<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1998
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
CELLNET FUNDING, LLC
CELLNET DATA SYSTEMS, INC.
(Exact names of Registrants as specified in their charters)
<TABLE>
<S> <C> <C>
DELAWARE 94-3298620
DELAWARE 94-2951096
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Numbers)
</TABLE>
125 SHOREWAY ROAD
SAN CARLOS, CALIFORNIA 94070
(650) 508-6000
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
------------------------
<TABLE>
<S> <C> <C>
BEN H. LYON, ESQ. BARRY E. TAYLOR, ESQ. JERRY V. ELLIOTT, ESQ.
Vice President and General Counsel MEREDITH S. JACKSON, ESQ. IRENE MAVROYANNIS, ESQ.
CellNet Data Systems, Inc. TREVOR J. CHAPLICK, ESQ. Shearman & Sterling
125 Shoreway Road Wilson Sonsini Goodrich & Rosati 599 Lexington Avenue
San Carlos, California 94070 Professional Corporation New York, New York 10022
(650) 508-6000 650 Page Mill Road (212) 848-4000
Palo Alto, California 94304
(650) 493-9300
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /X/ 333-50851
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. / /
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The information in the Registration Statement filed by CellNet Data Systems,
Inc. and CellNet Funding, LLC (the "Registrants") with the Securities and
Exchange Commission (File No. 333-50851) pursuant to the Securities Act of 1933,
as amended, is incorporated by reference into this Registration Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
certify that they have reasonable grounds to believe that they meet all of the
requirements for filing on Form S-3 and have duly caused this Registration
Statement to be signed on their behalf by the undersigned, thereunto duly
authorized, in the City of San Carlos, State of California on May 14, 1998.
CellNet Data Systems, Inc.
By: /s/ JOHN M. SEIDL
------------------------------------
John M. Seidl
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
CellNet Funding, LLC
By: CELLNET DATA SYSTEMS, INC., Its
Manager
------------------------------------
By: /s/ JOHN M. SEIDL
------------------------------------
John M. Seidl
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------------- ------------------------------------ --------------
<C> <S> <C>
Chairman of the Board of CellNet
/s/ JOHN M. SEIDL Data Systems, Inc., President and
------------------------------- Chief Executive Officer of each May 14, 1998
John M. Seidl Registrant (Principal Executive
Officer)
Vice President and Chief Financial
/s/ PAUL G. MANCA* Officer of each Registrant
------------------------------- (Principal Financial and May 14, 1998
Paul G. Manca Accounting Officer) and Director
of CellNet Funding, LLC
/s/ DAVID L. PERRY*
------------------------------- Vice President, Secretary and May 14, 1998
David L. Perry Director of CellNet Funding, LLC
/s/ PAUL M. COOK*
------------------------------- Director of CellNet Data Systems, May 14, 1998
Paul M. Cook Inc.
/s/ NEAL M. DOUGLAS*
------------------------------- Director of CellNet Data Systems, May 14, 1998
Neal M. Douglas Inc.
/s/ E. LINN DRAPER, JR.*
------------------------------- Director of CellNet Data Systems, May 14, 1998
E. Linn Draper, Jr. Inc.
/s/ WILLIAM C. EDWARDS*
------------------------------- Director of CellNet Data Systems, May 14, 1998
William C. Edwards Inc.
/s/ WILLIAM HART*
------------------------------- Director of CellNet Data Systems, May 14, 1998
William Hart Inc.
*By /s/ JOHN M. SEIDL
-------------------------------
John M. Seidl
(Attorney-in-fact)
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.: DESCRIPTION OF EXHIBITS
- -------- --------------------------------------------------------------------------
<C> <S>
4.7: Form of Escrow and Security Agreement, dated as of May , 1998, among
CellNet Data Systems, Inc., CellNet Funding, LLC and The Bank of New York.
4.8: Form of Written Action of the Manager of CellNet Funding, LLC, dated as of
May , 1998, with respect to the terms of the 7% Exchangeable Limited
Liability Company Preferred Securities.
4.9: Form of Certificate of Designation, Rights and Preferences of the
Redeemable Preferred Stock of CellNet Data Systems, Inc. filed May ,
1998 with the Secretary of State of the State of Delaware.
5.1: Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
*8.1: Opinion of Wilson Sonsini Goodrich & Rosati, P.C. as to certain tax
matters.
10.1: Employment Agreement with Ben Lyon dated January 28, 1998.
10.2: Severance Agreement with James J. Jennings dated March 16, 1998.
23.1: Independent Auditors' Consent.
23.2: Consents of Wilson Sonsini Goodrich & Rosati, P.C. (included in Exhibits
5.1 and 8.1).
24.3 Power of Attorney with respect to E. Linn Draper, Jr.
24.4 Power of Attorney with respect to William C. Edwards.
</TABLE>
- ---------
* Incorporated by reference to the Company's Registration Statement on Form
S-3 filed on April 23, 1998 (File No: 333-50851).
<PAGE>
Exhibit 4.7
ESCROW AND SECURITY AGREEMENT
This ESCROW AND SECURITY AGREEMENT (this "Escrow Agreement") is made and
entered into as of May __, 1998 among CELLNET FUNDING, LLC, a Delaware limited
liability company (the "Issuer"), CELLNET DATA SYSTEMS, INC. ("CellNet"), a
Delaware corporation, and THE BANK OF NEW YORK, a New York banking corporation
as escrow agent (the "Escrow Agent") for the holders (the "Holders") of the
Preferred Securities (as defined herein) issued by the Issuer under the LLC
Agreement referred to below.
W I T N E S S E T H
WHEREAS, pursuant to the Underwriting Agreement (the "Underwriting
Agreement") dated May __, 1998, among the Issuer, CellNet and Morgan Stanley
& Co. Incorporated (the "Underwriter"), the Issuer and CellNet have agreed to
sell to the Underwriter, 4,400,000 of Issuer's 7% Exchangeable Limited
Liability Company Preferred Securities, liquidation preference $25 per
preferred security (the "Firm Preferred Securities" and, together with the
Additional Preferred Securities (as defined herein), the "Preferred
Securities"), which will be mandatorily redeemable on June 1, 2010;
WHEREAS, pursuant to the Underwriting Agreement, the Issuer and CellNet
propose to issue and sell to the Underwriter not more than an additional
660,000 Preferred Securities (the "Additional Preferred Securities"), if and
to the extent that the Underwriter shall have determined to exercise the
right to purchase such additional Preferred Securities granted to the
Underwriter;
WHEREAS, the Issuer hereby agrees to (i) purchase or cause the purchase
of Pledged Securities (as defined herein) in an amount anticipated to be
sufficient upon receipt of scheduled interest and principal payments in
respect thereof to provide for the payment in cash of the dividends on the
Preferred Securities, payable quarterly in arrears on each March 1 and June
1, September 1 and December 1, commencing September 1, 1998 through and
including September 1, 2001 and (ii) deposit such Pledged Securities (as
defined herein) (or cause them to be so deposited in a securities) in an
account held by the Escrow Agent for the benefit of holders of the Preferred
Securities;
WHEREAS, to secure its obligations to the holders of the Preferred
Securities under the LLC Agreement (as defined herein) and the Preferred
Securities Designation (as defined in the LLC Agreement) and its obligations
to the holders of the Preferred Securities and the Escrow Agent hereunder
(collectively, the "Obligations"), the Issuer has agreed (i) to pledge to the
Escrow Agent for its benefit and the ratable benefit of the Holders of the
Preferred Securities, a security interest in the Pledged Securities (as
<PAGE>
defined herein) and related collateral and (ii) execute and deliver this
Escrow Agreement in order to secure the payment and performance by the Issuer
of all the Obligations. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings given to such terms in the
Amended and Restated of Limited Liability Company Agreement of the Issuer
dated as of May __, 1998 (as amended, restated, supplemented or otherwise
modified from time to time, the "LLC Agreement") or, if not therein defined,
in the Preferred Securities Designation. Unless otherwise defined herein or
in the LLC Agreement, terms used in Articles 8 or 9 of the Uniform Commercial
Code as enacted and in effect in the State of New York from time to time (the
"UCC") are used herein as therein respectively defined on the date hereof; and
WHEREAS, it is a condition precedent to the purchase of the Preferred
Securities by the Holders thereof that the Issuer shall have granted the
security interest and made the pledge contemplated by this Escrow Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and in order to induce the Holders of the Preferred Securities to purchase the
Preferred Securities and as a condition to the Closing of the offering of the
Preferred Securities, the Issuer hereby agrees with the Escrow Agent, for the
benefit of the Escrow Agent and for the ratable benefit of the Holders of the
Preferred Securities, as follows:
SECTION 1. PLEDGE AND GRANT OF SECURITY INTEREST.
The Issuer hereby pledges to the Escrow Agent for its benefit and for
the ratable benefit of the Holders of the Preferred Securities, and hereby
grants to the Escrow Agent for its benefit and for the ratable benefit of the
Holders of the Preferred Securities, a continuing security interest in and to
all of the Issuer's right, title and interest in, to and under the following
(hereinafter collectively referred to as the "Collateral"), whether now owned
or hereafter acquired or arising, whether evidenced by or characterized as
investment property, general intangibles, documents, instruments, accounts,
money or otherwise: (a) the United States Treasury securities identified in
Annex 1 to Exhibit A to this Escrow Agreement (the "Firm Pledged Securities"
and, together with the Additional Pledged Securities, the "Pledged
Securities"), (b) the United States Treasury securities, if any, to be
purchased pursuant to Section 7(c) any and all applicable security
entitlements to the Pledged Securities, (d) all dividends, interest, cash,
instruments and other property from time to time received, receivable or
otherwise distributed or distributable in respect of or in exchange for the
Pledged Securities, (e) The Bank of New York account in the name of "The Bank
of New York, as Escrow Agent for the benefit of the holders of the -%
Exchangeable Limited Liability Company Preferred Securities mandatorily
redeemable 2010 of CellNet Funding, LLC Collateral Escrow Account",
Administrative Account No. - (the "Escrow Account") established and
maintained by the Escrow Agent pursuant to this Escrow Agreement, (f) all
dividends, interest, cash, investments and other property of any kind from
time to time deposited in, received, receivable or otherwise distributed or
distributable in respect of or in exchange for the Escrow Account and any
credit balance maintained therein, (g) any and all related securities
accounts maintained with any securities intermediary in which security
entitlements to the Pledged Securities or any related investment property are
carried, and (h) all proceeds in any form of any and all of the foregoing
Collateral (including, without limitation, proceeds that constitute property
of the types described in clauses (a) - (h) of this Section 1) and, to the
extent not otherwise included, all cash.
-2-
<PAGE>
in such amount as will be sufficient upon receipt of scheduled interest
and/or principal payments of all Pledged Securities thereafter held in the
Pledged Account to provide payment for the first thirteen cash dividends due
on the Preferred Securities. The Additional Pledged Securities shall be
pledged by the Issuer to the Escrow Agent for the benefit of the Holders and
shall be held by the Escrow Agent in the Pledged Account.
SECTION 2. SECURITY FOR OBLIGATION. This Escrow Agreement and the
pledge of Collateral hereunder secures the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of all the Obligations. Without limiting the generality of the foregoing,
this Escrow Agreement and the grant of a security interest in the Collateral
hereunder secures the payment of all amounts that constitute part of the
Obligations and would be owed by the Issuer to the Holders of the Pledged
Securities under the Underwriting Agreement but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Issuer.
SECTION 3. DELIVERY OF COLLATERAL; ESCROW ACCOUNT; INTEREST. From
and after the date of this Escrow Agreement until the earliest to occur of
payment in full of the Obligations, payment in full in cash of all dividends
accruing through August 1, 2001, an Automatic Exchange or the exchange of all
of the Preferred Securities for CellNet Common Stock.
(a) Prior to or concurrently with the execution and delivery hereof
and prior to the transfer to the Escrow Agent of the Pledged Securities (or
acquisition by the Escrow Agent of any security entitlement thereto), as
provided in subsection (a) of this Section 3, the Escrow Agent shall establish
the Escrow Account on its books as an account segregated from all other
custodial or collateral accounts at its office at - Attention: -.
(b) All certificates or instruments representing or evidencing the
Pledged Securities or the Escrow Account shall be delivered to and held by or
on behalf of the Escrow Agent pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Escrow Agent. The Escrow Agent shall have the right,
at any time in its discretion and without notice to the Issuer, to transfer
to or to register in the name of the Escrow Agent or any of its nominees any or
all of the Collateral.
(c) The Pledged Securities shall be pledged and transferred to the
Escrow Agent as securities intermediary to be held in the Escrow Account.
Upon transfer of the Pledged Securities to the Escrow Agent (or the Escrow
Agent's acquisition of a security entitlement thereto), the Escrow Agent
shall make appropriate book entries indicating that the Pledged Securities
and/or such security entitlement have been credited to and are held in the
Escrow Account. The Escrow Agent shall deliver a notice to the Issuer and
the Underwriter indicating that (i) the Pledged Securities or a security
entitlement thereto has been credited to the Escrow Account by book entry, or
(ii) the Pledged Securities or a security entitlement thereto have been
pledged to and accepted by the Escrow Agent for credit to the Escrow Account.
Subject to the other terms and conditions of this Escrow Agreement, all
funds or other property held by the Escrow Agent pursuant to this Escrow
Agreement shall be held in the Escrow Account subject (except as expressly
provided in Sections 4(a), (b) and (c) hereof) to the exclusive dominion and
control of the Escrow Agent and exclusively for the benefit of the Escrow
Agent and for the ratable benefit of the Holders of the Preferred Securities
and segregated from all other funds or other property otherwise held by the
Escrow Agent. No Person other than the Escrow Agent shall be authorized to
issue entitlement orders with respect to the Pledged Securities and the
Issuer hereby directs the Escrow Agent not to comply with any entitlement
orders issued by any Person except pursuant to the terms hereof.
(d) All Collateral shall be retained in the Escrow Account pending
disbursement pursuant to the terms hereof.
-3-
<PAGE>
(e) Except as otherwise expressly provided hereby and
notwithstanding any term or condition to the contrary in any other existing
or future agreement relating to the Escrow Account, no Collateral deposited
in the Escrow Account shall be released from the Escrow Account, nor paid to
or for the account of, or withdrawn by or at the direction of, the Issuer or
any other Person.
(f) Concurrently with the execution and delivery of this Escrow
Agreement the Escrow Agent is delivering to the Issuer and the Underwriter a
duly executed control agreement, in the form of Exhibit A hereto, of an
officer of the Escrow Agent, confirming the Escrow Agent's establishment and
maintenance of the Escrow Account and its receipt and holding of the Firm
Pledged Securities or a security entitlement thereto and the crediting of the
Firm Pledged Securities or such security entitlement to the Escrow Account,
all in accordance with this Escrow Agreement.
(g) In the event the Underwriter shall decide to exercise the
right to purchase the Additional Preferred Securities pursuant to the
Underwriting Agreement, the Escrow Agent shall deliver, on the date of
issuance of the Additional Preferred Securities, to the Issuer and the
Underwriter a duly executed certificate, substantially in the form of
Exhibit A hereto, with respect to the Additional Pledged Securities, of an
officer of the Escrow Agent, confirming the Escrow Agent's maintenance of the
Escrow Account and its receipt and holding of the Additional Pledged
Securities or a security entitlement thereto and the crediting of the
Additional Pledged Securities or such security entitlement to the Escrow
Account, all in accordance with this Escrow Agreement.
(h) As soon as available from the appropriate filing offices after
the execution and delivery of this Escrow Agreement, the Issuer shall deliver
to the Escrow Agent acknowledgment copies or stamped receipt copies of proper
financing statements, duly filed on or before the Closing Date (as defined in
the LLC Agreement) with the filing offices respectively designated by the UCC
for the State of New York and the Uniform Commercial Code as enacted and in
effect in the State of California on the Closing Date for the State of
California, covering the Collateral described in this Escrow Agreement.
SECTION 4. DISBURSEMENTS.
(a) The Issuer hereby agrees that, on the date of each of the
first thirteen scheduled dividend payments on the Preferred Securities, the
Escrow Agent shall release from the Escrow Account and pay to the Holders of
the Preferred Securities funds sufficient to provide for payment in full of
such dividend payment then due on the Preferred Securities. The Escrow Agent
will release such funds on each such date funds in accordance with the terms
hereof and the payment provisions of the LLC Agreement to the Holders of the
Preferred Securities from (and to the extent of) proceeds of the Pledged
Securities in the Escrow Account. To the extent that a Class of Pledged
Securities (as defined below) is scheduled to mature on or about a dividend
payment date, the Escrow Agent shall make the dividend payment from such
Class of
(b) If the Issuer delivers to the Escrow Agent, prior to August 1,
2001, immediately available funds from any source other than the Escrow
Account ("Issuer Funds"), to make any dividend payment or portion of a
dividend payment, the Escrow Agent shall pay over to the Issuer or the
Issuer's designee, as the case may be, from the property in the Escrow
Account an amount less than or equal to the amount of Issuer Funds applied to
such dividend payment (or such lesser amount as the Escrow Agent may obtain
by liquidating Collateral to approximate the amount so applied) as soon as
practicable.
-4-
<PAGE>
(c) Upon (i) payment in full of the first thirteen scheduled
dividend payments on the Preferred Securities or (ii) exchange of all of the
Preferred Securities into shares of CellNet Common Stock, the security
interest in the Collateral granted pursuant to this Escrow Agreement will
automatically terminate and be of no further force and effect and the Escrow
Agent shall promptly release, pay over and transfer the remaining Collateral
to the Issuer or as the Issuer may direct; PROVIDED, that, in the case of an
exchange, the Escrow Agent shall not release any Class of Pledged Securities
(as defined below) which has a scheduled maturity within 15 days after the
date of release. Furthermore, upon the release of any Collateral from the
Escrow Account in accordance with the terms of this Escrow Agreement, whether
upon release of Collateral to Holders as payment of dividends or otherwise,
the security interest evidenced by this Escrow Agreement in such released
Collateral will automatically terminate and be of no further force and
effect. The Escrow Agent will take all steps reasonably requested by CellNet
or Funding to evidence any such release of record.
(d) At least six Business Days prior to the due date of each of the
first thirteen scheduled dividend payments on the Preferred Securities, the
Issuer shall give the Escrow Agent written notice whether such dividend payment
will be made pursuant to Section 4(a) or 4(b) and the respective amounts of the
dividend that will be paid from the Escrow Account and from Issuer Funds. Any
Issuer Funds to be used to make any dividend payment shall be delivered to the
Escrow Agent, in immediately available funds, prior to 10 a.m. one business day
prior to such dividend payment date. If no such notice is given or such Issuer
Funds have not been so delivered, the Escrow Agent will make the scheduled
dividend payment by releasing the appropriate amount from the property then
on deposit in the Escrow Account.
(e) Upon any Automatic Exchange, the Escrow Agent, pursuant to a
written notice given by the Issuer to the Escrow Agent, shall release from
the Escrow Account and pay the Holders whose Preferred Securities are being
automatically exchanged for shares of CellNet Common Stock pursuant to such
Automatic Exchange, such Holders' pro rata share of the entire Collateral, as
calculated by the Issuer and set forth in the Issuer's notice.
(f) The Issuer hereby authorizes the Escrow Agent to liquidate
Collateral in the Escrow Account (pursuant to written instructions from
Issuer) in order to make any scheduled payment of dividends or payment
pursuant to Section 4(e) above unless there are sufficient funds in the
Escrow Account on such dividend payment date.
(g) In the event that, prior to August 1, 2001, a holder of the
Preferred Securities exchanges such Preferred Securities with the Issuer for
shares of CellNet Common Stock in accordance with the LLC Agreement, the
Escrow Agent, upon receipt of a written notice thereof from the Issuer, shall
release and pay to CellNet from the Escrow Account an amount of each Class of
Pledged Securities (other than the Class of Pledged Securities, if any, that
will mature within 15 days from the date of such exchange) that are then held
in the Escrow Account equal to all of the Pledged Securities in such Class of
Pledged Securities multiplied by a fraction, the numerator of which is the
number of Preferred Securities which are being exchanged and the denominator
of which is all of the outstanding
-5-
<PAGE>
Preferred Securities, as calculated by the Issuer and set forth in the
Issuer's notice; provided however, that the Escrow Agent shall only release
each such Class of Pledged Securities to the extent that it receives from an
officer of the Issuer a written notice stating that it is such officer's
reasonable opinion that after such release, the Pledged Securities remaining
in the Escrow Account will be sufficient upon receipt of scheduled interest
and/or principal payment of all remaining Pledged Securities thereafter held
in the Pledged Account to provide payment for the remaining cash dividends
due on the Preferred Securities. Each group of Pledged Securities that has a
scheduled maturity on or about a dividend payment date with respect to the
Preferred Securities shall be considered, for purposes of this Section 4, a
"Class of Pledged Securities".
(h) Nothing contained in this Escrow Agreement shall (i) afford the
Issuer any right to issue entitlement orders with respect to any security
entitlement to the Pledged Securities or any securities account in which any
such security entitlement may be carried, or otherwise afford the Issuer control
of any such security entitlement or (ii) otherwise give rise to any rights of
the Issuer with respect to the Pledged Securities, any security entitlement
thereto or any securities account in which any such security entitlement may be
carried, other than the Issuer's rights under this Escrow Agreement as the
beneficial owner of Collateral pledged to and subject to the exclusive dominion
and control of the Escrow Agent in its capacity as such.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Issuer hereby
represents and warrants that:
(a) The execution and delivery by the Issuer of, and the
performance by the Issuer of its obligations under, this Escrow Agreement
will not contravene any provision of applicable law or the Certificate of
Formation of the Issuer or any material agreement or other material
instrument binding upon the Issuer or any of its subsidiaries or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Issuer or any of its subsidiaries, or result in the
creation or imposition of any lien on any assets of the Issuer, except for
the security interests granted under this Escrow Agreement; no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required (i) for the execution, delivery or performance by
the Issuer of its obligations under this Escrow Agreement, (ii) for the grant
by the Issuer of the security interest created hereby or for the pledge by
the Issuer of the Collateral pursuant to this Escrow Agreement or (iii)
except for any such consents, approvals, authorizations or orders required to
be obtained by the Escrow Agent (or the Holders) for reasons other than the
consummation of this transaction, for the exercise by the Escrow Agent of the
rights provided for in this Escrow Agreement or the remedies in respect of
the Collateral pursuant to this Escrow Agreement.
(b) The Issuer is the beneficial owner of the Collateral, free and
clear of any Lien or claims of any person or entity (except for the security
interests granted under this Escrow
-6-
<PAGE>
Agreement). No financing statement covering the Issuer's interest in the
Pledged Securities is on file in any public office, other than the financing
statements filed pursuant to this Escrow Agreement. The Issuer has no trade
names.
(c) This Escrow Agreement has been duly authorized, validly
executed and delivered by the Issuer and constitutes a valid and binding
agreement of the Issuer, enforceable against the Issuer in accordance with
its terms, except as the enforceability hereof may be limited by
(i) bankruptcy, insolvency, fraudulent conveyance, preference,
reorganization, moratorium or similar laws now or hereafter in effect
relating to or affecting creditors' rights or remedies generally, (ii) the
applicability of equitable principles, whether in a proceeding in equity or
at law, (iii) the exculpation provisions and rights to indemnification
hereunder may be limited by U.S. federal and state securities laws and public
policy considerations and (iv) the waiver of rights and defenses contained in
Section 11(b) and Section 14.11 hereof may be limited by applicable law.
(d) Upon the transfer to the Escrow Agent of the Pledged
Securities and the acquisition by the Escrow Agent of a security entitlement
thereto and control thereover, in accordance with Section 3, the pledge of
and grant of a security interest in the Collateral securing the payment of
the Obligations for the benefit of the Escrow Agent and the Holders of the
Preferred Securities will constitute a perfected security interest in such
Collateral with first priority against all creditors of the Issuer (and any
persons purporting to purchase any of the Collateral from the Issuer) except
as the enforceability thereof may be limited by (i) bankruptcy, insolvency,
fraudulent conveyance, preference, reorganization, moratorium or similar laws
now or hereafter in effect relating to or affecting creditors' rights or
remedies generally and (ii) the applicability of equitable principles,
whether in a proceeding in equity or at law.
(e) There are no legal or governmental proceedings pending or, to
the best of the Issuer's knowledge, threatened to which the Issuer or any of
its subsidiaries is a party or to which any of the properties of the Issuer
or any such subsidiary is subject that would materially adversely affect the
power or ability of the Issuer to perform its obligations under this Escrow
Agreement or to consummate the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Escrow Agreement
is not prohibited by law or governmental regulation (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System) applicable to the Issuer.
(g) No Event of Default (as defined below) exists.
SECTION 6. FURTHER ASSURANCES. The Issuer will, promptly upon
request by the Escrow Agent or as reasonably necessary to effectuate the
purposes hereof, at the Issuer's expense, execute and deliver or cause to be
executed and delivered, or use its reasonable best efforts to procure, all
assignments, instruments and other documents, all in form and substance
reasonably satisfactory to the Escrow Agent, deliver possession of all
instruments and deliver (within the meaning of UCC Section 8-301) all
securities (certificated and uncertificated), together with effective
endorsements or instruments of transfer duly executed in blank to the Escrow
Agent and take any other actions that are necessary or desirable to perfect,
continue the perfection of, or protect the first priority of the Escrow
Agent's security interest in and to the Collateral, to protect the Collateral
against the rights, claims, or interests of third persons (other than any
such rights, claims or interests created by or arising through the Escrow
Agent) or to effect the purposes of this Escrow Agreement.
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Without limiting the generality of the foregoing, the Issuer will: (i)
if any Collateral shall be evidenced by a promissory note or other
instrument, deliver and pledge to the Escrow Agent hereunder such note or
instrument duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the Escrow
Agent; and (ii) execute and file such financing or continuation statements or
amendments thereto, and such other instruments or notices, as may be
necessary or desirable in order to perfect and preserve the pledge,
assignment and security interest granted or purported to be granted hereby.
A photocopy or other reproduction of this Escrow Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as
a financing statement where permitted by law. The Issuer will furnish to the
Escrow Agent from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Escrow Agent may reasonably request, all in reasonable
detail. The Issuer will promptly pay all reasonable costs incurred in
connection with any of the foregoing within 60 days of receipt of an invoice
therefor. The Issuer also agrees to take all actions that are necessary to
perfect or continue the perfection of, or to protect the first priority of,
the Escrow Agent's security interest in and to the Collateral, including the
filing of all necessary financing and continuation statements, and to protect
the Collateral against the rights, claims or interests of third persons
(other than any such rights, claims or interests created by or arising
through the Escrow Agent).
SECTION 7. COVENANTS. The Issuer covenants and agrees with the
Escrow Agent for the benefit of the Escrow Agent and the Holders of the
Preferred Securities that from and after the date of this Escrow Agreement
until the earliest to occur of payment in full of the Obligations, payment in
full in cash of all dividends accruing through August 1, 2001, an Automatic
Exchange or the exchange of the Preferred Securities for CellNet Common
Stock:
(a) that (i) it will not (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to, or any
right to initiate entitlement orders with respect to, any of the Collateral
or its beneficial interest therein, and (ii) it will not create or permit to
exist any Lien or other adverse interest in or with respect to its beneficial
interest in any of the Collateral (except for the security interests granted
under this Escrow Agreement); and
(b) that it will not (i) enter into any agreement or understanding
that restricts or inhibits or purports to restrict or inhibit the Escrow
Agent's rights or remedies hereunder, including, without limitation, the
Escrow Agent's right to sell or otherwise dispose of the Collateral or
(ii) fail to pay or discharge any tax, assessment or levy of any nature with
respect to its beneficial interest in the Collateral not later than five days
prior to the date of any proposed sale under any judgment, writ or warrant of
attachment with respect to such beneficial interest.
(c) that, in the event the Underwriter shall decide to exercise
the right to purchase the Additional Preferred Securities pursuant to the
Underwriting Agreement, the Issuer shall use a portion of the proceeds from
such purchase by the Underwriter to purchase and deliver to the Escrow Agent
additional United States Treasury securities (the "Additional Pledged
Securities") in such amount as will be sufficient upon receipt of scheduled
interest and/or principal payments of all Pledged Securities thereafter held
in the Pledged Account to provide payment for the first thirteen cash
dividends due on the Preferred Securities. The Additional Pledged Securities
shall be pledged by the Issuer to the Escrow Agent for the benefit of the
Holders and shall be held by the Escrow Agent in the Pledged Account.
SECTION 8. POWER OF ATTORNEY. In addition to all of the powers
granted to the Escrow Agent pursuant to the LLC Agreement, the Issuer hereby
appoints and constitutes the Escrow Agent as the Issuer's attorney-in-fact
(with full power of substitution) to exercise to the fullest extent permitted
by law all of the following powers upon and at any time after the occurrence
and during the continuance of an Event of Default: (a) collection of proceeds
of any Collateral; (b) conveyance of any item of Collateral to any purchaser
thereof; (c) giving of any notices or recording of any Liens under Section 6
hereof; and (d) paying or discharging taxes or Liens levied or placed upon
the Collateral, with any such payments made by the Escrow Agent to become
part of the Obligations of the Issuer secured hereby. The Escrow Agent's
authority under this Section 8 shall include, without limitation, the
authority to endorse and negotiate any checks or instruments representing
proceeds of Collateral in the name of the Issuer, execute and give receipt
for any certificate of ownership or any document constituting Collateral,
transfer title to any item of Collateral, sign the Issuer's name on all
financing statements (to the extent permitted by applicable law) or any other
documents deemed necessary or appropriate by the Escrow Agent to preserve,
protect or perfect the security interest in the Collateral and to file the
same, prepare, file and sign the Issuer's name on any notice of Lien, and
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to take any other actions arising from or incident to the powers granted to
the Escrow Agent in this Escrow Agreement. This power of attorney is coupled
with an interest and is irrevocable by the Issuer.
SECTION 9. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The rights and
powers granted to the Escrow Agent hereunder are being granted in order to
preserve and protect the security interest of the Escrow Agent and the
Holders of the Preferred Securities in and to the Collateral granted hereby
and shall not be interpreted to, and shall not impose any duties on the
Escrow Agent in connection therewith other than those expressly provided
herein or imposed under applicable law. Except as provided by applicable law
or by the LLC Agreement, the Escrow Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to
that which the Escrow Agent accords similar property held by the Escrow Agent
for similar accounts, it being understood that the Escrow Agent in its
capacity as such shall not have any responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities or
other matters relative to any Collateral, whether or not the Escrow Agent has
or is deemed to have knowledge of such matters, (b) taking any necessary
steps to preserve rights against any parties with respect to any Collateral
or (c) investing or reinvesting any of the Collateral or any loss on any
investment. The Escrow Agent may reasonably rely on any written notice from
the Issuer without any further investigation on its part. Furthermore, the
Escrow Agent assumes no responsibility for the validity of the Pledged
Securities nor the sufficiency of such Pledged Securities to cover the first
thirteen dividend payments on the Preferred Securities.
SECTION 10. INDEMNITY. The Issuer shall fully indemnify, hold
harmless and defend the Escrow Agent and its directors, officers, agents and
employees, from and against any and all claims, actions, obligations,
liabilities and expenses, including reasonable defense costs, reasonable
investigative fees and costs, and reasonable legal fees, expenses and damages
arising from the Escrow Agent's performance as Escrow Agent under this Escrow
Agreement, except to the extent that such claim, action, obligation,
liability or expense is directly attributable to the bad faith, gross
negligence or wilful misconduct of such indemnified Person. The obligations
of the Issuer under this Section 10 shall survive termination of this Escrow
Agreement.
SECTION 11. REMEDIES UPON EVENT OF DEFAULT. If any of the events
described in subsection (e) of this Section 11 (each, an "Event of Default")
shall have occurred and be continuing:
(a) The Escrow Agent and the Holders of the Preferred Securities
shall have, in addition to all other rights given by law or by this Escrow
Agreement or the LLC Agreement, all of the rights and remedies with respect
to the Collateral of a secured party under the UCC. In addition, with
respect to any Collateral that shall then be in or shall thereafter come into
the possession or custody of the Escrow Agent, the Escrow Agent may sell or
cause the same to be sold at any broker's board or at public or private sale,
in one or more sales or lots, at such price or prices as the Escrow Agent may
deem best, for cash or on credit or for future delivery, without assumption
of any credit risk. The purchaser of any or all Collateral so sold shall
thereafter hold the same absolutely, free
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from any claim, encumbrance or right of any kind whatsoever created by or
through the Issuer. The Escrow Agent will give the Issuer reasonable notice
of the time and place of any public sale thereof, or of the time after which
any private sale or other intended disposition is to be made. Any sale of
the Collateral conducted in conformity with reasonable commercial practices
of banks, insurance companies, commercial finance companies, or other
financial institutions disposing of property similar to the Collateral shall
be deemed to be commercially reasonable. Any requirements of reasonable
notice shall be met if such notice is mailed to the Issuer as provided in
Section 14.1 hereof at least ten (10) days before the time of the sale or
disposition, or in the case of Collateral consisting of Treasury Strips or
other marketable securities which, the Issuer acknowledge, are collateral of
a type sold on a recognized market, two (2) business days before the time of
such sale or disposition. The Escrow Agent or any Holder of Preferred
Securities may, in its own name or in the name of a designee or nominee, buy
any of the Collateral at any public sale and, if permitted by applicable law,
at any private sale. All expenses (including court costs and reasonable
attorneys' fees, expenses and disbursements) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from the
proceeds of the sale or other disposition of the Collateral.
(b) All cash proceeds received by the Escrow Agent in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Escrow Agent, be held by the Escrow
Agent as collateral for, and/or then or at any time thereafter applied (after
payment of any amounts payable to the Escrow Agent pursuant to Section 12) in
whole or in part by the Escrow Agent for the ratable benefit of the Holders
of the Preferred Securities against, all or any part of the Obligations in
the following order: FIRST, to the fees, costs and expenses incurred by the
Escrow Agent in connection with the maintenance of the Escrow Account and
performance of its duties hereunder; SECOND, pro rata to the Holders in
respect of any dividends on the Preferred Securities then due or past due;
and THIRD, to any other Obligations secured hereby, pro rata to the Holders.
Any surplus of such cash or cash proceeds held by the Escrow Agent and
remaining after payment in full of all the Obligations shall be paid over to
the Issuer or to whomsoever may be lawfully entitled to received such surplus.
(c) The Escrow Agent may, at any time or from time to time,
following written notice to the Issuer except in the case of dividend
payments then due and payable, set-off and otherwise apply all or any part of
the Obligations then due and payable against the Escrow Account or any part
thereof.
(d) The Issuer further agrees to use its reasonable best efforts
to do or cause to be done all such other acts as may be necessary to make
such sale or sales of all or any portion of the Collateral pursuant to this
Section 11 valid and binding and in compliance with any and all other
applicable requirements of law. The Issuer further agrees that a breach of
any of the covenants contained in this Section 11 will cause irreparable
injury to the Escrow Agent and the Holders of the Preferred Securities, that
the Escrow Agent and the Holders of the Preferred Securities have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 11 shall be specifically enforceable
against the Issuer, and the Issuer hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred.
(e) "Events of Default", wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(i) the occurrence of any condition or event, as a result
of which, the Escrow Agent no longer has sole dominion and control over, and
a perfected, first-priority security interest in, the Collateral; or
(ii) a default by the Issuer in the observance or
performance of any other covenant or agreement contained in this Escrow
Agreement, which default continues for a period of 45 days after the Issuer
receives written notice specifying the default (and requiring that such
default be remedied) from Holders of not less than 25% of the outstanding
Preferred Securities; or
(iii) CellNet or the Issuer (A) commences a voluntary case or
proceeding under Title 11 of the United States Code as amended and in effect
from time to time or any other bankruptcy, insolvency, receivership,
reorganization, moratorium, or other law providing relief to debtors
(collectively, "Bankruptcy Law"), with respect to itself, (B) consents to the
entry of a judgment, decree or order for relief against it in any involuntary
case or proceeding under any Bankruptcy Law, (C) consents to the appointment
of a custodian of it or for substantially all of its property, (D) consents
to or acquiesces in the institution of a bankruptcy or an insolvency
proceeding against it, (E) makes a general assignment for the benefit of its
creditors, or (F) takes any corporate action to authorize or effect any of
the foregoing; or
(iv) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of CellNet or the Issuer in an
involuntary case or proceeding under any Bankruptcy Law, which shall
(A) approve as properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of CellNet or the Issuer, (B) appoint a
custodian of CellNet or the Issuer or for substantially all of its property,
or (C) order the winding-up or liquidation of its affairs; and such judgment,
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(v) any person or entity shall commence judicial
proceedings to foreclose upon any of the Collateral or shall initiate any
action under applicable law to enforce rights against any of the Collateral.
SECTION 12. EXPENSES. The Issuer will within 60 days after receipt of
invoice thereof, pay to the Escrow Agent the amount of any and all reasonable
expenses, including, without limitation, the reasonable fees, expenses and
disbursements of its counsel, experts and agents retained by the Escrow Agent,
that the Escrow Agent may incur in connection with (a) the review, negotiation
and administration of this Escrow Agreement, (b) the custody or preservation of,
or the sale of, collection from, or other realization upon, any of the
Collateral, (c) the exercise or enforcement of any of the rights of the Escrow
Agent and the Holders of the Preferred Securities hereunder or (d) the failure
by the Issuer to perform or observe any of the provisions hereof.
SECTION 13. SECURITY INTEREST ABSOLUTE. All rights of the Escrow Agent
and the Holders of the Preferred Securities and security interests hereunder,
and all obligations of the Issuer hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Underwriting
Agreement or any other agreement or instrument relating thereto;
(b) any lack of validity or enforceability of the LLC Agreement or
any other agreement or instrument relating thereto;
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(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the LLC Agreement;
(d) any taking, exchange, surrender, release or non-perfection of
any Liens on any other collateral for all or any of the Obligations; or
(e) any manner of application of collateral, or proceeds thereof,
to all or any of the Obligations, or any manner of sale or other disposition
of any collateral for all or any of the Obligations or any other assets of
the Issuer;
(f) any change, restructuring or termination of the legal
structure or existence of the Issuer; or
(g) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Issuer in respect of the Obligations or of this Escrow
Agreement.
SECTION 14. MISCELLANEOUS PROVISIONS.
Section 14.1. NOTICES. Any notice or communication given hereunder shall
be sufficiently given if in writing and delivered in person or mailed by first
class mail, commercial courier service or telecopier communication, addressed as
follows:
if to the Issuer:
CellNet Funding, LLC
125 Shoreway Road
San Carlos, CA 94070
Fax: (650) 508-6678
Attention: Executive Vice President and Chief Financial Officer
with copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Fax: (650) 493-6811
Attention: Barry Taylor
if to CellNet:
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, CA 94070
Fax: (650) 508-6678
Attention: David L. Perry and Ben H. Lyon
with copy to:
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Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Fax: (212) 848-7179
Attention: Jerry V. Elliot
if to the Escrow Agent:
The Bank of New York
101 Barclay Street, 12 East
New York, NY 10286
Fax: (212) 815-7181
Attention: Matthew Louis
with copy to:
Emmet, Marvin and Martin
120 Broadway
New York, NY 10271
Fax: (212) 238-3100
Attention: Bayard Chapin
Section 14.2. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Escrow
Agreement may not be used to interpret another pledge, security or debt
agreement of the Issuer. No such pledge, security or debt agreement (other than
the LLC Agreement) may be used to interpret this Escrow Agreement.
Section 14.3. SEVERABILITY. The provisions of this Escrow Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Escrow Agreement in any jurisdiction.
Section 14.4. HEADINGS. The headings in this Escrow Agreement have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 14.5. COUNTERPART ORIGINALS. This Escrow Agreement may be signed
in two or more counterparts, each of which shall be deemed an original, but all
of which shall together constitute one and the same agreement.
Section 14.6. NO THIRD PARTY BENEFICIARIES. Nothing in this Escrow
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders of the Preferred
Securities, any benefit or any legal or equitable right, remedy or claim under
this Escrow Agreement.
Section 14.7. AMENDMENTS, WAIVERS AND CONSENTS. Any amendment or waiver
of any provision of this Escrow Agreement and any consent to any departure by
the Issuer from any provision of this Escrow Agreement shall be effective only
if made or duly given in compliance with all of the terms and provisions of the
LLC Agreement, and neither the Escrow Agent nor any Holder of Preferred
Securities shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced in
any Event of Default or in any breach of any of the terms and conditions hereof.
Failure of the Escrow Agent or any Holder of
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Preferred Securities to exercise, or delay in exercising, any right, power or
privilege hereunder shall not preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. A waiver by the
Escrow Agent or any Holder of Preferred Securities of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy that the Escrow Agent or such Holder of Preferred Securities would
otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
Section 14.8. INTERPRETATION OF AGREEMENT. To the extent a term or
provision of this Escrow Agreement conflicts with the LLC Agreement, the LLC
Agreement shall control with respect to the subject matter of such term or
provision; PROVIDED, that the duties of the Escrow Agent shall be contained
solely within this Escrow Agreement.
Section 14.9. CONTINUING SECURITY INTEREST; TERMINATION.
(a) This Escrow Agreement shall create a continuing security
interest in and to the Collateral and shall, unless otherwise provided in
this Escrow Agreement, remain in full force and effect until the payment in
full in cash of the Obligations. This Escrow Agreement shall be binding upon
the Issuer, its transferees, successors and assigns, and shall inure,
together with the rights and remedies of the Escrow Agent hereunder, to the
benefit of the Escrow Agent, the Holders of the Preferred Securities and
their respective successors, transferees and assigns.
(b) So long as no Event of Default shall have occurred and be
continuing, this Escrow Agreement (other than Issuer's obligations under
Sections 10 and 12) shall terminate upon the payment in full in cash of the
Obligations. At such time, the Escrow Agent shall, at the Issuer's written
request, reassign and redeliver to the Issuer all of the Collateral hereunder
that has not been sold, disposed of, retained or applied by the Escrow Agent
in accordance with the terms of this Escrow Agreement and the LLC Agreement
and take all actions requested by the Issuer to release the security interest
created by this Escrow Agreement in and to the Collateral, including the
execution and delivery of all termination statements necessary to terminate
any financing or continuation statements filed with respect to the
Collateral. Such reassignment and redelivery shall be without warranty by or
recourse to the Escrow Agent in its capacity as such, except as to the
absence of any Liens on the Collateral created by or arising through the
Escrow Agent, and shall be at the reasonable expense of the Issuer.
Section 14.10. SURVIVAL OF REPRESENTATIONS AND COVENANTS. All
representations, warranties and covenants of the Issuer contained herein
shall survive the execution and delivery of this Escrow Agreement, and shall
terminate only upon the termination of this Escrow Agreement.
Section 14.11. WAIVERS. The Issuer waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and
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all other notices to which the Issuer might otherwise be entitled, except as
otherwise expressly provided herein or in the LLC Agreement.
Section 14.12. AUTHORITY OF THE ESCROW AGENT.
(a) The Escrow Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Escrow Agent by the terms
hereof, together with such powers as are reasonably incident thereto. The
Escrow Agent may perform any of its duties hereunder or in connection with the
Collateral by or through agents or employees and shall be entitled to retain
counsel and to act in reliance upon the advice of counsel concerning all such
matters. Except as otherwise expressly provided in this Pledge Agreement or
the LLC Agreement, neither the Escrow Agent nor any director, officer, employee,
attorney or agent of the Escrow Agent shall be liable to the Issuer for any
action taken or omitted to be taken by the Escrow Agent, in its capacity as
Escrow Agent, hereunder, except for its own bad faith, gross negligence or
willful misconduct, and the Escrow Agent shall not be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Escrow Agent and its directors, officers,
employees, attorneys and agents shall be entitled to rely on any communication,
instrument or document believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons.
(b) The Issuer acknowledges that the rights and responsibilities
of the Escrow Agent under this Escrow Agreement with respect to any action
taken by the Escrow Agent or the exercise or non-exercise by the Escrow Agent
of any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Escrow Agreement shall, as between
the Escrow Agent and the Holders of the Preferred Securities, be governed by
the LLC Agreement and by such other agreements with respect thereto as may
exist from time to time among them, but, as between the Escrow Agent and the
Issuer, the Escrow Agent shall be conclusively presumed to be acting as agent
for the Holders of the Preferred Securities with full and valid authority so
to act or refrain from acting, and the Issuer shall not be obligated or
entitled to make any inquiry respecting such authority.
Section 14.13. RIGHTS OF HOLDERS OF THE PREFERRED SECURITIES. No Holder of
Preferred Securities shall have any independent rights hereunder other than
those rights granted to individual Holders of the Preferred Securities pursuant
to the LLC Agreement; provided that nothing in this subsection shall limit any
rights granted to the Escrow Agent under the Preferred Securities or the LLC
Agreement.
Section 14.14. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES.
(A) THIS ESCROW AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER
THE LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING: THE MATTERS
IDENTIFIED IN 31 C.F.R. PART 357, 61 FED. REG. 43626
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AUG. 23, 1996), INCLUDING REVISED ARTICLE 8, SHALL BE GOVERNED SOLELY BY THE
LAWS SPECIFIED THEREIN.
(B) THE ISSUER HAS APPOINTED CELLNET DATA SYSTEMS, INC., 125
SHOREWAY ROAD, SAN CARLOS, CA 94070 AS ITS AGENT FOR SERVICE OF PROCESS IN
ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS ESCROW AGREEMENT AND FOR
ACTIONS BROUGHT UNDER U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY
FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK AND AGREES TO SUBMIT
TO THE JURISDICTION OF ANY SUCH COURT.
(C) THE ISSUER AGREES THAT THE ESCROW AGENT SHALL, IN ITS CAPACITY AS
ESCROW AGENT OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF PREFERRED SECURITIES,
HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST
THE ISSUER OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN
GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE ISSUER OR THE
COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE ESCROW AGENT TO REALIZE ON SUCH
COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE ESCROW AGENT. THE ISSUER AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS,
SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE ESCROW AGENT TO REALIZE
ON SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
ESCROW AGENT, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF
NOT ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.
THE ISSUER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN
THE CITY OF NEW YORK ONCE THE ESCROW AGENT HAS COMMENCED A PROCEEDING DESCRIBED
IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(D) THE ISSUER AGREES THAT NEITHER ANY HOLDER OF PREFERRED SECURITIES
NOR (EXCEPT AS OTHERWISE PROVIDED IN THIS ESCROW AGREEMENT OR THE LLC AGREEMENT)
THE ESCROW AGENT IN ITS CAPACITY AS ESCROW AGENT SHALL HAVE ANY LIABILITY TO THE
ISSUER (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY
THE ISSUER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS ESCROW
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS
BINDING ON THE ESCROW AGENT OR SUCH HOLDER OF PREFERRED SECURITIES, AS THE CASE
MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE
ESCROW AGENT
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OR SUCH HOLDERS OF PREFERRED SECURITIES, AS THE CASE MAY BE, CONSTITUTING BAD
FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(E) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE ISSUER WAIVES THE
POSTING OF ANY BOND OTHERWISE REQUIRED OF THE ESCROW AGENT OR ANY HOLDER OF
PREFERRED SECURITIES IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO
ENFORCE ANY JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS ESCROW AGREEMENT OR
ANY RELATED AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE ESCROW AGENT OR ANY
HOLDER OF PREFERRED SECURITIES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS ESCROW AGREEMENT
OR ANY RELATED AGREEMENT OR DOCUMENT BETWEEN THE ISSUER ON THE ONE HAND AND THE
ESCROW AGENT AND/OR THE HOLDERS OF THE PREFERRED SECURITIES ON THE OTHER HAND.
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IN WITNESS WHEREOF, the Issuer, CellNet and the Escrow Agent have each
caused this Escrow Agreement to be duly executed and delivered as of the date
first above written.
Issuer:
CELLNET FUNDING, LLC
By:
---------------------------------
CellNet Data Systems, Inc.,
Its: Manager
By:
--------------------------------
Name:
Title:
Escrow Agent:
BANK OF NEW YORK, as Escrow Agent
By:
-------------------------------
Name:
Title:
CELLNET:
CELLNET DATA SYSTEMS, INC.
By:
-------------------------------
Name:
Title:
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<PAGE>
TERMS OF THE EXCHANGEABLE LIMITED
LIABILITY COMPANY PREFERRED SECURITIES
DATED AS OF MAY __, 1998
WRITTEN ACTION OF THE MANAGER PURSUANT TO
SECTION 7.1 OF THE AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF CELLNET FUNDING, LLC
The undersigned Manager of CellNet Funding, LLC, a Delaware limited
liability company (the "Company"), pursuant to Section 7.1(b) of the Amended
and Restated Limited Liability Company Agreement of the Company (the
"Agreement") dated as of May __, 1998 by and among CellNet Data Systems, Inc.
("CellNet"), Ben H. Lyon, the Managers and the Persons who become Members of the
Company in accordance with the provisions thereof, does hereby authorize the
issue of, and establish the relative rights, powers, preferences, limitations
and restrictions of, a series of Preferred Securities as follows:
1. DEFINITIONS. All terms defined in the Agreement and not otherwise
defined herein shall have for purposes hereof the meanings provided for therein.
The following additional terms have the respective meanings specified below:
"Average Market Value" of the CellNet Common Stock means the average of the
Current Market Value for the Ten Trading Days ending on the second Business Day
prior to the applicable date of payment.
"Book-Entry Interest" means a beneficial interest in the global
certificates representing Preferred Securities, ownership and transfers of which
shall be made through the book-entry system of a Clearing Agency as described in
Section 11.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banking institutions in The City of New York are authorized or obligated
by law or executive order to close.
"CellNet Common Stock" means the Common Stock, $.001 par value per share,
of CellNet.
"CellNet Preferred Stock" means the Redeemable Preferred Stock, $.001
par value per share, of CellNet with such terms and provisions as set forth
in the Certificate of Designation, Rights and Preferences of the Redeemable
Preferred Stock of CellNet.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, that
is acting as depositary for the
<PAGE>
Preferred Securities and in whose name (or nominee's name) shall be
registered one or more global certificates representing Preferred Securities
and which shall undertake to effect book-entry transfers and pledges of
interests in the Preferred Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of interests in securities deposited with the
Clearing Agency.
"Closing Date" shall mean _____, 1998.
"Current Market Value" of the CellNet Common Stock means (i) the Volume
Weighted Average Price, as reported on the Nasdaq National Market, or (ii) the
average of the high and low sale prices of the CellNet Common Stock, if reported
on any other national securities exchange.
"Distributed Securities" has the meaning set forth in Section 5(b) hereof.
"Dividend Payment Date" has the meaning set forth in Section 4(a) hereof.
"Escrow Agreement" means the Escrow and Security Agreement dated as of
______, 1998 among CellNet, the Company and The Bank of New York, for the
ratable benefit of holders of the Preferred Securities.
"Exchange Agent" has the meaning set forth in Section 5(a) hereof.
"Exchange Price" means $25 divided by the Exchange Rate.
"Exchange Rate" has the meaning set forth in Section 5 hereof
"Guarantee" means the Guarantee Agreement dated as of _______, 1998,
executed and delivered between and the Company and CellNet for the benefit of
the holders from time to time of the Preferred Securities, as amended from time
to time.
"Holder(s)" means the registered holders of the Preferred Securities as
they appear on the books and records of the Company.
"Initial Redemption Date" has the meaning set forth in Section 6(b) hereof.
"Liquidation Distribution" has the meaning set forth in Section 8 hereof.
"Mandatory Exchange" has the meaning set forth in Section 5(a) hereof.
"Mandatory Exchange Date" has the meaning set forth in Section 5(a)
hereof.
"Mandatory Redemption" has the meaning set forth in Section 6(a) hereof.
"Mandatory Redemption Date" means May 1, 2010.
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<PAGE>
"Notice of Redemption" has the meaning set forth in Section 7(a) hereof.
"Optional Redemption" has the meaning set forth in Section 6(b) hereof.
"Preferred Securities" has the meaning set forth in Section 2 hereof.
"Securities" shall be a collective reference to the Preferred Securities
and the CellNet Common Stock issuable upon exchange of the Preferred Securities
pursuant to the terms of this Written Action.
"Securities Act" means the Securities Act of 1933, as amended.
"Trigger Event" has the meaning set forth in Section 5(b)(viii).
"Trading Day" means, with respect to any security listed or admitted to
trading on the NYSE, any day on which such securities are traded on the NYSE,
or, if such security is not listed or admitted to trading on the NYSE, on the
principal national securities exchange on which such security is listed or
admitted to trading, or, if such security is not listed or admitted to trading
on a national securities exchange, on the National Market System of the National
Association of Securities Dealers, Inc., or, if such security is not quoted or
admitted to trading on such quotation system, on the principal quotation system
on which such security is listed or admitted to trading or quoted, or, if not
listed or admitted to trading or quoted on any national securities exchange or
quotation system, in the over-the-counter market.
"Written Action" shall mean this written action of the Manager.
2. DESIGNATION AND RANKING. A total of 5,060,000 securities with a
liquidation preference of $25.00 per security are hereby authorized and
designated as "Exchangeable Limited Liability Preferred Securities"
(collectively, the "Preferred Securities", and, individually, a "Preferred
Security"). The Preferred Securities will, with respect to dividend
distributions and distributions upon the liquidation, winding-up or
dissolution of the Company, rank senior to all classes of common securities
of the Company. No other classes of capital securities or series of preferred
securities of the Company which are senior or on parity with the Preferred
Securities will be issuable by the Company.
3. VOTING.
Except as otherwise required in the Delaware Limited Liability
Company Act, 6 Del. C. Section 18-101, et seq., as amended, the Agreement
(including, without limitation, Section 8.1 thereof) or this Written Action,
Holders shall have, with respect to such Preferred Securities, no right or
power to vote on any question or matter or in any proceeding or to be
represented at, or to receive notice of, any meeting of Members.
-3-
<PAGE>
4. DIVIDENDS.
(a) The Holders shall be entitled to receive, out of funds legally
available therefor, cumulative dividends at a rate per annum of % of the
liquidation preference of $25 per Preferred Security. The amount of
dividends payable for a full quarterly dividend period shall be computed on a
daily basis. Dividends shall accrue from _______, 1998, and shall be payable
quarterly in arrears on February 1, May 1, August 1 and November 1 of each
year (each a "Dividend Payment Date") commencing August 1, 1998 to Holders of
record at the close of business on January 15, April 15, July 15 and October
15 immediately preceding the corresponding Dividend Payment Date. Dividends
shall accrue and be cumulative from _______, 1998 whether or not they have
been earned or declared and whether or not there are funds of the Company
legally available for the payment of dividends. In the event that any date
on which dividends are payable on the Preferred Securities is not a Business
Day, then payment of the dividend payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
(b) Dividends on the Preferred Securities will be paid to the
extent that the Company has sufficient assets legally available for the
payment of such dividends. Amounts available to the Company for dividends to
the holders of the Preferred Securities will be limited to cash, shares of
CellNet Common Stock received by the Company from CellNet as dividends on the
CellNet Preferred Stock (and proceeds from any sales of such CellNet Common
Stock by the Company) and the interest on and principal of the Treasury
strips that are held in the Escrow Account. Any such CellNet Common Stock
received by the Company may be paid as a dividend to the holders of the
Preferred Securities (only after August 1, 2001) or sold in the open market
to generate cash proceeds to pay cash dividends on the Preferred Securities.
(c) Through and including August 1, 2001 dividends on the
Preferred Securities shall be paid in cash. Thereafter, dividends on the
Preferred Securities may be paid, at the Company's option, in (i) cash, (ii)
CellNet Common Stock, valued at 90% of the Average Market Value of the
CellNet Common Stock, or (iii) any combination of cash and CellNet Common
Stock so valued; provided that any dividend payment must be made in cash to
the extent CellNet shall have provided the Company with cash (whether through
dividends on the CellNet Preferred Stock or otherwise) to make all or any
portion of such dividend payment. If any dividend (or portion thereof)
payable on any Dividend Payment Date is not paid in full on such Dividend
Payment Date, the amount of such dividend that is payable and that is not
paid on such date shall cumulate at the dividend rate, compounding quarterly,
until paid in full.
5. EXCHANGE.
(a) The Preferred Securities shall be exchangeable with the Company
at any time, in whole or in part, prior to May 1, 2010 (the "Mandatory
Redemption Date") (unless earlier redeemed), at the option of the holder thereof
and in the manner described below, into shares of
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<PAGE>
CellNet Common Stock at an exchange rate (the "Exchange Rate") which shall
initially be equal to _____ shares of CellNet Common Stock for each Preferred
Security (equivalent to an exchange of price of $ ____ per share of Common
Stock,) subject to adjustment as described below.
The Preferred Securities shall be automatically exchanged at any time
after the Closing Date and on or prior to May 1, 2001 (a "Mandatory
Exchange"), at the applicable exchange rate without any action on the part of
the Company or the holder on the next business day (the "Mandatory Exchange
Date") after the Current Market Value of the Common Stock equals or exceeds
the following trigger percentages (the "Trigger Percentages") which represent
the quotient of (i) the Exchange Price then in effect for at least 20 Trading
Days in any consecutive 30 Trading Day period during the 12 month period
ending on May 1 of the indicated year and (ii) the Current Market Value at
such time:
<TABLE>
<CAPTION>
TRIGGER
YEAR PERCENTAGES
<S> <C>
1999 170%
2000 160
2001 150
</TABLE>
In any consecutive 30 Trading Day period that includes Trading Days
before and after May 1, 1999 or May 1, 2000, the applicable Trigger
Percentage for each Trading Day in the trading period shall be used in order
to determine whether an Exchange Event has occurred.
Upon any Mandatory Exchange, the Company will make to each Holder an
additional payment in cash (the "Dividend Make-Whole Payment") with respect
to the Preferred Securities so exchanged in an amount equal to such Holder's
pro rata portion of the liquidation proceeds of any remaining Treasury strips
held pursuant to the Escrow Agreement. The Company will be obligated to make
the Dividend Make-Whole Payment on all Preferred Securities which are subject
to Mandatory Exchange. The Dividend Make-Whole Payment must be paid in cash.
A holder of a Preferred Security wishing to exercise its optional
exchange right shall (i) deliver an exchange notice to CellNet (in such
capacity, the "Exchange Agent"), (ii) if required, furnish appropriate
endorsements and transfer documents and (iii) if required, pay all transfer
or similar taxes, and the Exchange Agent shall, on behalf of such holder,
exchange such Preferred Securities with the Company for shares of CellNet
Common Stock and deliver such shares of CellNet Common Stock to such holder.
The Company shall obtain such shares of CellNet Common Stock by exchanging
shares of the CellNet Preferred Stock it holds with CellNet for CellNet
Common Stock, pursuant to the terms of the CellNet Preferred Stock.
Holders of Preferred Securities at the close of business on a dividend
record date shall be entitled to receive the dividends payable on such
Preferred Securities on the corresponding Dividend Payment Date
notwithstanding the exchange of such Preferred Securities following such
dividend record date but prior to such Dividend Payment Date. Except as
provided in the immediately preceding sentence, neither the Company nor
CellNet will make, or be required to make, any payment, allowance or
adjustment for accumulated and unpaid dividends, whether or not in arrears,
on exchanged Preferred Securities. Each exchange will be deemed to have been
effected
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<PAGE>
immediately prior to the close of business on the day on which the related
exchange notice was received by the Exchange Agent.
Following any exchange at the election of a holder of such holder's
Preferred Securities into CellNet Common Stock, dividends will cease to
accrue on such Preferred Securities and such holder will not be entitled to
participate in the proceeds from the Treasury strips held by Funding.
No fractional shares of CellNet Common Stock shall be issued as a result of
exchange, but in lieu thereof such fractional interest shall be paid by the
Company in cash based on the last reported sale price of CellNet Common Stock on
the date the affected Preferred Securities are surrendered for exchange.
(b) The Exchange Rate shall be adjusted from time to time by the
Company as follows:
(i) In case CellNet shall pay a dividend or make a distribution,
in shares of CellNet Common Stock, on CellNet Common Stock, the Exchange Rate in
effect at the opening of business on the date following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be increased by multiplying such Exchange Rate by a fraction
of which the denominator shall be the number of shares of CellNet Common Stock
outstanding at the close of business on the date fixed for such determination
and the numerator shall be the sum of such number of shares and the total number
of shares constituting such dividend or other distribution, such increase to
become effective immediately after the opening of business on the day following
the date fixed for such determination. CellNet will not pay any dividend or
make any distribution on shares of CellNet Common Stock held in the treasury of
CellNet. If any dividend or distribution of the type described in this Section
5(b)(i) is declared but is not so paid or made and not required to be so paid or
made, the Exchange Rate shall again be adjusted to the Exchange Rate which would
then be in effect if such dividend or distribution had not been declared.
(ii) In case CellNet shall issue rights or warrants to all
holders of CellNet Common Stock entitling them (for a period expiring within
45 days after the date fixed for determination of stockholders entitled to
receive such rights or warrants) to subscribe for or purchase CellNet Common
Stock at a price per share less than the Average Market Value per share at
the record date for the determination of stockholders entitled to receive
such rights or warrants, the Exchange Rate in effect immediately prior
thereto shall be adjusted so that the same shall equal the rate determined by
multiplying the Exchange Rate in effect immediately prior to the date fixed
for determination of stockholders entitled to receive such rights or warrants
by a fraction the denominator of which shall be the number of shares of
CellNet Common Stock outstanding at the close of business on the date fixed
for determination of stockholders entitled to receive such rights or warrants
plus the number of shares which the aggregate offering price of the total
number of shares so offered would purchase at such Average Market Value and
the numerator of which shall be the number of shares of CellNet Common Stock
outstanding on the date fixed for determination of stockholders entitled to
receive such rights or warrants plus the number of additional shares of
CellNet Common Stock offered for subscription or purchase. Such adjustment
shall be made successively whenever any such rights or warrants are issued,
and shall become effective immediately after the opening of business on the
day following the record date for the determination of the stockholders
entitled to receive such rights or warrants. In determining whether any
rights or warrants entitle the holders to subscribe for or purchase shares of
CellNet Common Stock at less
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<PAGE>
than such Average Market Value, and in determining the aggregate offering
price of such shares of CellNet Common Stock, there shall be taken into
account any consideration received by the CellNet for such rights or
warrants, the value of such consideration, if other than cash, to be
determined by the board of directors. To the extent that shares of CellNet
Common Stock are not delivered or required to be delivered after the
expiration of such rights or warrants, the Exchange Rate shall be readjusted
to the Exchange Rate which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made on the basis of
delivery of only the number of shares of CellNet Common Stock actually
delivered. If such rights or warrants are not so issued and not required to
be so issued, the Exchange Rate shall again be adjusted to be the Exchange
Rate which would then be in effect if such record date for the determination
of stockholders entitled to receive such rights or warrants had not been
fixed.
(iii) In case outstanding shares of CellNet Common Stock shall
be subdivided into a greater number of shares of CellNet Common Stock, the
Exchange Rate in effect at the opening of business on the day following the
day upon which such subdivision becomes effective shall be proportionately
increased, and conversely, in case outstanding shares of CellNet Common Stock
shall be combined into a smaller number of shares of CellNet Common Stock,
the Exchange Rate in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be
proportionately reduced, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes
effective.
(iv) In case CellNet shall distribute to all holders of
CellNet Common Stock any shares of any class of capital stock of CellNet
(other than CellNet Common Stock) or evidences of its indebtedness or assets
(excluding cash dividends or other distributions to the extent paid from
retained earnings of CellNet) or rights or warrants to subscribe for or
purchase any of its securities (excluding those referred to in subsection
(ii) above) (any of the foregoing hereinafter in this subsection the
"Distributed Securities"), then in each such case the Exchange Rate shall be
adjusted so that the same shall equal the rate determined by multiplying the
Exchange Rate in effect on the record date with respect to such distribution
by a fraction of which the denominator shall be the Average Market Value on
such record date less the fair market value on such record date (as
determined by the board of directors of CellNet, whose determination shall be
conclusive) of the Distributed Securities applicable to one share of CellNet
Common Stock and the numerator of which shall be the Average Market Value per
share on the record date for the determination of shareholders entitled to
receive such distribution; such adjustment shall become effective immediately
prior to the opening of business on the day following such record date.
Notwithstanding the foregoing, in the event the then fair market value (as so
determined) of the portion of the Distributed Securities applicable to one
share of CellNet Common Stock is equal to or greater than the Average Market
Value on the relevant record date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder shall have the right to
receive upon exchange the amount of Distributed Securities such holder would
have received had such holder exchanged each Preferred Security on such
record date. In the event that such distribution is not so paid or made, the
Exchange Rate shall again be adjusted to the Exchange Rate which would then
be in effect if such distribution had not been declared. If the board of
directors of CellNet determines the fair market value of any
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<PAGE>
distribution for purposes of this subsection by reference to the actual or
when issued trading market for any securities, it must in doing so consider
the prices in such market over the same period used in computing the Average
Market Value.
Notwithstanding the foregoing provisions of this subsection, no adjustment
shall be made hereunder for any distribution of Distributed Securities if
CellNet makes proper provision so that each Holder who exchanges a Preferred
Security (or any portion thereof) after the record date for such distribution
shall be entitled to receive upon such exchange, in addition to the shares of
CellNet Common Stock issuable upon such exchange, the amount and kind of
Distributed Securities that such holder would have been entitled to receive if
such holder had, immediately prior to such record date, exchanged such Preferred
Security for CellNet Common Stock, provided that, with respect to any
Distributed Securities that are convertible, exchangeable or exercisable, the
foregoing provision shall only apply to the extent (and so long as) the
Distributed Securities receivable upon exchange of such Preferred Security would
be convertible, exchangeable or exercisable, as applicable, without any loss of
rights or privileges for a period of at least 60 days following exchange of such
Preferred Security.
(v) In case CellNet shall, by dividend or otherwise, distribute to
all holders of CellNet Common Stock cash (excluding (x) any quarterly cash
dividend on the CellNet Common Stock to the extent the aggregate cash
dividend per share of CellNet Common Stock in any fiscal quarter does not
exceed the greater of (A) the amount per share of CellNet Common Stock of the
next preceding quarterly cash dividend on the CellNet Common Stock to the
extent such preceding quarterly dividend did not require any adjustment of
the Exchange Rate pursuant to this subsection (as adjusted to reflect
subdivisions or combinations of the CellNet Common Stock), and (B) 3.75% of
the average of the last reported sales price of the CellNet Common Stock
(determined as provided below) during the ten Trading Days next preceding the
date of declaration of such dividend and (y) any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary), then, in such case, unless CellNet elects
to reserve such cash for distribution to the Holders upon the exchange of the
Preferred Securities so that any such Holder exchanging Preferred Securities
will receive upon such exchange, in addition to the shares of CellNet Common
Stock to which such Holder is entitled, the amount of cash which such holder
would have received if such Holder had, immediately prior to the record date
for such distribution of cash, exchanged its Preferred Securities for CellNet
Common Stock, the Exchange Rate shall be adjusted so that the same shall
equal the rate determined by multiplying the Exchange Rate in effect
immediately prior to the close of business on such record date by a fraction
of which the denominator shall be such Average Market Value on the record
date less the amount of cash so distributed (and not excluded as provided
above) applicable to one share of CellNet Common Stock and the numerator of
which shall be the Average Market Value on such record date; such adjustment
to be effective immediately prior to the opening of business on the day
following the record date; provided, however, that in the event the portion
of the cash so distributed applicable to one share of CellNet Common Stock is
equal to or greater than the Average Market Value on the record date, in lieu
of the foregoing adjustment, adequate provision shall be made so that each
Holder shall have the right to receive upon exchange the amount of cash such
Holder would have received had such Holder exchanged each Preferred Security
on the record date. If such dividend or distribution is not so paid
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<PAGE>
or made, the Exchange Rate shall again be adjusted to be the Exchange Rate
which would then be in effect if such dividend or distribution had not been
declared.
If any adjustment is required to be made as set forth in this subsection as
a result of a distribution that is a quarterly dividend, such adjustment shall
be based upon the amount by which such distribution exceeds the amount of the
quarterly cash dividend permitted to be excluded pursuant hereto. If an
adjustment is required to be made as set forth in this subsection above as a
result of a distribution that is not a quarterly dividend, such adjustment shall
be based upon the full amount of the distribution.
(vi) In case a tender or exchange offer made by CellNet or any
subsidiary of CellNet for all or any portion of the CellNet Common Stock
shall expire and such tender or exchange offer shall involve the payment by
CellNet or such subsidiary of consideration per share of CellNet Common Stock
having a fair market value (as determined by the board of directors of
CellNet or, to the extent permitted by applicable law, a duly authorized
committee thereof, whose determination shall be conclusive, and described in
a resolution of the board of directors of CellNet or such duly authorized
committee thereof, as the case may be), at the last time (the "Expiration
Time") tenders or exchanges may be made pursuant to such tender or exchange
offer (as it shall have been amended), that exceeds the Average Market Value
on the Trading Day next succeeding the Expiration Time, the Exchange Rate
shall be adjusted so that the same shall equal the rate determined by
multiplying the Exchange Rate in effect immediately prior to the Expiration
Time by a fraction of which the denominator shall be the number of shares of
CellNet Common Stock outstanding (including any tendered or exchanged shares)
on the Expiration Time multiplied by the Average Market Value on the Trading
Day next succeeding the Expiration Time and the numerator of which shall be
the sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance (up
to any maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the Expiration
Time (the shares deemed so accepted up to any such maximum, being referred to
in this subsection as the "Purchased Shares") and (y) the product of the
number of shares of CellNet Common Stock outstanding (less any Purchased
Shares) on the Expiration Time and the Average Market Value on the Trading
Day next succeeding the Expiration Time; such adjustment to become effective
immediately prior to the opening of business on the day following the
Expiration Time. If CellNet is obligated to purchase shares pursuant to any
such tender or exchange offer, but CellNet is permanently prevented by
applicable law from effecting any such purchases or all such purchases are
rescinded, the Exchange Rate shall again be adjusted to be the Exchange Rate
which would then be in effect if such tender or exchange offer had not been
made.
(vii) The "fair market value" shall mean the amount which a
willing buyer under no compulsion to buy would pay a willing seller under no
compulsion to sell in an arm's length transaction. The "record date" shall
mean, with respect to any dividend, distribution or other transaction or event
in which the holders of CellNet Common Stock have the right to receive any cash,
securities or other property or in which the CellNet Common Stock (or other
applicable security) is exchanged for or converted into any combination of cash,
securities or other property, the
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<PAGE>
date fixed for determination of stockholders entitled to receive such cash,
securities or other property (whether such date is fixed by the board of
directors of CellNet or by statute, contract or otherwise).
(viii) Rights or warrants distributed by CellNet to all
holders of CellNet Common Stock entitling the holders thereof to subscribe for
or purchase shares of CellNet's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events ("Trigger Event"):
1. are deemed to be transferred with such shares of
CellNet Common Stock,
2. are not exercisable, and
3. are also issued in respect of future issuances of
CellNet Common Stock,
shall not be deemed distributed for purposes of this Section 5 until the
occurrence of the earliest Trigger Event. In addition, in the event of any
distribution of rights or warrants, or any Trigger Event with respect thereto,
that shall have resulted in an adjustment to the Exchange Rate under this
Section 5, (1) in the case of any such rights or warrants which shall all have
been redeemed or repurchased without exercise by any holders thereof, the
Exchange Rate shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or repurchase
price received by a holder of CellNet Common Stock with respect to such rights
or warrants (assuming such holder had retained such rights or warrants), made to
all holders of CellNet Common Stock as of the date of such redemption or
repurchase, and (2) in the case of any such rights or warrants all of which
shall have expired without exercise by any holder thereof, the Exchange Rate
shall be readjusted as if such issuance had not occurred.
(ix) No adjustment to the Exchange Rate shall be required
unless such adjustment would require an increase or decrease of at least 1%
in such rate; provided, however, that any adjustments which by reason of this
subsection (ix) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made by the Company and shall be made to the nearest cent
or to the nearest one hundredth of a share, as the case may be. Anything in
this Section 5 to the contrary notwithstanding, the Company and CellNet shall
be entitled to make such increases in the Exchange Rate, in addition to those
required by this Section 5, as they in their discretion shall determine to be
advisable in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or any distribution
of securities convertible into or exchangeable for stock hereafter made by
the Company to its stockholders shall not be taxable. To the extent
permitted by applicable law, the Company and CellNet from time to time may
increase the Exchange Rate by any amount for any period of time if the period
is at least 20 days, the increase is irrevocable during the period and the
board of directors of CellNet shall have made a determination that such
increase would be in the best interests of the Company and CellNet, which
determination shall be conclusive. Whenever the
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<PAGE>
Exchange Rate is so increased, the Company shall mail to Holders a notice of
the increase. The Company shall mail the notice at least 15 days before the
date the increased Exchange Rate takes effect. The notice shall state the
increased Exchange Rate and the period it will be in effect.
(x) Whenever the Exchange Rate is adjusted, as herein provided,
CellNet shall promptly prepare an officers' certificate setting forth the
Exchange Rate after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. Promptly after the preparation of such
certificate, the Company shall prepare a notice of such adjustment of the
Exchange Rate setting forth the adjusted Exchange Rate and the date on which
such adjustment becomes effective and shall mail such notice of such adjustment
of the Exchange Rate to each Holder.
(xi) In any case in which this Section 5 provides that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to any
Holder of a Preferred Security exchanged after such record date and before the
occurrence of such event the additional shares of CellNet Common Stock issuable
upon such exchange by reason of the adjustment required by such event over and
above the CellNet Common Stock issuable upon such exchange before giving effect
to such adjustment and (ii) paying to such holder any amount in cash or
additional shares in lieu of any fractional share.
(xii) In case of a tender or exchange offer made by a person
other than CellNet or any subsidiary for an amount which increases the offeror's
ownership of CellNet Common Stock to more than 25% of the CellNet Common Stock
outstanding and shall involve the payment by such person of consideration per
share of CellNet Common Stock having a fair market value (as determined by the
board of directors of CellNet, whose determination shall be conclusive, and
described in a resolution of the board of directors of CellNet) at the last time
(the "Expiration Time") tenders or exchanges may be made pursuant to such tender
or exchange offer (as it shall have been amended) that exceeds the Average
Market Value on the Trading Day next succeeding the Expiration Time, and in
which, as of the Expiration Time the board of directors of CellNet is not
recommending rejection of the offer, the Exchange Rate shall be increased so
that the same shall equal the price determined by multiplying the Exchange Rate
in effect immediately prior to the Expiration Time by a fraction of which the
denominator shall be the number of shares of CellNet Common Stock outstanding
(including any tendered or exchange shares) on the Expiration Time multiplied
by the Average Market Value on the Trading Day next succeeding the Expiration
Time and the numerator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to in this subsection as the
"Purchased Shares") and (y) the product of the number of shares of CellNet
Common Stock outstanding (less any Purchased Shares) on the Expiration Time
and the Average Market Value on the Trading Day next succeeding the
Expiration Time, such increase to become effective immediately prior to the
opening of business on the day following the Expiration Time. In the event
that such person is obligated to purchase shares pursuant to any such tender
or exchange offer, but such person is permanently prevented by applicable law
from effecting
-11-
<PAGE>
any such purchases or all such purchases are rescinded, the Exchange Rate
shall again be adjusted to be the Exchange Rate which would then be in effect
if such tender or exchange offer had not been made. Notwithstanding the
foregoing, the adjustment described in this Section 5(b)(xii) shall not be
made if, as of the Expiration Time, the offering documents with respect to
such offer disclose a plan or intention to cause the Company to engage in a
consolidation or merger of CellNet or a sale of substantially all of
CellNet's assets.
5A. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any
of the following events occur, namely (i) any reclassification or change of
outstanding shares of CellNet Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of CellNet with another person as a result of which holders of
CellNet Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
CellNet Common Stock, or (iii) any sale or conveyance of the properties and
assets of CellNet as, or substantially as, an entirety to any other person as
a result of which holders of CellNet Common Stock shall be entitled to
receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such CellNet Common Stock, then the Manager or
the successor or purchasing person, as the case may be, shall prepare and
execute a supplement to this Written Action providing that each Preferred
Security shall be entitled to be exchanged for the kind and amount of shares
of stock and other securities or property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of CellNet
Common Stock issuable upon exchange of Preferred Securities immediately prior
to such reclassification, change, consolidation, merger, combination, sale or
conveyance. Such supplement shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in
Section 5 hereof. The Company shall cause notice of the execution of such
supplement to be mailed to each Holder. The above provisions of this Section
shall similarly apply to successive reclassifications, consolidations,
mergers, combinations, and sales.
5B. TAXES ON SHARES ISSUED. The issuance of stock certificates on
exchanges of Preferred Securities shall be made without charge to the
exchanging holder for any and all taxes and duties that may be payable in
respect of the issue or delivery of such stock. The Company shall not,
however, be required to pay any tax or duty which may be payable in respect
of any transfer involved in the issue and delivery of stock in any name other
than that of a Holder, and the Company shall not be required to issue or
deliver any such stock certificate unless and until the person or persons
requesting the issue thereof shall have paid to the Company the amount of
such tax or duty or shall have established to the satisfaction of the Company
that such tax or duty has been paid.
If CellNet implements a stockholders' rights plan, such rights plan must
provide that upon exchange of the Preferred Securities into CellNet Common Stock
the holders will receive, in addition to the CellNet Common Stock issuable upon
such exchange, such rights whether or not such rights have separated from the
CellNet Common Stock at the time of such exchange.
-12-
<PAGE>
5C. FUNDAMENTAL CHANGE. Notwithstanding the foregoing, but not in
addition to the adjustments set forth elsewhere herein, if CellNet or the
Company makes an announcement of the occurrence of a Fundamental Change at
any time prior to the Mandatory Redemption Date, there will be an adjustment
to the Exchange Rate of the Preferred Securities (the "Fundamental Change
Exchange Rate") such that the Exchange Rate will thereafter equal the
liquidation preference of the Preferred Securities, divided by the
Fundamental Change Average Market Value, unless the Fundamental Change
Exchange Rate is lower than the then current Exchange Rate of the Preferred
Securities as calculated in the manner described above (in which case there
will be no such adjustment to the exchange rate).
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which all or substantially of all of the outstanding
shares of CellNet Common Stock shall be exchanged for, converted into, acquired
for or constitute the right to receive stock, securities, other property or
assets (including cash) of another entity or person (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise).
"Fundamental Change Average Market Value" of the CellNet Common Stock means
the arithmetic average of the Current Market Value for the ten trading days
ending on the fifth business day prior to the date of the closing of the
Fundamental Change.
5D. NO ADJUSTMENTS. Notwithstanding anything herein to the contrary,
no adjustment will be required as a result of (a) the issuance of shares of
CellNet Common Stock as a result of any of the following (i) the grant,
exercise or issuance of stock or stock options under CellNet's employee,
consultant or director stock plans as amended from time to time, (ii) the
exercise of outstanding warrants or conversion or exchange of existing notes
and securities, (iii) in satisfaction of CellNet's obligations under its
Employee Stock Purchase Plan, as amended from time to time, or (b) the
issuance of CellNet Common Stock as a dividend on or upon exchange of the
Preferred Securities. CellNet Common Stock issued in connection with
acquisitions of businesses or assets from persons that are not affiliates of
CellNet will be deemed to have been issued for a price at least equal to
Average Market Value.
6. REDEMPTION.
(a) Unless earlier redeemed or exchanged, the Preferred Securities
must be redeemed (the "Mandatory Redemption"), out of funds legally available
therefor, by the Company at a redemption price of 100% of the liquidation
preference of the Preferred Securities plus accrued and unpaid dividends, if
any, on the Mandatory Redemption Date.
(b) The Preferred Securities are subject to optional redemption
(an "Optional Redemption") on or after May 1, 2001 (the "Initial Redemption
Date"). At any time and from time to time on or after the Initial Redemption
Date and until the Mandatory Redemption Date, the Company will have the right
to redeem, in whole or in part, the Preferred Securities at a redemption
price equal to the product of the liquidation preference set forth below,
together with accrued and
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<PAGE>
unpaid dividends, if any, to the date of redemption, and the redemption
percentage set forth below if redeemed in the 12-month period beginning on
May 1 of the indicated year:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PERCENTAGE
<S> <C>
2001 %
2002
2003
2004
2005
2006
2007
2008
2009
2010 100.000%
</TABLE>
(c) The redemption price pursuant to an Optional Redemption or the
Mandatory Redemption may be paid, in each case at the Company's option, in
(i) cash, (ii) CellNet Common Stock, valued at 90% of the Average Market
Value of the CellNet Common Stock in the case of the Optional Redemption and
100% of the Average Market Value of the CellNet Common Stock in the case of
the Mandatory Redemption, or (iii) any combination of cash and CellNet Common
Stock; provided that the Company, in its notice of such redemption, must
state whether the redemption price will be paid in cash, CellNet Common Stock
or a combination thereof, and provided that any payment must be made in cash
to the extent the Company shall have sufficient cash legally available funds
to make all or any portion of such payment with respect to such redemption.
7. REDEMPTION AND EXCHANGE PROCEDURES.
(a) Notice of any redemption (optional or mandatory) of the
Preferred Securities (a "Notice of Redemption") shall be irrevocable and
shall be given by the Company by mail not fewer than 30 nor more than 60
calendar days prior to the date fixed for redemption thereof to CellNet and
to each Holder of Preferred Securities that are being redeemed. For purposes
of the calculation of the date of redemption and the date on which notices
are given pursuant to this Section 7(a), a Notice of Redemption shall be
deemed to be given on the day such notice is first mailed by first-class
mail, postage prepaid, to each appropriate Holder of Preferred Securities. A
Notice of Redemption shall be addressed to each appropriate Holder of
Preferred Securities at the address of such Holder appearing in the books and
records of the Company. If all of the Preferred Securities are represented
by Book-Entry Interests, Notices of Redemption shall be sent to the Clearing
Agency. No defect in the Notice of Redemption or in the mailing thereof with
respect to any Preferred Security shall affect the validity of the redemption
proceedings with respect to any other Preferred Security. If fewer than all
the Preferred Securities are being redeemed, then any redemption shall be on
a pro rata basis.
-14-
<PAGE>
(b) If the Preferred Securities are represented by Book-Entry
Interests, the Company shall irrevocably deposit sufficient funds on the date
fixed for redemption with the Clearing Agency and give the Clearing Agency
irrevocable instructions and authority to pay the redemption price to the
Holders of the Preferred Securities to be redeemed, and if the Preferred
Securities are not represented by Book-Entry Interests, the Company shall
irrevocably deposit such funds with the transfer agent for the Preferred
Securities and give such transfer agent such irrevocable instructions and
authority to pay the redemption price to the Holders of the Preferred Securities
to be redeemed. If a Notice of Redemption shall have been given and sufficient
funds irrevocably deposited as required, then immediately prior to the close of
business on the date of such deposit, all rights of the Holders of such
Preferred Securities so called for redemption will cease, except the right of
such Holders to receive the redemption price, but without additional interest
from and after such redemption date. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
redemption price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect of
any such delay), except that if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day. In
the event that payment of the redemption price is improperly withheld or refused
and not paid either by the Company or by CellNet (pursuant to the Guarantee),
dividends on the Preferred Securities called for redemption will continue to
accumulate at the then applicable rate to the date that the redemption price is
actually paid and the Holders of such Preferred Securities may exercise all of
their rights as Holders thereof.
8. LIQUIDATION RIGHTS. In the event of any voluntary or involuntary
liquidation, dissolution, winding-up or termination of the Company (each a
"Liquidation"), the then holders of the Preferred Securities shall be
entitled to receive out of the assets of the Company (which will include the
CellNet Preferred Stock, any interest on and principal of the Treasury Strips
that are held in the Escrow Account, any CellNet Common Stock that the
Company received from CellNet as a dividend (or otherwise) and have not
distributed as a dividend on the Preferred Securities or sold in the open
market, and any other assets of the Company), after satisfaction of
liabilities to creditors, if any, distributions in an amount equal to, and
not in excess of, the aggregate of the stated liquidation preference of $25
of Preferred Security plus accrued and unpaid dividends thereon to the date
of payment (the "Liquidation Distribution").
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Company has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable by the
Company on the Preferred Securities shall be paid on a pro rata basis. CellNet
is obligated to pay dividends, consisting, at CellNet's option, of any
combination of cash and CellNet Common Stock, to the Company so that it will be
able to make the Liquidation Distribution in full.
9. SINKING FUND. The Preferred Securities shall not be subject to the
operation of a retirement or sinking fund.
10. GUARANTEE OF LIABILITIES. It shall be a condition precedent to the
issuance of the Preferred Securities that CellNet execute and deliver to the
Company the Guarantee.
-15-
<PAGE>
11. BOOK-ENTRY ISSUANCE.
(a) The Depository Trust Company, New York, New York ("DTC"), will
initially act as the Clearing Agency. The Preferred Securities will be issued
only as fully-registered securities and will be initially registered in the name
of Cede & Co. (DTC's partnership nominee).
(b) DTC may discontinue providing its services as Clearing Agency
with respect to the Preferred Securities by giving reasonable notice to the
Company as provided in the agreement between the Company and DTC. Under such
circumstances, if a successor Clearing Agency is not obtained, CellNet at its
expense shall cause certificates for Preferred Securities to be printed and
delivered as promptly as practicable. If CellNet decides to discontinue use
of the system of book-entry transfers through DTC (or a successor Clearing
Agency), CellNet at its expense shall cause certificates for Preferred
Securities to be printed and delivered to the beneficial owners of the Preferred
Securities as promptly as practicable.
(c) In the event that the Preferred Securities do not remain in
book-entry-only form, the following provisions will apply:
(i) Registration of transfers of Preferred Securities will be
effected without charge by or on behalf of the Company, but upon payment (and/or
the giving of such indemnity as the Company or the Manager may require) in
respect of any tax or other governmental charges which may be imposed in
connection therewith.
(ii) Exchanges of Preferred Securities for shares of CellNet
Common Stock shall be effected without charge by or on behalf of the Company,
but upon payment (and/or the giving of such indemnity as the Company or the
Manager may require) in respect of any tax or other governmental charges
which may be imposed in connection with the issuance of any shares of CellNet
Common Stock in the name of any person other than the Holder of the Preferred
Security for which it is being exchanged or for any reason other than such
exchange.
(iii) The Company shall not be required to register or cause
to be registered the transfer of Preferred Securities after such Preferred
Securities have been called for redemption.
12. REGISTRAR AND TRANSFER AGENT. The Company hereby appoints The Bank of
New York as its initial registrar, transfer agent and paying agent for the
Preferred Securities. The Company may at any time designate an additional or
substitute registrar, transfer agent and paying agent for the Preferred
Securities and shall promptly notify the Holders of the Preferred Securities of
any such designation.
13. GOVERNING LAW. This Written Action shall be governed by and construed
in accordance with the laws of the State of Delaware without giving effect to
the principles of conflict of laws thereof.
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<PAGE>
IN WITNESS WHEREOF, the undersigned Manager of the Company has caused this
Written Action to be executed.
CELLNET DATA SYSTEMS, INC.
By:
--------------------------------
Name:
Title:
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<PAGE>
CERTIFICATE OF DESIGNATION, RIGHTS AND PREFERENCES
OF THE
REDEEMABLE PREFERRED STOCK
OF
CELLNET DATA SYSTEMS, INC.
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
CELLNET DATA SYSTEMS, INC. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that pursuant to authority conferred upon the Board of Directors of the
Corporation by its Certificate of Incorporation and pursuant to the provisions
of Section 151 of the General Corporation Law of the State of Delaware, said
Board of Directors duly approved and adopted the following resolution:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by its Certificate of Incorporation (hereinafter
referred to as the "Certificate of Incorporation"), the Board of Directors
does hereby create, authorize and provide for the issue of a Preferred Stock
Redeemable 2010, par value $.001 per share, with a stated value of $10,000
per share, consisting of 12,650 shares, having the designation, preferences
and relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth in
the Certificate of Incorporation and in this Resolution as follows:
1. DESIGNATION AND AMOUNT. The distinctive designation of such series
is Preferred Stock "Redeemable 2010" (hereinafter in this Resolution called
the "Redeemable Preferred Stock"), and the number of shares constituting such
series shall be 12,650.
2. RANK. The Redeemable Preferred Stock shall, with respect to
dividend rights and rights of liquidation, winding up and dissolution, rank
(i) senior to all classes of common stock of the Corporation and to each
other class of capital stock or series of preferred stock established after
the date of this Resolution by the Board of Directors the terms of which do
not expressly provide that it ranks senior to or on a parity with the
Redeemable Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up or dissolution of the Corporation
(collectively referred to with the common stock of the Corporation as "Junior
Securities"); (ii) on a parity with any class of capital stock or series of
preferred stock issued by the Corporation established after the date of this
<PAGE>
Resolution by the Board of Directors, the terms of which expressly provide
that such class or series will rank on a parity with the Redeemable Preferred
Stock as to dividend distributions and distributions upon the liquidation,
winding-up or dissolution of the Corporation (collectively referred to as
"Parity Securities"); and (iii) junior to each class of capital stock or
series of preferred stock issued by the Corporation established after the
date of this Resolution by the Board of Directors, the terms of which
expressly provide that such class or series will rank senior to the
Redeemable Preferred Stock as to dividend distributions and distributions
upon liquidation, winding-up or dissolution of the Corporation (collectively
referred to as "Senior Securities"). The Redeemable Preferred Stock will be
subject to the issuance of series of Junior Securities, Parity Securities and
Senior Securities, and the issuance of any new class of CellNet Junior
Securities and/or CellNet Parity Securities pursuant to any stockholder
rights plan adopted by the Corporation shall not require the approval of the
holders of Redeemable Preferred Stock. The Corporation may not issue any new
class of Senior Securities without the approval of the holders of at least a
majority of the shares of Redeemable Preferred Stock then outstanding, voting
or consenting, as the case may be, separately as one class.
3. DIVIDENDS. The registered holder ("Holder") of shares of the
Redeemable Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors of the Corporation, out of funds legally
available therefor, dividends in additional shares of Redeemable Preferred
Stock at the annual rate of __% of the liquidation preference per share
through and including August 1, 2001, and thereafter as described below. Such
dividends shall be cumulative, whether or not earned or declared, on a daily
basis from the date of issuance of the Redeemable Preferred Stock, and shall
be payable quarterly in arrears on or prior to February 1, May 1, August 1,
and November 1 of each year commencing on August 1, 1998 (each of such dates
being a "dividend payment date") through May 1, 2010 (the "Final Dividend
Date"), with respect to the period commencing with the date of issuance of
the Redeemable Preferred Stock or the immediately preceding dividend payment
date and ending on the day preceding such respective dividend payment date
(each of such periods being a "dividend period"), to stockholders of record
on the preceding January 15, April 15, July 15, and October 15, respectively
(each, a "regular record date"). Any dividend payments made with respect to
shares of Redeemable Preferred Stock on or before August 1, 2001, shall be
made in such number of additional fully paid and nonassessable shares of
Redeemable Preferred Stock having an aggregate liquidation preference equal
to the amount of such dividends and the issuance of such additional shares of
Preferred Stock shall constitute full payment of such dividend. All shares of
Redeemable Preferred Stock issued as a dividend with respect to the
Redeemable Preferred Stock will thereupon be duly authorized, validly issued,
fully paid and nonassessable and free of all liens and charges. After August
1, 2001, dividends on the Redeemable Preferred Stock may be paid, in the sole
discretion of the Board of Directors of the Corporation, in shares of common
stock, $.001 par value per share of the Corporation ("Common Stock"), or in
cash or any combination of cash and Common Stock, in an amount that will
enable the Holder (i) to transfer such Common Stock to the holders of the
Holder's Exchangeable Limited Liability Company Preferred Securities (the
"Funding Preferred Securities") in full payment of dividends on the Funding
Preferred Securities, valued at 90% of the Average Market Value (as defined
below) of the Common Stock, or (ii) to sell such shares of Common Stock in
the open market in order for the Holder to make full dividend payments on the
Funding Preferred Securities in cash, in each case for the corresponding
dividend period with respect to the Funding Preferred Securities. At any
time and from time to time after the issuance of the Redeemable Preferred
Stock, the Corporation may, as, when and if declared by the Board of
Directors, declare additional dividends to the Holder in shares of Common
Stock, in such amounts in order for the Holder to have sufficient funds in
cash, following a sale thereof by the Holder, to satisfy all obligations with
respect to the Funding Preferred Securities.
"Average Market Value" of the Common Stock means the average of
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<PAGE>
the Current Market Value for the ten trading days ending on the second
business day prior to the applicable date of payment. "Current Market Value"
of the Common Stock means (i) the Volume Weighted Average Price, as reported
on the Nasdaq National Market or (ii) the average of the high and low sales
prices of the Common Stock, if reported on any other national securities
exchange.
4. LIQUIDATION PREFERENCE.
Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, holders of Redeemable Preferred Stock will be
entitled to be paid, out of the assets of the Corporation available for
distributions, $10,000 per share of Redeemable Preferred Stock, plus an
amount in cash equal to accumulated and unpaid dividends thereon to the date
fixed for liquidation, dissolution or winding-up (including an amount equal
to a prorated dividend for the period from the last dividend payment date to
the date fixed for liquidation, dissolution or winding-up), before any
distribution is made on any Junior Securities, including, without limitation,
Common Stock. If, upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, the amounts payable with respect to the
Redeemable Preferred Stock and all other Parity Securities are not paid in
full, the holders of the Redeemable Preferred Stock and the Parity Securities
will share equally and ratably in any distribution of assets of the
Corporation with respect to the Redeemable Preferred Stock and the Parity
Securities, in proportion to the full liquidation preference and accumulated
and unpaid dividends to which each is entitled. After payment of the full
amount of the liquidation preference and accumulated and unpaid dividends to
which they are entitled, the Holders will not be entitled to any further
participation in any distribution of assets of the Corporation.
5. OPTIONAL REDEMPTION ON FINAL DIVIDEND DATE.
All of the shares of Redeemable Preferred Stock shall be, at the
option of the Corporation, subject to redemption by the Corporation (the
"Final Dividend Date Redemption") at a redemption price equal to 100% of the
liquidation preference per share, together with accrued and unpaid dividends
thereon to the redemption date, in cash out of funds legally available
therefor without interest, two (2) business days prior to May 1, 2010. If
the Corporation elects to make a Final Dividend Date Redemption, the
Corporation will declare and pay a special dividend, or make a capital
contribution to the Holder, in an amount equal to the shortfall, if any, in
the assets of the Holder necessary for Holder to redeem the Funding Preferred
Securities in full. If the Corporation elects not to make a Final Dividend
Date Redemption, the Corporation shall make an investment in Holder in an
amount sufficient to enable Holder to redeem the Funding Preferred Securities
in full on May 1, 2010. Any such investment shall consist of a payment of
cash to a Holder or a distribution to Holder of Common Stock or any
combination of the foregoing. Common Stock distributed to the Holder pursuant
to this Section 5 shall be valued at 100% of the Average Market Value
thereof. The obligation of the Corporation to make this investment shall
inure to the benefit of the holders of the Funding Preferred Securities, may
be enforced directly by such holders as third party beneficiaries and may not
be waived or modified without the consent of each holder affected thereby.
6. OPTIONAL REDEMPTION BY THE CORPORATION.
The Redeemable Preferred Stock will also be subject to optional
redemption by the Corporation (a "CellNet Optional Redemption") on or after
May 1, 2001. In such event, the Corporation shall redeem, in whole or in
part, the Redeemable Preferred Stock at a redemption price equal to the
percentage of the liquidation preference set forth below, together with
accrued and unpaid dividends, if any, to the redemption date, if redeemed in
the 12-month period beginning on May 1 of the indicated year:
-3-
<PAGE>
<TABLE>
<CAPTION>
REDEMPTION
YEAR PERCENTAGE
<S> <C>
2001 %
2002
2003
2004
2005
2006
2007
2008
2009
2010 100.000%
</TABLE>
Upon any CellNet Optional Redemption, the Corporation will declare and
pay a special dividend, or make a cash capital contribution, in an amount equal
to the shortfall, if any, in the assets of the Holder necessary for Holder to
complete its optional redemption of the Funding Preferred Securities.
7. METHOD OF PAYMENT OF REDEMPTION PRICE.
All payments pursuant to a CellNet Optional Redemption or a Final
Dividend Date Redemption may be paid, in each case at the Corporation's
option, in (i) cash, (ii) shares of Common Stock, valued at 90% of the
Average Market Value of the Common Stock in the case of the CellNet Optional
Redemption and 100% of the Average Market Value of the Common Stock in the
case of the Final Dividend Date Redemption, or (iii) any combination of cash
and Common Stock.
8. EXCHANGE OF PREFERRED STOCK.
The Redeemable Preferred Stock is exchangeable into Common Stock at
the option of the Holder, upon the Holder's receipt of a request from a
holder of Funding Preferred Securities to exchange such Funding Preferred
Securities for Common Stock, at an initial exchange rate of ____ shares of
Common Stock for each share of Redeemable Preferred Stock, subject to the
same adjustments that are made to the exchange rate of the Funding Preferred
Securities. Notwithstanding the foregoing, the number of shares of Common
Stock issuable to the Holder upon exchange of the Redeemable Preferred Stock
shall equal the number of shares of Common Stock issuable by the Holder upon
exchange of the Funding Preferred Securities.
The Redeemable Preferred Stock shall be automatically exchanged
into Common Stock at any time after _______, 1998 and on or prior to May 1,
2001 at an initial exchange rate of ___ shares of Common Stock for each share
of Redeemable Preferred Stock, subject to the same adjustments that are made
to the exchange rate of the Funding Preferred Securities as provided in the
Terms of the Funding Preferred Securities dated as of May __, 1998. Upon the
occurence of an exchange event ("Exchange Event"). An Exchange Event shall
be deemed to have occurred without any action on the part of the Corporation
or the Holder on the next business day after the Current Market Value of the
Common Stock for at least twenty Trading Days in any consecutive period of
thirty Trading Days equals or exceeds the following Trigger Percentages of
the exchange price of the Funding Preferred Securities then in effect, as
determined, pursuant to the Terms of the Preferred Securities dated ______,
1998 during the following specified periods, (i) in the 12-month period
beginning May 1, 1998 and ending April 30, 1999, 170%, (ii) in the 12-month
period beginning May 1, 1999 and ending April 30, 2000, 160% and (iii) in the
12-month period
-4-
<PAGE>
beginning May 1, 2000 and ending April 30, 2001, 150%. In any consecutive 30
day trading period that includes Trading Days before and after May 1, 1999 or
May 1, 2000, the applicable Trigger Percentage for each Trading Day in the
trading period shall be used in order to determine whether an Exchange Event
has occurred.
"Trading Day" means, with respect to any security listed or
admitted to trading on the NYSE, any day on which such securities are traded
on the NYSE, or, if such security is not listed or admitted to trading on the
NYSE, on the principal national securities exchange on which such security is
listed or admitted to trading, or, if such security is not listed or admitted
to trading on a national securities exchange, on the National Market System
of the National Association of Securities Dealers, Inc., or, if such security
is not quoted or admitted to trading on such quotation system, on the
principal quotation system on which such security is listed or admitted to
trading or quoted, or, if not listed or admitted to trading or quoted on any
national securities exchange or quotation system, in the over-the-counter
market.
In the event a holder of the Funding Preferred Securities wishes to
exchange such Funding Preferred Securities with the Holder prior to May 1,
2001, the Holder shall deliver to the Corporation (i) a number of shares of
Redeemable Preferred Stock equal to all of the outstanding Redeemable
Preferred Stock multiplied by a fraction, the numerator of which is the
number of Funding Preferred Securities which are presented to the Holder for
exchange and the denominator of which is all of the outstanding Funding
Preferred Securities (the "Ratio"), and (ii) an amount of each Class of
Treasury Strips (other than the Class of Treasury Strips, if any, that will
mature within 15 days from the date of such exchange) then held by Funding or
an escrow agent equal to all of the Treasury Strips in such Class multiplied
by the Ratio.
Following any exchange by a holder of such holder's Preferred
Securities into CellNet Common Stock, dividends will cease to accrue on such
Preferred Securities and such holder will not be entitled to participate in
the proceeds from the Treasury Strips (as defined herein) held by Funding,
except in the event of an Automatic Exchange as described below.
"Treasury Strips" means the U.S. Treasury strips held by Funding or
an escrow agent to secure the first 13 dividend payments on the Funding
Preferred Securities. Each group of Treasury Strips that is payable on or
about a dividend payment date shall be considered, for purposes of this
paragraph, a "Class of Treasury Strips."
If the Corporation implements a stockholders' rights plan, such
rights plan must provide that upon exchange of Redeemable Preferred Stock for
Common Stock the Holder will receive, in addition to the Common Stock
issuable upon such exchange, such rights whether or not such rights have
separated from the Common Stock at the time of such exchange.
9. VOTING RIGHTS. The holders of record of shares of Redeemable
Preferred Stock shall not be entitled to any voting rights except as
otherwise provided herein or required by law. Except as otherwise provided
herein, without the affirmative vote of the holders of more than 50% of the
then outstanding shares of Redeemable Preferred Stock, voting as a single
class, the Corporation may not:
i. amend the Certificate of Incorporation, as amended by the
Certificate of Designation, so as to have an adverse effect on the specific
rights, preferences, privileges or voting powers of shares of the Redeemable
Preferred Stock; or
ii. authorize, issue or create any class of capital stock that is
pari passu with or senior with respect to dividends or liquidation rights to
the Redeemable Preferred Stock. Notwithstanding the foregoing, the
Corporation may amend the Certificate of Incorporation without prior notice
to or consent of the Holder or the holders of the Funding Preferred
Securities, when authorized by the Board of Directors, if (a) the Board of
Directors determines after consultation with legal counsel that such action
would not materially and adversely affect the rights of the Holder or any
holder of the Funding Preferred Securities and (b) the Corporation delivers
to the Holder a legal opinion of independent counsel to the effect that the
requirements of clause (a) have been satisfied as set forth in this
Certificate of Designation.
-5-
<PAGE>
10. EXCLUSIVITY. Except as expressly set forth herein, the holders of
the Redeemable Preferred Stock shall have no rights other than those provided
by law.
"RESOLVED FURTHER, that, before the Corporation shall issue any
shares of the Redeemable Preferred Stock, a certificate pursuant to Section
151 of the General Corporation Law of the State of Delaware shall be made,
executed, acknowledged, filed and recorded in accordance with the provisions
of Sections 103 and 151 thereof, and the proper officers of the Corporation
are hereby authorized and directed to do all acts and things which may be
necessary or proper in their opinion to carry into effect the purposes and
intent of this and the foregoing resolutions."
-6-
<PAGE>
IN WITNESS WHEREOF, CellNet Data Systems, Inc. has caused this
Certificate of Designation, Rights and Preferences to be signed by John M.
Seidl, its Chief Executive Officer and President, and attested by David L.
Perry, its Secretary, on this __th day of May, 1998.
CELLNET DATA SYSTEMS, INC.
By:
---------------------------------------
John M. Seidl
Chief Executive Officer and President
Attest:
David L. Perry
Secretary
-7-
<PAGE>
EXHIBIT 5.1
[Wilson Sonsini Goodrich & Rosati letterhead]
May __, 1998
CellNet Data Systems, Inc.
125 Shoreway Road
San Carlos, California 94070
CellNet Funding, LLC
125 Shoreway Road
San Carlos, California 94070
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by
CellNet Data Systems, Inc. ("CellNet") and CellNet Funding, LLC ("Funding,")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission on or about April __, 1998 (as
such Registration Statement may thereafter be amended or supplemented, the
"Registration Statement") in connection with the registration under the
Securities Act of (i) 5,060,000 shares of Exchangeable Limited Liability
Company Preferred Securities Mandatorily Redeemable 2010, $.__ par value $25
liquidation preference (the "Preferred Securities"), (ii) - shares of
CellNet common stock, par value $.001 per share (the "Common Stock"),
issuable after August 1, 2001 upon exchange of the Preferred Securities. The
Preferred Securities are fully and unconditionally guaranteed by CellNet (the
"Guarantee") as set forth in the Prospectus, which constitutes part of the
Registration Statement. The Registration Statement also registers the
Guarantee. The Preferred Securities include 660,000 shares to be issued by
the Company pursuant to an over-allotment option granted to the Underwriter.
As your legal counsel, we have examined the proceedings being taken by you
relating to the issuance and sale of each of the above described securities.
It is our opinion that (i) the Preferred Securities and Common Stock
when issued and sold in the manner referred to in the Registration Statement
and in accordance with the resolutions adopted by the Board of Directors of
CellNet and the manager of Funding, respectively, will be legally and validly
issued, fully paid and nonassessable and (ii) that the Guarantee, when duly
authorized and legally issued will constitute the valid and binding
obligation of CellNet.
<PAGE>
CellNet Data Systems, Inc.
CellNet Funding, LLC
May __, 1998
Page 2
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 the Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
<PAGE>
Exhibit 10.1
January 28, 1998
Mr. Ben H. Lyon
Danville, CA 94526
Dear Ben:
This will confirm the revised offer of regular full-time
employment we are extending to you for the position of Vice President &
General Counsel of CellNet Data Systems, Inc. (the "Company"). This offer of
employment is subject to (a) the completion of reference checks satisfactory
to the Company, (b) the approval of the Board of Directors of the Company at
its next regularly scheduled meeting on February 4, 1998, (c) your acceptance
of it on or before February 2, 1998, and (d) your employment eligibility
under the Immigration Reform and Control Act of 1986. This offer assumes
that you will commence your employment with the Company upon satisfaction of
the above conditions and that you will be elected an officer of the Company
on April 2, 1998, as we have discussed.
In your capacity as Vice President & General Counsel you will
report to the Chairman of the Board, President & Chief Executive Officer of
the Company and be expected to work closely with me and with other members of
senior management.
Your initial base salary will be paid at the rate of $160,000.00
per year. You will be paid a cash signing bonus of $15,000.00, less
applicable Federal and State income withholding taxes.
As a regular full-time employee you will be entitled to all of
the benefits provided under the Company's standard employee benefits program
as is in effect from time to time. The Company's current benefits program is
summarized in the enclosed employee benefits information materials. In lieu
of the Company's length of service requirements under its standard vacation
policy, you will be granted a total of 20 days of paid vacation per year,
accrued on a daily basis as provided under the Company's standard vacation
policy.
In addition, you will be granted options to purchase up to 50,000
shares of Common Stock of the Company at the fair market value determined as
of the date of the
<PAGE>
Mr. Ben H. Lyon - January 28, 1998
Page 2
_____________________________
grant, subject to the approval of the Board of Directors and to all the
provisions of the stock option plan and agreement under which such options
may be granted. Employee stock options generally vest over a period of five
(5) years at the rate of ten percent (10%) after the first six months from
date of hire and five percent (5%) every three (3) months thereafter, unless
employment is terminated for any reason during the vesting period.
Your employment with the Company will be for an initial period of
one (1) year from date of hire (the "Initial Term"). Unless either party
gives written notice to the contrary at any time prior to the expiration of
the Initial Term, your employment with the Company will continue thereafter
for an indeterminate period of time, however, any such employment will be "at
will." You, as well as the Company, will have the right to terminate the
employment relationship at any time both during and after the Initial Term
for any reason, with or without cause. If the Company elects to terminate
the employment relationship without cause at any time during the Initial
Term, the Company will nevertheless continue to pay you your salary and
continue your coverage under the Company's standard benefits program on the
same terms and conditions for the remainder of the Initial Term, except that
your stock option grants will cease to vest as of the date the employment
relationship is terminated. If the employment relationship is terminated by
you for any reason or by the Company for cause at any time during the Initial
Term, or if the employment relationship is terminated by you or by the
Company for any reason at any time after the Initial Term, the Company will
have no obligation to continue your salary, and will have no obligation to
continue your benefits except as provided in such circumstances under the
Company's standard benefits program then in effect or as may then be required
by law.
Please confirm your acceptance of this offer by signing both
original copies of this letter and returning one signed copy to us. The
other copy is yours to retain.
<PAGE>
Mr. Ben H. Lyon - January 28, 1998
Page 3
_____________________________
The Company has a promising future which requires talented,
dedicated and motivated people like you to make it successful. We look
forward enthusiastically to your joining our organization.
Sincerely,
/s/ David L. Perry
David L. Perry
Vice President
I have read this letter and I accept the Company's offer of
employment on the terms outlined above.
Signature: /s/ Ben H. Lyon
Date: 1/30/98
<PAGE>
Exhibit 10.2
March 16, 1998
James J. Jennings
San Francisco, CA 94123
Dear Jim:
This letter is intended to confirm our agreement concerning the
termination of your relationship with CellNet Data Systems, Inc. (the
"Company").
1. You will submit your resignation as Vice President, Sales and
Marketing of the Company and as an officer of each of the Company's
subsidiary companies with effect as of March 15, 1998 (your "Officer
Termination Date"). You will remain an employee of the Company until March
15, 1999, at which time you will resign and cease to be an employee of the
Company (your "Employment Termination Date"). Each such action is
acknowledged to be voluntary on your part. You agree that you will make
yourself reasonably available to answer questions and to provide reasonable
assistance in connection with the orderly transfer of your responsibilities.
Between your Officer Termination Date and your Employment Termination Date
you will have no assigned duties and you will have no authority to represent
the Company or to bind the Company to any contract or other obligation. The
Company agrees that it will not make any disparaging comments concerning you
or relating to your employment with the Company. You agree that you will not
make any disparaging comments concerning the Company or relating to your
employment by the Company.
2. Notwithstanding the submission of your resignation as an officer
and/or as an employee of the Company, the Company agrees (a) to continue to
pay you your current salary (at the rate of $183,768 per year) for a period
of one year from your Officer Termination Date through your Employment
Termination Date in equal biweekly installments on the Company's normal
payroll payment dates, and (b) to continue your employee medical, dental,
vision, employee assistance, life insurance, accidental death and
dismemberment insurance, 401(k) retirement plan, and Section 125 premium
payment plan benefits during the same period, including dependent benefits,
to the extent applicable. You will not be entitled, however, (a) to coverage
under the Company's business travel accident insurance program following your
Officer Termination Date (since you will not be traveling on business for the
Company), or (b) to participate in the Company's 1996 Employee Stock Purchase
Plan, 1994 Stock Plan, or Bonus Plan following your Officer Termination Date.
Following your Employment Termination Date, you shall be entitled to such
benefits continuation under COBRA as is then available to Company employees
whose employment has been voluntarily terminated.
<PAGE>
James J. Jennings - March 16, 1998
____________________________
3. Notwithstanding the submission of your resignation as an officer and
as an employee of the Company, the Company agrees (a) to immediately vest as
of your Officer Termination Date, 21,600 then unvested shares of the
Company's Common Stock purchased under your Restricted Stock Purchase
Agreement dated August 1, 1995, and (b) to immediately vest as of your
Officer Termination Date, your then unvested right to purchase up to 8,940
additional shares of the Company's Common Stock at $2.00 per share under your
Incentive Stock Option Agreement dated March 20, 1996. All other vesting
under your Restricted Stock Purchase Agreement dated August 1, 1995 and under
each of your Stock Option Agreements dated March 20, 1996 and August 7, 1997,
respectively, shall cease as of your Officer Termination Date. Solely for
the purposes of your Restricted Stock Purchase Agreement dated August 1, 1995
and each of your Stock Option Agreements dated March 20, 1996 and August 7,
1997, respectively, you shall be treated as having resigned voluntarily as of
your Officer Termination Date.
4. The Company hereby exercises its right to repurchase at cost ($0.25
per share) all remaining unvested shares of the Company's Common Stock
purchased under your Restricted Stock Purchase Agreement dated August 1, 1995
(32,400 shares) as of your Officer Termination Date for a total price of
$8,100, which purchase shall be settled as of your Officer Termination Date
by means of a credit in that amount against the amount outstanding under the
loan made by the Company to you for the purchase of restricted stock
thereunder (the "Restricted Stock Purchase Loan"). (The amount outstanding
on your Officer Termination Date was $41,707.06. The credit of $8,100 will
be credited first to the payment of interest amounting to $5,707.06 and then
to the reduction of principal leaving a principal balance due on such date of
$33,607.06.) Notwithstanding anything to the contrary set forth in the loan
agreement and promissory note evidencing the Restricted Stock Purchase Loan,
you shall repay in full the entire outstanding balance, including both
principal and accrued interest to the date of repayment, on or before June
15, 1998.
5. The Letter Agreement between you and the Company dated July 11, 1994
pursuant to which you were employed by the Company is hereby superseded and
terminated by this Agreement without any further obligation on the part of
the Company to you pursuant to that Letter Agreement. The Employee Agreement
Concerning Inventions, Trade Secrets and Confidential Information between you
and the Company dated August 2, 1994 shall continue to remain in full force
and effect in accordance with its terms. The Employee Severance Agreement
between you and the Company dated August 9, 1995 providing for certain
prospective benefits in the event of a change of control of the Company is
hereby terminated as of your Officer Termination Date. The Indemnification
Agreement between you and the Company dated August 30, 1996 shall continue to
remain in full force and effect in accordance with its terms.
2
<PAGE>
James J. Jennings - March 16, 1998
____________________________
6. You shall be entitled to keep your present car telephone following
your Officer Termination Date without reimbursement to the Company for its
present value. The Company shall reimburse you for the reasonable cost of
removing your present car telephone should you elect to have it removed at
any time prior to June 15, 1998. You shall be responsible, however, for all
telephone charges and expenses (a) following your Officer Termination Date,
and (b) prior to your Officer Termination Date to the extent that such
expense is of a personal nature and not reimbursable as a business expense
under the Company's current policies in that regard.
7. Until June 15, 1998, you shall be entitled to use without
reimbursement to the Company for their value (a) the Company's E-Mail system
and your current E-Mail address, and (b) the Company's Voice-Mail system and
your current Voice-Mail box, in each case, provided that these are used for
legitimate purposes and in a manner not contrary to the best interests of the
Company.
8. Until June 15, 1998, you shall have the right to the continued use
of the Company's laptop computer equipment now in your possession (DAC Serial
#4429). You shall return such equipment to the Company on or before that
date in the condition received, reasonable wear and tear excepted.
9. In consideration of the severance benefits provided under this
Agreement, you hereby agree on your own behalf and on behalf of your family
members, heirs, executors assigns and other representatives to waive and
release the Company from and agree not to sue concerning any claim, duty,
obligation or cause of action relating to any matters of any kind, whether
presently known or unknown, suspected or unsuspected, that you or any of them
may have arising out of or in connection with your employment by the Company
or the termination of such employment, it being understood, however, that
this waiver, release and agreement not to sue shall not extend to (a) any
failure by the Company to provide the severance benefits contemplated by this
Agreement, (b) any failure by the Company to pay you your salary at its
current rate and to provide all of the benefits to which you are or may be
entitled to as an employee prior to your Officer Termination Date, (c) any
failure by the Company to reimburse you in full for all ordinary and
necessary business expenses incurred by you prior to your Officer Termination
Date in accordance with the Company's standard policies in that regard, and
(d) any failure by the Company to honor its obligations to you under the
terms of your Restricted Stock Purchase Agreement dated August 1, 1995 and
each of your Stock Option Agreements dated March 20, 1996 and August 7, 1997,
respectively, with the Company, as modified hereby. To the extent that the
foregoing may be deemed to constitute a general release, you should be aware
that California Civil Code Section 1542
3
<PAGE>
James J. Jennings - March 16, 1998
____________________________
provides that A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
WITH THE DEBTOR. In order to make effective your above waiver, release and
agreement not to sue concerning any claim, duty, obligation or cause of
action relating to any matters of any kind, whether presently known or
unknown, suspected or unsuspected, that you or any of your above
representatives may have arising out of or in connection with your employment
by the Company or the termination of such employment, you hereby agree to
waive any rights you or they may have under said Section 1542 and under any
other statute or common law principles of similar effect.
If the above accurately reflects our agreement concerning the above
matters, please so indicate by executing and returning to us the duplicate
original copy of this Agreement enclosed herewith.
Sincerely,
John M. Seidl,
Chairman of the Board,
President & Chief Executive Officer
Agreed:
_____________________
James J. Jennings
4
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of CellNet Data Systems, Inc. and CellNet Funding, LLC on Form S-3 of our
report dated February 2, 1998, appearing in the Prospectus, which is a part
of Amendment No. 1 to Registration Statement No. 333-50851 of CellNet Data
Systems, Inc. and CellNet Funding, LLC on Form S-3. We also consent to the
incorporation by reference of our report dated February 2, 1998 included in
the Annual Report on Form 10-K of CellNet Data Systems, Inc. for the year
ended December 31, 1997, which is incorporated by reference in Amendment
No. 1 to Registration Statement No. 333-50851 of CellNet Data Systems, Inc.
and CellNet Funding, LLC on Form S-3, which is incorporated by reference in
this Registration Statement. In addition, we consent to the reference to us
under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
San Jose, California
May 12, 1998
<PAGE>
Exhibit 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signature" constitutes and appoints John M. Seidl
and Paul G. Manca, each as his or her true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) and supplements to
this Registration Statement and any related Registration Statement filed
pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and to perform
each and every act and thing requisite and necessary to be done in connection
with the above premises, as fully for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or his, her or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ E. LINN DRAPER, JR.
--------------------------------------
E. Linn Draper, Jr. April 22, 1998
Director of CellNet Data Systems, Inc.
<PAGE>
Exhibit 24.4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signature" constitutes and appoints John M. Seidl
and Paul G. Manca, each as his or her true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) and supplements to
this Registration Statement and any related Registration Statement filed
pursuant to Rule 462(b) of the Securities Act of 1933, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and to perform each and every act and thing requisite and necessary to be
done in connection with the above premises, as fully for all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or his, her or
their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/ WILLIAM C. EDWARDS
-------------------------------------- April 22, 1998
William C. Edwards
Director of CellNet Data Systems, Inc.
