
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS--Since 1993, CellNet Data Systems, Inc. and
subsidiaries (the "Company") has focused substantially all of its resources and
efforts on the development of the CellNet wireless data communication system to
provide automated network meter reading and other services to the utility
industry and to providers of non-utility services. The Company's primary
activities since 1993 have included research and development, prototype product
development, field testing, commercial network installation, and provision of
wireless data communication services, in connection with the development and
deployment of its CellNet wireless data communication system.
The Company is in the process of progressively installing its network for
Kansas City Power & Light Company and commenced the installation of its network
for Union Electric Company in the first quarter of 1996. Management plans to
significantly increase operations through the roll-out of additional
installations for other utility companies and intends to fund these operations
through additional debt and equity financing arrangements.
The Company provides its services to utility companies under long-term
contracts by which the Company is obligated to provide meter reading and related
services over the term of the contract. The length of the contracts vary and can
include renewal options under which the Company's commitments under the contract
could exceed 20 years, although there is no assurance that such options would be
exercised, or that contract termination clauses would not be exercised. Renewal
options generally contain terms which are substantially similar to the original
service agreements. Contract termination clauses generally provide for defined
payments intended to cover remaining network asset values.
CONSOLIDATION--The accompanying consolidated financial statements include
the accounts of CellNet Data Systems, Inc. and its wholly-owned subsidiaries.
All material intercompany accounts and transactions are eliminated in
consolidation.
FINANCIAL STATEMENT 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. Such estimates
include the level of the allowance for potentially uncollectible accounts
receivable, reserves for network components and inventory that are obsolete,
slow moving or nonsalable, evaluation of network assets for impairment, accrued
liabilities and a valuation allowance for net deferred tax assets. Actual
results could differ from these estimates.
CASH EQUIVALENTS--Cash equivalents are highly liquid debt instruments
acquired with an original maturity of three months or less. The recorded
carrying amounts of the Company's cash and cash equivalents approximate their
fair market value.
SHORT-TERM INVESTMENTS--Short-term investments represent debt and equity
securities which are stated at fair value. All short-term investments are
classified as available-for-sale. Any temporary difference between an
investment's amortized cost and its market value is recorded as a separate
component of stockholders' deficit until such gains or losses are realized.
Gains or losses on the sale of securities are computed using the specific
identification method.
F-7
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities," in
1994. The adoption of this standard did not have a significant effect in the
Company's financial position or results of operations.
CUSTOMER CONCENTRATION AND CONCENTRATION OF CREDIT RISK--Financial
instruments that potentially subject the Company to credit risk consist
principally of cash and cash equivalents, short-term investments and accounts
receivable. The Company sells its products and services to, and installs its
networks primarily for utility companies in the United States. To reduce credit
risk related to accounts receivable, the Company periodically evaluates its
customers' financial condition. Collateral is generally not required. Reserves
are maintained for credit losses, but the Company historically has not
experienced any significant losses related to individual customers or groups of
customers in any particular geographical area. One utility represented 29% and
73% of revenues for the year ended December 31, 1995 and the six months ended
June 30, 1996, respectively and 60% and 27% of accounts receivable at the end of
the respective periods. Another utility accounted for 23% of accounts receivable
at June 30, 1996. Another utility represented 18%, 58%, 64% and 16% of revenues
for the years ended December 31, 1993, 1994 and 1995 and the six months ended
June 30, 1996, respectively and 34% of accounts receivable at December 31, 1994.
Another utility represented 37% and 10%, and an additional utility represented
36% and 14% of revenues for the years ended December 31, 1993 and 1994,
respectively.
The Company invests in a variety of financial instruments such as commercial
paper, debt securities of the U.S. government, foreign debt securities and
preferred stock. The Company's policy limits the amount of credit exposure with
any one financial instrument or commercial issuer. All such instruments are
rated by Standard and Poors as A- or higher. The Company also places its
investments for safekeeping with high-credit-quality financial institutions.
NETWORK COMPONENTS AND INVENTORY--Network components and inventory are
stated at the lower of cost (first-in, first-out method) or market. At December
31, 1995 and June 30, 1996, such network components and inventory consisted
primarily of purchased and in process materials to be included in the Company's
installed networks and also for product sales. Network components, upon
completion of assembly, are either sold to customers or transferred to a
particular network location and included in networks in progress.
NETWORKS IN PROGRESS--Networks in progress, which are stated at cost,
include both equipment assembled at the Company and systems partially installed
at customer sites. Interest is capitalized using the Company's cost of capital
until the point in the installation process at which each network begins
generating revenue. Accordingly, $458,000 of interest was capitalized during
1995 and $983,000 of interest was capitalized for the six months ended June 30,
1996. Depreciation is computed on a straight-line basis over the shorter of the
estimated useful lives of the network assets or the expected minimum period of
revenue generation under the related contract (estimated to be approximately ten
years).
PROPERTY--Property is stated at cost. Depreciation and amortization are
computed on a straight-line basis over estimated useful lives of three to five
years or the capital lease term, if shorter.
F-8
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEBT ISSUANCE COST is comprised of debt issue costs associated with the
Senior Discount Notes (see Note 5). These costs are capitalized and amortized
using the effective interest method over the lives of the related debt.
RECENTLY ISSUED ACCOUNTING STANDARDS--In October 1995, the Financial
Accounting Standards Board (FASB) issued SFAS No. 123, "Accounting for
Stock-Based Compensation." The new standard defines a fair value method of
accounting for stock options and other equity instruments. The new standard
permits companies to continue to account for equity transactions with employees
under existing accounting rules but requires disclosure in a note to the
financial statements of the pro forma net income as if the Company had applied
the new method of accounting. The Company intends to follow the disclosure
alternative for its employee stock plans at December 31, 1996. Adoption of the
new standard will not impact reported earnings and will have no effect on the
Company's cash flows.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets to be Disposed Of," which became effective January 1, 1996.
This statement requires the Company to review long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recovered. Implementation did not have a material impact on
the Company's financial statements.
REVENUE RECOGNITION--Network service revenue, associated with installed
networks, is recognized in the period of service. Product sales are recognized
upon product shipment. Estimated warranty costs are recorded at the time the
product sales are recognized.
RESEARCH AND DEVELOPMENT--Research and development costs are expensed as
incurred. The Company's networks include certain software applications which are
integral to their operation. The costs to develop such software have not been
capitalized as the Company believes its software development processes are
essentially completed concurrent with the establishment of technological
feasibility of the software and/or development of the related network hardware.
FOREIGN CURRENCY TRANSLATION--The functional currency of the Company's U.K.
subsidiary is the U.S. dollar. Accordingly, all monetary assets and liabilities
are translated at the current exchange rate at the end of the period,
nonmonetary assets and liabilities are translated at historical rates and
operating expenses are translated at average exchange rates in effect during the
period. Transaction gains and losses, which are included in other income
(expense) in the accompanying consolidated statements of operations, have not
been significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The recorded carrying amounts of the
Company's financial instruments, namely cash and cash equivalents and short-term
investments, approximate their fair value. The estimated fair value of the
Company's Senior Discount Notes was $179,563,000 at December 31, 1995 and
$212,469,000 at June 30, 1996. The fair values of cash equivalents and
short-term investments are based on quoted market prices and the estimated fair
value of the Senior Discount Notes is based on information provided by the
initial purchaser of the original notes.
PRO FORMA NET LOSS PER SHARE--Pro forma net loss per share is computed using
the weighted average number of common and common equivalent shares outstanding
during the period. Common equivalent
F-9
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
shares include preferred stock and certain warrants (using the "if converted"
method) and stock options and the remaining warrants (using the treasury stock
method). Common equivalent shares are excluded from the computation if their
effect is anti-dilutive, except that, pursuant to the Securities and Exchange
Commission's Staff Accounting Bulletins and staff policy, such computations
include all common and common equivalent shares issued within the 12 months
preceding the initial filing date as if they were outstanding for all periods
presented. In addition, all outstanding preferred stock that converts and all
warrants that are assumed to be exercised in connection with the proposed
offering are included in the computation as common equivalent shares even when
the effect is anti-dilutive.
UNAUDITED INTERIM FINANCIAL INFORMATION--The unaudited interim financial
information as of June 30, 1996 and for the six months ended June 30, 1995 and
1996 has been prepared on the same basis as the audited financial statements. In
the opinion of management, such unaudited information includes all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of this interim information. Operating results for the six months ended June 30,
1996 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996.
UNAUDITED PRO FORMA INFORMATION--Unaudited pro forma information reflects
the conversion of each of the outstanding shares of Series CC redeemable
convertible preferred stock into two shares of common stock, the conversion of
each of the outstanding shares of Series AA, BB and DD convertible preferred
stock into two shares of common stock, the assumed exercise and conversion of
each of the outstanding warrants to purchase Series BB preferred stock into two
shares of common stock, and the assumed exercise of each of the outstanding
warrants issued in connection with the Company's Senior Discount Notes (see
Notes 5 and 7) for one share of common stock, upon the closing of the initial
public offering as contemplated by this Prospectus.
2. SHORT-TERM INVESTMENTS
The fair value and the amortized cost of short-term investments at December
31, 1994 and 1995 and June 30, 1996 are presented as follows. Fair values are
based on quoted market prices obtained from the Company's broker. All of the
Company's short-term investments are classified as available-for-sale, since the
Company intends to sell them as needed for operations. The following tables
present the unrealized holding gains and losses related to each category of
investment security (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-------------------------------------
UNREALIZED
AMORTIZED LOSS ON MARKET
COST INVESTMENT VALUE
----------- ------------- ---------
<S> <C> <C> <C>
Equity securities.................................................... $ 6,001 $ (1) $ 6,000
Corporate debt securities............................................ 3,509 (4) 3,505
Debt securities of states of the United States and political
subdivisions of the states......................................... 2,500 -- 2,500
----------- ----- ---------
Total................................................................ $ 12,010 $ (5) $ 12,005
----------- ----- ---------
----------- ----- ---------
</TABLE>
F-10
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
2. SHORT-TERM INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------------
UNREALIZED UNREALIZED
AMORTIZED LOSS ON GAIN ON MARKET
COST INVESTMENT INVESTMENT VALUE
----------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
Auction-rate preferred stock............................ $ 19,803 $ (3) $ -- $ 19,800
Corporate debt securities............................... 64,664 -- -- 64,664
Debt securities of states of the United States and
political subdivisions of the states.................. 3,000 -- -- 3,000
Debt securities issued by United States government
agencies.............................................. 4,647 -- 2 4,649
Foreign debt securities................................. 3,668 (2) -- 3,666
----------- ----- ----- ---------
Total................................................... $ 95,782 $ (5) $ 2 $ 95,779
----------- ----- ----- ---------
----------- ----- ----- ---------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------------
UNREALIZED UNREALIZED
AMORTIZED LOSS ON GAIN ON MARKET
COST INVESTMENT INVESTMENT VALUE
----------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
Auction-rate preferred stock............................ $ 22,800 $ -- $ -- $ 22,800
Corporate debt securities............................... 9,453 (16) -- 9,437
----------- ----- ----- ---------
Total................................................... $ 32,253 $ (16) $ -- $ 32,237
----------- ----- ----- ---------
----------- ----- ----- ---------
</TABLE>
The final maturity periods of short-term investments at December 31, 1995
were as follows (in thousands):
<TABLE>
<CAPTION>
MARKET VALUE
-----------------------------------------------------
ONE TO GREATER
WITHIN FIVE THAN 10 NO
ONE YEAR YEARS YEARS MATURITY TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Auction-rate preferred stock............................... $ -- $ -- $ -- $ 19,800 $ 19,800
Corporate debt securities.................................. 17,064 10,000 28,400 9,200 64,664
Debt securities of states of the United States and
political subdivisions of the states..................... -- -- 3,000 -- 3,000
Debt securities issued by United States government
agencies................................................. 4,649 -- -- -- 4,649
Foreign debt securities.................................... 3,666 -- -- -- 3,666
--------- --------- --------- --------- ---------
Total.................................................. $ 25,379 $ 10,000 $ 31,400 $ 29,000 $ 95,779
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
F-11
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
2. SHORT-TERM INVESTMENTS (CONTINUED)
The final maturity periods of short-term investments at June 30, 1996 were
as follows (in thousands):
<TABLE>
<CAPTION>
MARKET VALUE
---------------------------------------------------------
ONE TO GREATER
WITHIN ONE FIVE THAN 10 NO
YEAR YEARS YEARS MATURITY TOTAL
----------- --------- ----------- --------- ---------
Auction-rate preferred stock................. $ -- $ -- $ 22,800 $ -- $ 22,800
<S> <C> <C> <C> <C> <C>
Corporate debt securities.................... 9,437 -- -- -- 9,437
----------- --------- ----------- --------- ---------
$ 9,437 $ -- $ 22,800 $ -- $ 32,237
----------- --------- ----------- --------- ---------
----------- --------- ----------- --------- ---------
</TABLE>
All short-term investments with a final maturity exceeding one year have
provisions requiring their repurchase at par at the option of the holder and for
adjustment to market rates of interest on at least an annual basis (auction-rate
preferred stock). The Company treats such investments as having a maturity of
one year or less for purposes of compliance with investment limitations provided
in the Senior Discount Note Indenture (see Note 5).
3. PROPERTY
Property consists of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
Manufacturing equipment and tools.............................. $ 1,363 $ 4,870 $ 6,403
<S> <C> <C> <C>
Office furniture and equipment................................. 3,639 4,111 5,712
Engineering equipment.......................................... 1,639 2,119 2,604
--------- --------- -----------
Total.......................................................... 6,641 11,100 14,719
Accumulated depreciation and amortization...................... (3,770) (3,561) (5,590)
--------- --------- -----------
Total.......................................................... $ 2,871 $ 7,539 $ 9,129
--------- --------- -----------
--------- --------- -----------
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995 JUNE 30, 1996
--------- --------- -------------
Accrued contractual obligations..................................... $ 325 $ 273 $ 315
<S> <C> <C> <C>
Deferred revenue.................................................... 210 190 192
Warranty reserve.................................................... 130 15 14
Other............................................................... 224 503 469
--------- --------- -----
Total............................................................... $ 889 $ 981 $ 990
--------- --------- -----
--------- --------- -----
</TABLE>
F-12
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
5. SENIOR DISCOUNT NOTES
In 1995, the Company received $175,837,000 in gross proceeds from the
issuance of $325,000,000 aggregate principal amount at maturity of its 13%
Senior Discount Notes due June 15, 2005 and related warrants to purchase
2,600,000 shares of common stock at $0.005 per share (the Notes and Common Stock
Warrants). Aggregate proceeds of $2,974,000 were attributed to the Common Stock
Warrants. Commencing December 15, 2000, interest will be payable on the Notes
semi-annually in arrears on each December 15 and June 15 at the rate of 13% per
annum.
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on and after June 15, 2000 at specified redemption prices for the
relevant year of redemption, plus accrued and unpaid interest to the date of
redemption. In addition, the Company may redeem in cash at its option at any
time prior to June 15, 1998 up to 25% of the aggregate principal amount of the
Notes at 113% of the accreted value thereof on the date of redemption plus
accrued and unpaid interest, if any, from the proceeds of a public equity
offering (as defined). There are no sinking fund requirements. In the event of a
change of control (as defined), each holder of the Notes has the option to
require the Company to repurchase such holder's Notes at 101% of the accreted
value thereof on the date of repurchase (if prior to June 15, 2000) or 101% of
the aggregate principal face amount thereof, plus accrued and unpaid interest,
if any, to the repurchase date (if on or after June 15, 2000). The Notes rank
senior in right of payment to all existing and future subordinated indebtedness
of the Company and pari passu with all existing and future senior indebtedness
of the Company. The Indenture pursuant to which the Senior Discount Notes were
issued contains certain covenants that, among other things, limit the ability of
the Company to make dividend payments, make investments, repurchase outstanding
shares of stock, prepay other debt obligations, incur additional indebtedness,
effect asset dispositions, engage in sale and leaseback transactions,
consolidate, merge or sell all or substantially all of the Company's assets,
engage in transactions with affiliates, or effect certain transactions by its
restricted subsidiaries (as defined). At December 31, 1995, a portion of the
Company's short-term investments had been made in corporate debt securities and
auction-rate preferred stock in amounts which exceeded the investment
limitations under the Indenture. The Company was otherwise in compliance with
the financial covenants of the Indenture at December 31, 1995. The Company
subsequently adjusted its investment portfolio to bring it into compliance with
such limitations within the period provided by the Indenture, and at June 30,
1996 the Company was in compliance with all covenants of the Indenture.
6. SERIES CC REDEEMABLE CONVERTIBLE PREFERRED STOCK
In conjunction with the proposed initial public offering of the Company's
common stock, all outstanding shares of Series CC redeemable convertible
preferred stock will automatically convert into common stock upon the closing of
the offering (see Note 1).
At December 31, 1995 and June 30, 1996, 3,215,768 shares of Series CC
redeemable convertible preferred stock were designated and outstanding. Each
share is convertible into two shares of common stock, subject to adjustments for
events of dilution. In addition to converting upon an initial public offering,
the Series CC redeemable convertible preferred stock is also automatically
convertible into common stock upon the election of the holders of more than 60%
of the outstanding shares of such series, or at such time as fewer than 500,000
shares remain outstanding. Each share has the same voting rights as the number
of shares of common stock into which it is convertible.
F-13
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
6. SERIES CC REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
Holders are entitled to noncumulative dividends of $0.964 per share or, in
the event of liquidation or merger, liquidation distributions of $9.64 per share
in preference to all convertible preferred stock. The holders of Series CC
preferred stock have the right of first refusal to purchase a pro rata portion
of preferred or common stock the Company proposes to issue to any public or
private utility. Further, the holders of Series CC preferred stock have the
right of first refusal to purchase a pro rata portion of any preferred or common
stock that any subsidiary of the Company proposes to issue to any public or
private utility if the subsidiary's business is unrelated to the market area of
such utility or if such securities are convertible into common or preferred
stock of the Company. The right of first refusal terminates three years after an
initial public offering.
Under a Put Agreement dated August 15, 1994 (the Put Agreement), the holders
of Series CC preferred stock, acting as a group representing not less than 25%
of the outstanding Series CC preferred stock, have the right to "put" those
shares to the Company after May 12, 2001 (Investor Put) at the higher of $9.64
per share or the fair market value at the time of exercise of the Investor Put
(the Redemption Price). The Investor Put will be extinguished in the event of an
initial pubic offering by the Company of its common stock in which the net
proceeds to the Company are at least $20 million, in the event of the sale of
the Company or if not exercised by November 13, 2002. In the event the Investor
Put is not completed by the Company for any reason within six months after the
right is exercised then (a) the Redemption Price shall increase annually from
the date the Investor Put was exercised at a rate of 15% for the first year, and
five additional percentage points for each year thereafter (pro rated for any
partial year), and (b) the holders of Series CC preferred stock shall have the
right to initiate a separate demand registration at the Company's expense only
for the holders of shares with rights under the Investor Put. In the event the
fair market value of the Series CC preferred stock exceeds $96.40 (as adjusted
for any stock split, stock dividend, or other combinations or reclassifications)
per share at the time the Investor Put is exercised, the amount payable to the
holders of the Series CC preferred stock who participate in the Investor Put may
be paid 50% at closing and the balance, plus interest at the prime rate, on the
first anniversary of the closing. The Company's obligations under the Put
Agreement will be suspended for such time that performance of such obligations
would result in a breach of, a default, or an event of default under the
Indenture governing the Company's Senior Discount Notes or would otherwise
result in a violation of law.
7. STOCKHOLDERS' EQUITY (DEFICIT)
CONVERTIBLE PREFERRED STOCK--In conjunction with the proposed initial public
offering of the Company's common stock, all outstanding shares of convertible
preferred stock will automatically convert into common stock upon the closing of
the offering (See Note 1). At December 31, 1995, convertible preferred stock
consists of:
<TABLE>
<CAPTION>
AMOUNT (NET OF
ISSUE ISSUANCE LIQUIDATION
DESIGNATED OUTSTANDING PRICE COSTS) PREFERENCE
---------- ----------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Series AA...................................... 5,000,000 5,000,000 $ 1.00 $ 4,928,000 $ 5,000,000
Series BB...................................... 4,256,733 3,489,845 4.75 16,073,000 16,577,000
Series DD...................................... 647,923 646,830 9.64 6,194,000 6,235,000
---------- ----------- -------------- -------------
9,904,656 9,136,675 $ 27,195,000 $ 27,812,000
---------- ----------- -------------- -------------
---------- ----------- -------------- -------------
</TABLE>
F-14
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Significant terms of the convertible preferred stock are as follows:
- Each share is convertible into two shares of common stock, subject to
adjustments for events of dilution. Shares of Series AA, BB and DD
preferred stock will automatically be converted into common stock upon
completion of a public offering with net proceeds in excess of $20 million
and at a price equal to or greater than $2.00, $6.00 ($12.05 after January
1, 1997) and $9.64 ($12.05 after January 1, 1997) per common share,
respectively (see Note 1). Each series of preferred stock is also
automatically convertible into common stock upon the election of the
holders of more than 50% of the outstanding shares of such series, or at
such time as fewer than 500,000 shares (1,000,000 shares in the case of
Series AA preferred stock) of such series (as adjusted for stock splits,
stock dividends and combinations) remain outstanding.
- Each share has the same voting rights as the number of shares of common
stock into which it is convertible.
- Holders of preferred stock are entitled to noncumulative dividends or, in
the event of liquidation or merger, distributions in the order of
preference shown as follows:
<TABLE>
<CAPTION>
NON-CUMULATIVE LIQUIDATION
DIVIDENDS PER DISTRIBUTION
SHARE PER SHARE
--------------- -------------
<S> <C> <C>
Series BB....................................................... $ 0.475 $ 4.75
Series AA....................................................... $ 0.100 $ 1.00
Series DD....................................................... $ 0.964 $ 9.64
</TABLE>
- Each series of preferred stock must receive their full dividend before the
next series receives any dividends. Additionally, any dividends exceeding
these minimum amounts are shared between the common and preferred shares
on a pro-rata basis.
- Each series of preferred stock must receive their full preferential
amounts before the next series receives any liquidation distributions.
Additionally, any funds available for distribution in excess of these
minimum amounts, plus $0.25 per share for common stock, is to be
distributed ratably among the holders of the common, redeemable
convertible preferred and convertible preferred stock.
- The holders of at least 5,000 shares of Series AA or BB preferred stock
have the right of first refusal to purchase their pro rata portion of
certain issues of preferred or common stock of the Company on the same
terms and conditions as the Company offers such securities to other
investors, subject to certain conditions and limitations. The right of
first refusal of all holders terminates upon the registered public
offering of the Company's common stock with net proceeds of at least $20
million.
F-15
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
COMMON STOCK--At December 31, 1995 and June 30, 1996, the Company had
reserved shares of common stock for issuance as follows:
<TABLE>
<CAPTION>
DECEMBER JUNE 30,
31, 1995 1996
---------- -----------
<S> <C> <C>
Conversion of preferred stock.......................... 24,704,886 24,705,692
Issuance under stock option plans...................... 5,261,630 5,086,420
Issuance upon exercise of common stock warrants........ 2,653,832 2,653,832
Issuance upon exercise and conversion of Series BB
preferred stock warrants............................. 1,533,776 1,532,970
---------- -----------
Total.................................................. 34,154,124 33,978,914
---------- -----------
---------- -----------
</TABLE>
WARRANTS--At December 31, 1995, the following warrants to purchase stock
were outstanding:
Warrants to purchase 2,310 shares of common stock at $126.92 per share are
exercisable and expire at various dates through December 9, 1996, or, with
notice from the Company immediately prior to (a) the closing of a firm
committment underwritten initial public offering of the Company's securities,
(b) the merger of the Company into or with another corporation in which the
Company is not the survivor and the stockholders of the Company own less than
50% of the voting securities of the surviving corporation, or (c) the sale,
transfer or lease of all or substantially all of the assets of the Company.
Warrants to purchase 750 shares (300 shares at June 30, 1996) of common
stock at $20.00 per share, are exercisable and expire at various dates through
February 6, 1997, or, with notice from the Company immediately prior to (a) the
merger of the Company into or with another corporation in which the stockholders
of the Company hold less than 50% of the voting securities of the surviving
corporation or its parent; (b) the sale, conveyance or disposition of all or
substantially all of the assets of the Company, or (c) the liquidation,
dissolution or winding up of the Company.
Warrants to purchase 50,000 shares of common stock at $2.00 per share become
exercisable over a five-year period at the rate of 20% per year commencing
August 21, 1992, subject to certain conditions. The purchase right may not be
exercised prior to either (a) February 24, 1998, (b) the effective date of a
registration statement filed by the Company for an initial public offering of
its common stock, (c) five days prior to the merger of the Company with or into
another corporation as a result of which the stockholders of the Company hold
less than 50% of the equity securities of the surviving corporation or its
parent, or (d) five days prior to a sale, conveyance or disposition of all or
substantially all of the assets of the Company. The warrants expire on February
24, 1999, or, with written notice from the Company, two days prior to (a) the
merger of the Company with or into a corporation as a result of which the
stockholders of the Company hold less than 50% of the equity securities of the
surviving corporation or its parent (unless the securities received are freely
tradable and listed on a national securities exchange or on the Nasdaq National
Market), (b) the sale, conveyance or disposition of all or substantially all of
the assets of the Company, or (c) the liquidation, dissolution or winding up of
the Company.
In connection with the sale of Series BB preferred stock in 1993 certain
purchasers were granted warrants to purchase an additional 766,888 shares
(766,485 shares at June 30, 1996) of Series BB preferred stock at $4.75 per
share. The warrants are exercisable from the date of grant through the earlier
of
F-16
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
(a) September 30, 1998 or (b) with written notice from the Company, immediately
prior to (i) the closing of a firm committment underwritten initial public
offering of the Company's securities (see Note 1), (ii) the merger of the
Company into or with another corporation in which the Company is not the
survivor and the stockholders of the Company hold less than 50% of the voting
securities of the surviving corporation, or (iii) the sale, transfer or lease of
all or substantially all of the assets of the Company.
Warrants to purchase 2,600,000 shares of common stock at $0.005 per share
were granted in connection with the issuance and sale in 1995 of the Company's
Senior Discount Notes (see Note 5). The warrants expire on the earliest to occur
of (a) June 15, 2005, (b) 90 days after a change of control of the Company (as
defined) (see Note 1), and (c) 90 days after the consummation of a public equity
offering of the Company (as defined). The warrants may be exercised on the
earliest to occur of (a) the seventh day prior to a change of control of the
Company (as defined), (b) the consummation of a public equity offering (as
defined), or (c) 90 days prior to expiration.
STOCK OPTION PLANS--The Company has stock option plans (the Plans) under
which shares are reserved for issuance to officers, directors, employees and
consultants. Under the Plans, both incentive and nonstatutory stock options to
purchase common stock may be granted or restricted common stock may be sold at
prices not less than the fair market value of the common stock at the date of
grant. The fair market value and terms of exercise are determined by the Board
of Directors. Options outstanding at December 31, 1995 generally become
exercisable ratably over five years, commencing six months from the date of the
individual's employment or the date of grant and expire ten years from the date
of grant. At December 31, 1995, there were 1,827,000 shares available for future
grants under the Plans.
A summary of stock option activity under the Plans on a combined basis is as
follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------------
NUMBER OF
SHARES PRICE PER SHARE
----------- ----------------
<S> <C> <C>
Balances, January 1, 1994......................................................... 1,618,434 $ 0.05 to $0.25
Granted........................................................................... 4,447,850 0.25 to 0.50
Exercised......................................................................... (533,656) 0.25 to 0.50
Cancelled......................................................................... (292,000) 0.25 to 0.50
-----------
Balances, December 31, 1994 5,240,628 0.05 to 0.50
Granted........................................................................... 514,600 0.50 to 1.50
Exercised......................................................................... (2,318,096) 0.05 to 0.50
Cancelled......................................................................... (163,498) 0.05 to 1.50
-----------
Balances, December 31, 1995 3,273,634 0.05 to 1.50
Granted........................................................................... 743,310 1.75 to 3.00
Exercised......................................................................... (175,210) 0.05 to 1.50
Cancelled......................................................................... (62,598) 0.50 to 2.00
-----------
Balances, June 30, 1996........................................................... 3,779,136 $ 0.05 to 3.00
-----------
-----------
</TABLE>
F-17
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
RESTRICTED STOCK--Certain officers, employees and consultants exercised
unvested stock options with cash or full recourse notes. The related shares of
common stock are subject to repurchase by the Company at the orginal purchase
price per share upon the purchaser's cessation of service prior to the vesting
of such shares. The restricted stock continues to vest in accordance with the
terms of the original stock option. The related notes bear interest at rates
ranging from 6.04% to 7.92% and are due in 1999 through 2000. At December 31,
1995, 1,847,156 outstanding shares of such stock were subject to repurchase at
the original exercise price (1,688,908 shares at June 30, 1996).
8. INCOME TAXES
No federal income taxes were provided in 1993, 1994, 1995 or for the six
months ended June 30, 1996 due to the Company's net losses. The provisions for
income taxes for these periods represent various state minimum income and
franchise taxes. The provision for income taxes differs from the amount computed
by applying the federal statutory income tax rate to the loss before income
taxes as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS
---------------------------------- ENDED JUNE
1993 1994 1995 30, 1996
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Taxes computed at federal statutory rate............... 35.0% 35.0% 35.0% 35.0%
State income taxes, net of federal effect.............. 4.5 4.5 4.5 4.5
Research tax credits................................... 2.8 3.1 1.0 0.6
Change in valuation allowance.......................... (42.2) (42.5) (40.4) (40.0)
----- ----- ----- -----
Total provision........................................ 0.1% 0.1% 0.1% 0.1%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
The tax effects of temporary differences that give rise to deferred taxes
were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
Deferred tax assets:
<S> <C> <C> <C>
Expenses not currently deductible for tax purposes......... $ 1,504 $ 2,182 $ 1,995
Senior discount note interest.............................. -- 3,817 8,274
Tax net operating loss and credit carryforwards............ 18,939 30,910 40,723
Research and development expenses capitalized for tax
purposes................................................. 1,991 3,645 2,044
--------- --------- -----------
Total deferred tax assets.................................... 22,434 40,554 53,036
Valuation allowance on deferred tax assets................... (22,434) (40,554) (53,036)
--------- --------- -----------
Net deferred income taxes.................................... $ -- $ -- $ --
--------- --------- -----------
--------- --------- -----------
</TABLE>
At December 31, 1995, the Company had net operating loss carryforwards of
approximately $82,500,000 and $7,300,000 available to offset future federal and
California taxable income, respectively. The extent to which the loss
carryforwards can be used to offset future taxable income may be limited,
depending on the extent of ownership changes within any three-year period as
provided in the Tax Reform
F-18
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
8. INCOME TAXES (CONTINUED)
Act of 1986 and the California Conformity Act of 1987. Such federal
carryforwards expire in 2001 through 2010. Such state carryforwards expire in
1996 through 2000.
Equity issuances in April 1991 triggered such a limitation on loss
carryforwards. At that time, the Company had federal net operating loss
carryforwards of approximately $10,500,000. As of December 31, 1995,
approximately $4,000,000 of this net operating loss remains limited to an annual
usage of approximately $1,400,000 for federal income tax purposes. Any
significant stock issuances after December 31, 1995 will likely result in
another such ownership change. The annual limitation for utilization of the net
operating losses and tax credit carryforwards incurred up to the point of change
will be equal to the fair market value of the Company immediately before such
change multiplied by the then current long-term tax exempt interest rate.
The Company has capitalized approximately $59,400,000 of research and
development expenditures for California purposes which are available for
amortization in future years. Realization of the deferred tax assets associated
with these expenditures is contingent upon the amount of income or loss
apportioned to California during the subject amortization periods. Research and
development tax credit carryforwards of approximately $1,800,000 and $900,000
are also available to offset future federal and California income taxes payable,
respectively.
A valuation allowance has been recorded against tax assets for which
realization is uncertain. Based upon the Company's history of operating losses
and the expiration dates of the loss carryforwards, the Company has recorded a
valuation allowance to the full extent of its net deferred tax assets.
9. CONTINGENCIES AND COMMITMENTS
The industry in which the Company operates is characterized by frequent
litigation regarding patent and other intellectual property rights. The Company
is party to a trademark claim. Although the ultimate outcome of this matter is
not presently determinable, management believes that its resolution will not
have a material effect on the Company's financial position or results of
operations.
At December 31, 1994 and 1995 and June 30, 1996, equipment with a net book
value of $456,000, $854,000 and $822,000 (net of accumulated amortization of
$1,495,000, $372,000 and $536,000, respectively), has been leased under capital
leases.
The Company leases its manufacturing and office facilities under a
noncancelable operating lease which expires in December 2000. Deferred rent
results from the difference between facilities rent expense recognized on the
straight-line basis over the term of the lease as compared to the contractual
payments made.
F-19
<PAGE>
CELLNET DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
9. CONTINGENCIES AND COMMITMENTS (CONTINUED)
Future minimum annual rental payments under capital and operating leases are
as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDING DECEMBER 31, LEASES LEASES
- ----------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
1996..................................................................................... $ 360 $ 1,087
1997..................................................................................... 315 1,059
1998..................................................................................... 158 1,040
1999..................................................................................... 91 1,046
2000..................................................................................... 54 1,081
Thereafter............................................................................... -- 749
----------- -----------
Total minimum lease payments............................................................. 978 $ 6,062
-----------
-----------
Amount representing interest............................................................. (158)
-----------
Present value of minimum lease payments.................................................. $ 820
-----------
-----------
</TABLE>
Facilities rent expense was $245,000, $421,000, $901,000, and $599,000 for
1993, 1994, 1995 and for the six months ended June 30, 1996, respectively. Rent
expense is net of sublease income of $296,000 and $175,000 in 1993 and 1994,
respectively.
10. SUBSEQUENT EVENTS
On August 30, 1996 the Company reincorporated in Delaware. The Board of
Directors of the Company approved a two-for-one split of all outstanding shares
of common stock effective as of September 5, 1996. All shares and per-share
amounts have been adjusted to reflect this split. On October 2, 1996, the
Company went effective as a public company.
Also in October 1996 the Company became a party to a patent infringement
suit and a class action lawsuit. Although the ultimate outcome of these matters
is not presently determinable, management believes that the resolution of these
suits will not have a material effect on the Company's financial position or
results of operations.
* * * * *
F-20
