<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CELLNET DATA SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
TO BE HELD APRIL 30, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CellNet
Data Systems, Inc., a Delaware corporation (the "Company"), will be held on
Thursday, April 30, 1998, at 8:00 a.m., local time, at the Company's facilities
at 355 Shoreway Road, San Carlos, California 94070, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the Company's 1994 Stock Plan to increase the
number of shares of Common Stock available for issuance thereunder by
2,500,000 shares.
3. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the Company for the fiscal year ending December 31, 1998.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 4, 1998, are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All stockholders are invited to attend the meeting in person. However, to
assure your representation at the meeting, you are urged to mark, sign, date and
return the enclosed proxy card as promptly as possible in the postage prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if he or she has returned a proxy.
Sincerely,
John M. Seidl
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
San Carlos, California
March 27, 1998
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
CELLNET DATA SYSTEMS, INC.
---------------------
PROXY STATEMENT FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of CellNet Data Systems, Inc., a
Delaware corporation ("CellNet" or the "Company"), for use at the Annual Meeting
of Stockholders to be held on Thursday, April 30, 1998, at 8:00 a.m., local
time, or at any adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at the Company's facilities at 355 Shoreway Road, San Carlos,
California 94070. The Company's telephone number is (650) 508-6000.
These proxy solicitation materials were mailed at the expense of the Company
on or about March 27, 1998, together with the Company's 1997 Annual Report to
Stockholders, to all stockholders entitled to vote at the meeting.
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Stockholders of record at the close of business on March 4, 1998 (the
"Record Date"), are entitled to notice of and to vote at the meeting. On
February 16, 1998, 41,880,068 shares of the Company's Common Stock were issued
and outstanding. The following table sets forth the beneficial ownership of the
Company's Common Stock as of February 16, 1998, as to (i) each person who is
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) each director of and each nominee for director of the
Company, (iii) each of the executive officers named in the Summary Compensation
Table below and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER SHARES
BENEFICIALLY PERCENT BENEFICIALLY
BENEFICIAL OWNER OWNED(1) OWNED(1)(2)
- ------------------------------------------------------------------------ -------------------- ---------------------
<S> <C> <C>
William C. Edwards(3)................................................... 3,891,850 9.3%
3000 Sand Hill Road
Bldg. 1, Suite 190
Menlo Park, CA 94025
Alan R. Brudos(4)....................................................... 2,742,524 6.5
3000 Sand Hill Road
Bldg. 1, Suite 190
Menlo Park, CA 94025
Odyssey Partners, L.P................................................... 2,724,508 6.5
31 West 52nd Street
New York, NY 10019
Banner Partners(5)...................................................... 2,590,780 6.2
3000 Sand Hill Road
Bldg. 1, Suite 190
Menlo Park, CA 94025
John M. Seidl(6)........................................................ 1,126,350 2.7
Paul M. Cook(7)......................................................... 1,928,274 4.6
Neal M. Douglas(8)...................................................... 1,614,526 3.9
William Hart(9)......................................................... 405,282 1.0
Paul G. Manca(10)....................................................... 191,100 *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER SHARES
BENEFICIALLY PERCENT BENEFICIALLY
BENEFICIAL OWNER OWNED(1) OWNED(1)(2)
- ------------------------------------------------------------------------ -------------------- ---------------------
<S> <C> <C>
Phillip Mallory(11)..................................................... 182,500 *
Robert A. Hayes(12)..................................................... 174,000 *
David L. Perry(13)...................................................... 158,300 *
E. Linn Draper, Jr.(14)................................................. 10,000 *
All directors and executive officers as a group (13 persons)(15)........ 11,578,516 27.3
</TABLE>
- ------------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. In computing the
number of shares beneficially owned by a person and the percentage of
ownership of that person, shares of Common Stock subject to options or
warrants held by that person that are currently exercisable or exercisable
within 60 days of February 16, 1998 are deemed outstanding. Such shares,
however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. The persons named in this table
have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them, subject to community property
laws where applicable and except as indicated in the other footnotes to this
table.
(2) Percentage of beneficial ownership is based on 41,880,068 shares of Common
Stock outstanding as of February 16, 1998.
(3) Includes 2,037,492 shares, 553,298 shares, and 313,022 shares of Common
Stock beneficially owned by Banner Partners, Banner Partners/Minaret, and
Carson, a partnership, certain members of Mr. Edwards's family and certain
foundations and trusts of which Mr. Edwards is a trustee, respectively. Mr.
Edwards, a director of the Company, may be deemed to be a beneficial owner
of shares held by such family members, foundations and trusts. Mr. Edwards
and Alan R. Brudos are the general partners of Banner Partners and Banner
Partners/Minaret and each exercises sole voting and dispositive power over
the shares held by Banner Partners and Banner Partners/Minaret.
(4) Includes 2,037,492 shares, 553,298 shares, and 151,734 shares of Common
Stock beneficially owned by Banner Partners, Banner Partners/Minaret, and a
trust of which Mr. Brudos is the trustor, respectively. Mr. Brudos and
William C. Edwards are the general partners of Banner Partners and Banner
Partners/Minaret and each exercises sole voting and dispositive power over
the shares held by Banner Partners and Banner Partners/Minaret. Mr. Brudos
exercises shared voting and dispositive power over the shares held by the
trust.
(5) Includes 553,298 shares held by Banner Partners/Minaret which is wholly
owned by Banner Partners.
(6) Includes 250,000 shares of Common Stock that the Company had the right to
repurchase at cost as of February 16, 1998, which rights lapse based upon
continued performance of services by Mr. Seidl, and 9,100 shares of Common
Stock which are held by Mr. Seidl as a trustee of a trust for a family
member who shares Mr. Seidl's household. Mr. Seidl disclaims all beneficial
ownership of all securities held in trust for such family member. Also
includes 2,800 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of February 16, 1998 held by Mr. Seidl.
(7) Includes 1,808,274 shares of Common Stock beneficially owned by the Paul and
Marcia Cook Living Trust dated April 21, 1992 and 120,000 shares of Common
Stock beneficially owned by two trusts of which Mr. Cook is trustee.
(8) Includes 1,613,476 shares of Common Stock beneficially owned by AT&T
Ventures Company, L.P. Mr. Douglas, a director of the Company, is a general
partner of AT&T Ventures Company, L.P. and
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<PAGE>
may be deemed to be the beneficial owner of such shares. Mr. Douglas
disclaims beneficial ownership of the shares except to the extent of his
proportionate partnership interest therein.
(9) Includes 331,862 shares of Common Stock beneficially owned by Technology
Partners West Fund IV, L.P. Mr. Hart, a director of the Company, is a
general partner of Technology Partners West Fund IV, L.P. and may be deemed
to be the beneficial owner of such shares. Mr. Hart disclaims beneficial
ownership of the shares except to the extent of his proportionate
partnership interest therein.
(10) Includes 81,000 shares of Common Stock that the Company had the right to
repurchase at cost as of February 16, 1998, which rights lapse based upon
continued performance of services by Mr. Manca. Also includes 11,100 shares
of Common Stock issuable upon exercise of options exercisable within 60 days
of February 16, 1998 held by Mr. Manca.
(11) Includes 68,000 shares of Common Stock that the Company had the right to
repurchase at cost as of February 16, 1998, which rights lapse based on
continued performance of services by Mr. Mallory. Also includes 12,000
shares of Common Stock issuable upon exercise of options exercisable within
60 days of February 16, 1998 held by Mr. Mallory.
(12) Includes 164,000 shares issuable upon the exercise of options exercisable
within 60 days of February 16, 1998 held by Mr. Hayes.
(13) Includes 45,750 shares of Common Stock that the Company had the right to
repurchase at cost as of February 16, 1998, which rights lapse based upon
continued performance of services by Mr. Perry. Also includes 22,100 shares
of Common Stock issuable upon exercise of options exercisable within 60 days
of February 16, 1998 held by Mr. Perry.
(14) Consists of 10,000 shares issuable upon the exercise of options exercisable
within 60 days of February 16, 1998 held by Mr. Draper.
(15) Includes 635,678 shares of Common Stock that the Company had the right to
repurchase at cost as of February 16, 1998, which rights lapse based upon
continued performance of services by the executive officers. Also includes
562,406 shares of Common Stock issuable upon exercise of options exercisable
within 60 days of February 16, 1998.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each holder of Common Stock is entitled to one vote for each share held. The
cost of soliciting proxies will be borne by the Company. The Company may retain
the services of a proxy solicitation firm to aid in solicitation of proxies from
brokers, bank nominees and other institutional owners on terms customary for
such services. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, personally or by telephone or telegram.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the votes eligible to be cast by holders of shares of Common Stock
issued and outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST" or "WITHHOLD AUTHORITY" on a matter at the Annual Meeting are treated
as being present at the meeting for purposes of establishing a quorum and are
also
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<PAGE>
treated as Votes Cast at the meeting with respect to such matter. For this
purpose, the "Votes Cast" are defined under Delaware law to be the shares of the
Company's Common Stock present in person or represented by proxy at the Annual
Meeting and "entitled to vote on the subject matter."
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of a controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
In a 1988 Delaware case, BERLIN V. EMERALD PARTNERS, the Delaware Supreme
Court held that, while broker non-votes should be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for purposes of determining the number of
Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Accordingly, the Company intends to treat broker non-votes
in this manner. Thus, a broker non-vote will not have any effect on the outcome
of the voting on a proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at next year's Annual Meeting must be received by the
Company no later than November 27, 1998 so that they may be included in the
proxy statement and form of proxy relating to that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A Board of six directors is to be elected at the meeting. The Company's
bylaws authorize a Board of Directors that can range in size from six to eleven
directors, with the number of directors presently set at ten. The Company
believes it is in its best interests at this time to maintain a Board with six
directors and four vacancies. Under the terms of a Shareholders' Agreement among
the Company and certain stockholders of the Company, so long as certain parties
to the Shareholders' Agreement continue to hold not less than 700,000 shares of
Common Stock (as such number is adjusted for stock splits, consolidations or
other similar events), the Company is obligated to nominate for election as
directors the following persons: (i) one candidate selected by El Dorado
Investment Company, which position is currently vacant; (ii) Paul M. Cook; (iii)
one candidate selected by Banner Partners, currently William C. Edwards; (iv)
one candidate selected by AT&T Ventures Company, L.P., currently Neal M.
Douglas; (iv) one candidate selected by Odyssey Partners, L.P., which position
is currently vacant; and (v) the Chief Executive Officer of the Company,
currently John M. Seidl.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's six nominees named below, all of whom are
presently directors of the Company. Proxies may not be voted for a greater
number of persons than the number of nominees named. In the event that any
nominee of the Company is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. The Company is
not aware of any nominee who will be unable or will decline to serve as a
director. The term of office of each person elected as a director will continue
until the next Annual Meeting of Stockholders or until a successor has been
elected and qualified. William C. Edwards is the father of Cree A. Edwards, an
executive officer of the Company. There are no other family relationships among
the directors or executive officers of the Company.
4
<PAGE>
The names of the nominees and certain information about them as of December
31, 1997 are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ---------------------- --- ------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
John M. Seidl 58 President and Chief Executive Officer of the Company 1994
Paul M. Cook 73 Chief Executive Officer of DIVA Systems Corporation 1990
Neal M. Douglas 39 General Partner, AT&T Ventures Company, L.P. 1993
E. Linn Draper, Jr. 55 President and Chief Executive Officer of American Electric Power Company, 1997
Inc.
William C. Edwards 69 General Partner, Bryan & Edwards 1991
William Hart 57 General Partner, Technology Partners 1992
</TABLE>
JOHN M. SEIDL became President, Chief Executive Officer and a director of
the Company in September 1994. From December 1992 to September 1994, Mr. Seidl
served as director of St. Mary's Land & Exploration Company, CRSS, Inc., J.B.
Poindexter, Inc. and a privately-held company. From January 1989 through
December 1992, Mr. Seidl served as a director of MAXXAM, Inc., an aluminum,
forest products and real estate concern, and Chairman and Chief Executive
Officer of Kaiser Aluminum Corporation. From September 1990 through December
1992, Mr. Seidl also served as President of MAXXAM, Inc. Previously, Mr. Seidl
was Executive Vice President, from July 1985 to May 1986, and President and
Chief Operating Officer, from May 1986 to January 1989, of Enron Corp., an
energy company. Mr. Seidl currently is a director of St. Mary's Land &
Exploration Company and several privately-held companies and non-profit
organizations. He received a B.S. degree in Engineering from the United States
Military Academy, and M.P.A. and Ph.D. degrees in Political Economy from Harvard
University.
PAUL M. COOK has been a director of the Company continuously since August
1990. Mr. Cook became Chief Executive Officer of the Company in August 1990, and
assumed the additional title of President in 1992. He relinquished the positions
of President and Chief Executive Officer in September 1994. Since June 1995, Mr.
Cook has been the Chief Executive Officer and Chairman of the Board of DIVA
Systems Corp., a company developing video-on-demand products. Until his
retirement in April 1990, Mr. Cook was Chief Executive Officer of Raychem
Corporation, a plastics and insulation manufacturer, which he founded in 1957.
Since September 1994, Mr. Cook has served as Chairman of the Board of SRI
International, Inc., and as a director of Raychem Corporation. Currently, Mr.
Cook is also a director of Chemfab Corporation. He received a B.S. degree from
the Massachusetts Institute of Technology.
NEAL M. DOUGLAS has been a director of the Company since October 1993. Since
January 1993 he has been a general partner of AT&T Ventures Company, L.P., a
venture capital firm. From May 1989 to January 1993, he was a partner of New
Enterprise Associates, another venture capital firm. Mr. Douglas also serves as
director of two privately-held companies.
E. LINN DRAPER, JR. has been a director of the Company since April 1997.
Since May 1993, he has been Chairman, President and Chief Executive Officer of
American Electric Power Company, Inc. ("AEP") and since March 1992, he has been
the President of AEP. Dr. Draper is also Chairman, President and Chief Executive
Officer of the American Electric Power Service Corporation, the management and
technology arm of the AEP system, President of Ohio Valley Electric Corporation
and its subsidiary, Indiana-Kentucky Electric Corporation and Chairman of the
Edison Electric Institute. From 1987 to 1992, Dr. Draper was Chairman, President
and Chief Executive Officer of Gulf States Utility Company. He is a member of
the National Academy of Engineering and serves as a director of Nuclear Energy
Institute, the Institute of Nuclear Power Operations, and the Greater Columbus
Chamber of Commerce.
5
<PAGE>
WILLIAM C. EDWARDS has been a director of the Company from October 1985 to
April 1986 and has been a director continuously since March 1991. Since October
1968 he has been a general partner of Bryan & Edwards, an investment
partnership. Mr. Edwards also serves as a director of Western Atlas, Inc. and
two privately-held companies.
WILLIAM HART has been a director of the Company since October 1992. He has
been a general partner of Technology Partners West Fund IV, L.P. ("Technology
Partners"), a venture capital firm, since its founding in 1979. Mr. Hart also
serves as a director of Trimble Navigation, Ltd., Silicon Gaming, Inc. and
several privately-held corporations.
VOTE REQUIRED
The six nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be elected
as directors.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of nine meetings during
the fiscal year ended December 31, 1997. All directors of the Company attended
75% or more of the aggregate number of Board meetings and committee meetings
held in 1997 during their respective periods of service as a director and as a
member of one or more committees of the Board except for director Draper who
attended 50% of such meetings.
The Board of Directors has standing Audit, Compensation, Executive and
Nominating Committees.
The Audit Committee of the Board of Directors, currently consisting of
directors Douglas and Draper held one meeting during 1997 to review with the
independent auditors matters relating to the Company's annual audit and
reporting requirements and the Company's internal accounting controls. The Audit
Committee reviews the nature, scope and results of the independent audit of the
Company, the Company's accounting principles and internal accounting controls
and other matters relating to the relationship of the independent auditors with
the Company.
The Compensation Committee of the Board of Directors, currently consisting
of directors Edwards, Douglas and Hart, held a total of three meetings during
1997. The Compensation Committee is primarily responsible for determining the
salary and benefits of the elected officers of the Company, and to recommend
stock option grants for the Company's officers and other employees, subject to
approval by the Board of Directors.
The Executive Committee of the Board of Directors, currently consisting of
directors Cook, Seidl and Edwards, held no meetings but took one action by
written consent during 1997. The Executive Committee is authorized to exercise
all of the powers and authority of the Board of Directors except those which are
generally reserved to the entire Board under Delaware law.
The Nominating Committee of the Board of Directors, currently consisting of
directors Hart, Cook and Edwards, did not meet or take any action by written
consent during 1997. The Nominating Committee is responsible for selecting and
recommending to the Board of Directors qualified candidates for election as
directors of the Company. The Nominating Committee will consider nominees
recommended by stockholders of the Company. Any such recommendations to be
considered by the stockholders at the 1999 Annual Meeting of Stockholders should
be addressed to the Secretary of the Company for attention of the Nominating
Committee and must be delivered to or mailed and received at the principal
executive offices of the Company no later than November 27, 1998. Each such
recommendation must include (i) the name and address of the stockholder making
the recommendation, (ii) the name and address of the person or persons being
recommended, (iii) a representation that the stockholder is a holder of record
of stock of the Company entitled to vote for the election of directors of the
Company, (iv) a description of all arrangements or understandings between the
stockholder and the person or persons being recommended, if any,
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<PAGE>
with respect to such candidacy and/or service as a director of the Company if
nominated or elected, (v) such other information regarding each recommended
nominee as would be required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had the recommended
nominee been nominated, and (vi) the consent of each recommended nominee to
serve as director of the Company if so nominated and elected.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Messrs. Edwards, Douglas
and Hart, none of whom is or has been an officer or employee of the Company. Mr.
Edwards is the father of Cree A. Edwards, an executive officer of the Company.
No interlocking relationship exists between the Company's Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other party, nor has any such relationship existed in the past. Entities
affiliated with Messrs. Edwards, Douglas and Hart are stockholders of the
Company and have entered into financing arrangements with the Company from time
to time.
PROPOSAL TWO
APPROVAL OF AMENDMENT TO THE 1994 STOCK PLAN
The 1994 Stock Plan (the "1994 Plan") was adopted by the Board of Directors
in December 1994 and adopted by the stockholders in June 1995 and was amended by
the Board in February, 1997 to reserve an additional 2,500,000 shares of Common
Stock for issuance thereunder, bringing the total number of shares reserved for
issuance under the 1994 Plan to 5,500,000.
The Company believes that its 1994 Plan is an important factor in attracting
and retaining skilled personnel. From time to time, the Company reviews the
number of shares available for issuance under the 1994 Plan and, based on the
Company's estimates of the number of shares expected to be issued under the 1994
Plan, management presents to the Board of Directors a recommendation for the
addition of shares reserved for issuance. The Board reviews such recommendation
and if approved by the Board, presents a proposal for the stockholders'
approval.
As of December 31, 1997, 634,409 shares of Common Stock had been issued upon
exercise of stock options, options to purchase an aggregate of 2,177,849 shares
were outstanding at a weighted average exercise price of $6.03 per share, of
which 323,230 shares were vested, and 187,742 shares remained available for
future issuance under the 1994 Plan.
SUMMARY OF THE 1994 PLAN
The essential features of the 1994 Plan are outlined below.
PURPOSE. The purposes of the 1994 Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to the employees and consultants of the Company and to
promote the success of the Company's business.
ADMINISTRATION. The 1994 Plan may be administered by the Board or a
committee of the Board (the "Administrator"). Subject to the other provisions of
the 1994 Plan, the Administrator has the power to determine the terms and
conditions of any options and stock purchase rights granted, including but not
limited to the exercise price, the number of shares subject to the option or
stock purchase right and the exercisability thereof. The 1994 Plan is currently
administered by the Board of Directors.
ELIGIBILITY AND TERMS OF OPTIONS. The 1994 Plan provides that nonstatutory
stock options and stock purchase rights may be granted only to employees,
directors and consultants, so long as no such individual is granted options to
purchase more than 1,000,000 shares in any fiscal year. Incentive stock options
may be granted only to employees. An optionee who has been granted an option
may, if he or she is otherwise
7
<PAGE>
eligible, be granted additional options or stock purchase rights. With respect
to any optionee who owns stock possessing more than 10% of the voting power of
all classes of stock of the Company (a "10% Stockholder"), the exercise price of
any incentive stock option granted must equal at least 110% of the fair market
value on the grant date and the maximum term of the option must not exceed five
years. The term of all other options under the 1994 Plan may not exceed ten
years. The Administrator selects the optionees and determines the number of
shares to be subject to each option. In making such determination, the duties
and responsibilities of the employee, director or consultant, the value of his
or her services, his or her present and potential contribution to the success of
the Company, the anticipated number of years of future service and other
relevant factors are taken into account.
CONDITIONS OF OPTIONS. Each option granted under the 1994 Plan is evidenced
by a written stock option agreement between the optionee and the Company and is
subject to the following conditions:
(a) EXERCISE PRICE. The Administrator determines the exercise price of
options to purchase shares of Common Stock. However, the exercise price of
an incentive stock option or of a nonstatutory stock option intended to
qualify as "performance based compensation" within the meaning of 162(m) of
the Internal Revenue Code of 1986 (the "Code") must not be less than 100%
(110%, if issued to a 10% Stockholder) of the fair market value of the
Common Stock on the date the option is granted. For so long as the Company's
Common Stock is traded on the Nasdaq National Market, the fair market value
of a share of Common Stock shall be the closing sale price for such stock
(or the closing bid if no sales were reported) as quoted on the Nasdaq
National Market for the last market trading day prior to the time of
determination.
(b) VALUE LIMITATION. If the aggregate fair market value of all shares
of Common Stock subject to an optionee's incentive stock option which are
exercisable for the first time during any calendar year exceeds $100,000,
the excess options shall be treated as nonstatutory options.
(c) FORM OF CONSIDERATION. The consideration to be paid for the shares
of Common Stock issued upon exercise of an option shall be determined by the
Administrator and is set forth in the option agreement. Such form of
consideration may vary for each option, and may consist entirely of cash,
check, promissory note, other shares of the Company's Common Stock meeting
certain criteria, any combination thereof, or any other legally permissible
form of consideration as may be provided in the 1994 Plan or the option
agreement.
(d) EXERCISE OF THE OPTION. Each stock option agreement will specify
the term of the option and the date when the option is to become
exercisable. The terms of such vesting are determined by the Administrator.
Options granted under the 1994 Plan have a ten-year term (five years, if
issued to a 10% Stockholder) and to date generally become exercisable over
five years at a rate of one-tenth of the shares subject to the options at
the end of six months from the date of grant and one-twentieth of the shares
every three months thereafter, subject to continuation as a service
provider. An option is exercised by giving written or electronic notice of
exercise to the Company and by tendering full payment of the purchase price
to the Company.
(e) TERMINATION OF EMPLOYMENT. In the event an optionee ceases to be
an employee, director or consultant, other than upon the optionee's death or
disability, the optionee may exercise his or her options within such period
of time as is determined by the Administrator (not to exceed three months in
the case of an incentive stock option) from the date of such termination
(and in no event later than the expiration of the term of such options as
set forth in the option agreement) to the extent that the optionee was
entitled to exercise them at the date of such termination. In the absence of
a specified time in the option agreement, the optionee may exercise his or
her options within three months following the date of such termination.
Options granted under the 1994 Plan to date have generally provided that
optionees may exercise their options within thirty days from the date of
termination of employment other than for the optionee's death or disability.
8
<PAGE>
(f) DISABILITY. In the event an optionee ceases to be an employee,
director or consultant as a result of permanent and total disability (as
defined in Section 22(e)(3) of the Code), the optionee may exercise his or
her options at any time within twelve months from the date of such
termination, but only to the extent that the optionee was entitled to
exercise them at the date of termination, (and in no event later than the
expiration of the term of such options as set forth in the option
agreement).
(g) DEATH. In the event an optionee dies while he or she is an
employee, director or consultant, within twelve months following the date of
death (but in no event later than the expiration of the term of such options
as set forth in the notice of grant), the optionee's estate or a person who
acquires the right to exercise the options by bequest or inheritance may
exercise said options, but only to the extent that the optionee was entitled
to exercise them at the date of death.
(h) TERMINATION OF OPTIONS. Excluding incentive stock options issued
to 10% Stockholders, options granted under the 1994 Plan expire on the date
set forth in the option agreement (not to exceed ten years from the date of
grant). Incentive stock options granted to 10% Stockholders expire five
years from the date of grant (or such shorter period set forth in the option
agreement). No option may be exercised by any person after the expiration of
its term.
(i) NONTRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an option or stock purchase right
may not be sold, pledged, assigned, hypothecated, transferred or disposed of
in any manner, other than by will or the laws of descent and distribution,
and may be exercised during the lifetime of the optionee only by the
optionee. In the event of the optionee's death, options may be exercised by
a person who acquires the right to exercise the option by bequest or
inheritance.
TERMS AND CONDITIONS OF STOCK PURCHASE RIGHTS. Each stock purchase right
granted under the 1994 Plan shall be evidenced by a written or electronic offer
which sets forth the terms, conditions and restrictions related to the offer,
including the number of shares that the offeree shall be entitled to purchase,
the price to be paid, and the time within which the offeree must accept such
offer. The offer shall be accepted by execution of a restricted stock purchase
agreement in such form as determined by the Administrator. Unless the
Administrator determines otherwise, the restricted stock purchase agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's service with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the restricted stock purchase agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The Administrator shall determine
the rate at which the repurchase option lapses. Once the stock purchase right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS. Subject
to any required action by the stockholders of the Company, the number of shares
of Common Stock covered by each outstanding option or stock purchase right, and
the number of shares of Common Stock which have been authorized for issuance
under the 1994 Plan but as to which no options or stock purchase rights have yet
been granted or which have been returned to the 1994 Plan upon cancellation or
expiration of an option or stock purchase right, as well as the price per share
of Common Stock covered by each such outstanding option or stock purchase right,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company. The conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment
9
<PAGE>
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an option or stock purchase right.
DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each optionee as soon
as practicable prior to the effective date of such proposed transaction. To the
extent it has not been previously exercised, the Option or Stock Purchase Right
shall terminate immediately prior to the consummation of such proposed action.
The Administrator in its discretion may provide for an optionee to have the
right to exercise his or her option until ten (10) days prior to such
transaction as to all of the optioned stock covered thereby, including shares as
to which the option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
shares purchased upon exercise of an option or stock purchase right shall lapse
as to all such shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an option or stock purchase right will terminate
immediately prior to the consummation of such proposed action.
MERGER OR ASSET SALE. In the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the
Company, each outstanding option or stock purchase right will be assumed or an
equivalent option or right substituted by the successor corporation or a parent
or subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option or stock purchase
right, the optionee shall fully vest in and have the right to exercise the
option or stock purchase right as to all of the optioned stock, including shares
as to which it would not otherwise be vested or exercisable.
AMENDMENT AND TERMINATION OF THE 1994 PLAN. The Board may at any time
amend, alter, suspend or terminate the 1994 Plan. The Company shall obtain
stockholder approval of any 1994 Plan amendment to the extent necessary and
desirable to comply with applicable laws. No amendment, alteration, suspension
or termination of the 1994 Plan shall impair the rights of any Optionee, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
FEDERAL TAX INFORMATION
Options granted under the 1994 Plan may be either incentive stock options,
as defined in Section 422 of the Code, or nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% Stockholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term, or short-term capital gain or loss, depending on the holding period.
All of the options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize taxable income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be
10
<PAGE>
subject to tax withholding by the Company. Upon resale of such shares by the
optionee, any difference between the sales price and the optionee's purchase
price, to the extent not recognized as taxable income as described above, will
be treated as long-term or short-term capital gain or loss, depending on the
holding period.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired upon
exercise of a nonstatutory option.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE PARTICIPANT AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED UNDER
THE 1994 PLAN, DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE MADE TO
THE APPLICABLE PROVISIONS OF THE TAX CODE. IN ADDITION, THIS SUMMARY DOES NOT
DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE INCOME TAX LAWS OF
ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
PARTICIPATION IN THE 1994 PLAN
The following table sets forth information with respect to options granted
under the 1994 Plan during the fiscal year ended December 31, 1997 to (i) all
executive officers as a group, and (ii) all other employees (excluding executive
officers) as a group:
<TABLE>
<CAPTION>
SHARES SUBJECT WEIGHTED AVERAGE
TO OPTIONS EXERCISE PRICE
NAME AND POSITION GRANTED PER SHARE
- ------------------------------------------------------------------------------ --------------- -----------------
<S> <C> <C>
All executive officers as a group (8 persons)................................. 130,500 $ 11.50
All other employees (excluding executive officers) as a group................. 772,100 $ 10.71
</TABLE>
VOTE REQUIRED FOR APPROVAL OF AMENDMENT
The affirmative vote of the majority of the Votes Cast will be required
under Delaware law to approve the amendment to the 1994 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE 1994
PLAN. THE EFFECT OF AN ABSTENTION IS THE SAME AS A VOTE AGAINST THE AMENDMENT OF
THE 1994 PLAN.
PROPOSAL THREE
RATIFICATION OF
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 1998, and recommends that stockholders vote "FOR"
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements since
the inception of the Company. Representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting, will have an opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
The Board of Directors recommends a vote "FOR" the ratification of the
appointment of Deloitte & Touche LLP as independent auditors.
11
<PAGE>
MANAGEMENT, EXECUTIVE COMPENSATION AND OTHER MATTERS
MANAGEMENT
The executive officers of the Company and their ages as of December 31, 1997
are as follows.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
John M. Seidl............................. 58 President, Chief Executive Officer and Director
Cree A. Edwards........................... 40 Vice President, Marketing
Robert A. Hayes........................... 45 Vice President, Development and Operations
James J. Jennings(1)...................... 50 Vice President, Sales and Marketing
Larsh M. Johnson.......................... 40 Vice President and Chief Technology Officer
Paul G. Manca............................. 39 Vice President and Chief Financial Officer
Philip H. Mallory......................... 58 Vice President and General Manager, Services
David L. Perry............................ 57 Vice President, General Counsel, Secretary and Chief
Administrative Officer
</TABLE>
- ------------------------
(1) Mr. Jennings resigned his position with the Company, effective as of March
15, 1998.
JOHN M. SEIDL'S biography appears under Proposal One of this proxy
statement.
CREE A. EDWARDS is a co-founder of the Company, served as Vice President,
Business Development from January 1994 to January 1997 and has served as Vice
President, Marketing since that time. Mr. Edwards was President of the Company
from October 1984 to February 1990 and Executive Vice President from February
1990 to January 1994. Prior to founding CellNet in 1984, Mr. Edwards was an Area
Sales Manager for Octel Communications Corporation, a voice processing
manufacturer, from September 1984 to September 1985, and a Major Accounts
Manager for the General Electric Information Services Company from March 1983 to
September 1984. He received a B.A. degree in Economics from the University of
California, Davis.
ROBERT A. HAYES joined the Company in January 1993 as Vice President,
Special Assistant to the President. He became Vice President, Software
Development in March 1994 and was named Vice President, Development in January
1995 and Vice President, Development and Operations in April 1997. From February
1991 to December 1992, Mr. Hayes held a number of positions with Everex Systems,
Inc. ("Everex"), a computer hardware manufacturer, including Vice President of
Manufacturing, Vice President of Quality and Service, Manager of the Network
Division and Group Manager of Service. Everex filed for Chapter 11 bankruptcy
protection in January 1993. Mr. Hayes received B.S. and M.C.E. degrees in Civil
Engineering from Rice University.
JAMES J. JENNINGS joined the Company in August 1994 and has served as Vice
President, Sales and Marketing since that time. From April 1988 until July 1994,
Mr. Jennings was a Vice President of Octel Communications Corporation, a voice
processing manufacturer, where he served in a variety of domestic and
international sales, marketing and business development capacities. Mr. Jennings
served as an officer in the United States Army from 1968 to 1975. Mr. Jennings
holds a B.S. degree in Engineering from the United States Military Academy and
an M.B.A. degree from the University of San Francisco.
LARSH M. JOHNSON is a co-founder of the Company and has served in several
vice presidential positions from October 1984 to December 1994 and, since
January 1995, as Vice President and Chief Technology Officer. While at CellNet
and prior to co-founding the Company in 1984, he was a self-employed product
design consultant from May 1983 to June 1985 and Director of Product Development
at Interactive Communications Corporation, a video systems company, from
February 1984 to June 1985. Mr. Johnson was an Engineering Manager at Digital
Optics Corporation, a company specializing in electro-optical systems, from
March 1981 to April 1983 and an electrical engineer at Systems Control
Corporation, a
12
<PAGE>
computer hardware company, from June 1980 to April 1981. He received his B.S.
and M.S. degrees in Mechanical Engineering from Stanford University.
PAUL G. MANCA joined the Company in May 1995 as Vice President and Chief
Financial Officer. From March 1993 to May 1995, he was the Managing Director and
Group Head of the Communications Group at BZW/Barclays Bank. Mr. Manca joined
BZW/Barclays as Vice President, Merchant Banking Division in February 1987. From
June 1980 to February 1987, Mr. Manca was employed in the corporate finance
group of the Canadian Imperial Bank of Commerce. He received a B.A. degree in
Economics from the University of California, Berkeley and an M.B.A. degree in
Finance from Golden Gate University.
PHILIP H. MALLORY joined the Company in January 1995 as Vice President and
General Manager, Services. From June 1996 until April 1997, he assumed the
additional duties of Vice President, Operations. From June 1992 to January 1995,
Mr. Mallory held various positions at CAE-Link Corporation, a defense
contractor, including Director of Strategic Planning, Director--Product
Management and Director-- Department of Defense Marketing. Mr. Mallory served as
a career officer in the United States Army from June 1961 to August 1991,
attaining the rank of Major General prior to his retirement. During his army
career he held a number of posts, including Commanding General of the 2nd
Armored Division, NATO Advisor to the Secretary of Defense, and the Commanding
General of the 7th Army Training Command. Mr. Mallory holds a B.S. degree in
Engineering from the United States Military Academy and an M.S. degree in
Engineering--Applied Science from the University of California, Davis. Mr.
Mallory also attended the Industrial College of the Armed Forces in Washington,
D.C., where he attained the equivalent of a master's degree in Resource
Management.
DAVID L. PERRY joined the Company in November 1994 as Vice President,
General Counsel and Secretary, and was appointed Chief Administrative Officer in
February 1996. From January 1992 through November 1994, Mr. Perry was engaged as
an attorney in private practice. From January 1984 through December 1991, Mr.
Perry was Vice President and General Counsel of Kaiser Aluminum Corporation.
From August 1969 through December 1983, Mr. Perry served in a variety of
capacities in Kaiser Aluminum's Law Department. Mr. Perry received a B.A. degree
from Amherst College and a J.D. degree from the Boalt Hall School of Law,
University of California, Berkeley.
CERTAIN TRANSACTIONS
In connection with the sale of Common Stock in December 1994 and January
1995 to Mr. Seidl, the Company's President and Chief Executive Officer, the
Company loaned Mr. Seidl $300,000. The loans are full recourse, bear interest at
a rate of 7.74% per annum in the case of $100,000 of principal and at the rate
of 7.92% per annum in the case of $200,000 of principal, are due on the earlier
of termination of Mr. Seidl's employment or December 26, 1999 and January 25,
2000, respectively, and are secured by the shares of Common Stock purchased with
the proceeds of such loans.
In connection with the sale of Common Stock in July 1995 to Mr. Mallory, an
executive officer of the Company, the Company loaned Mr. Mallory $85,000. The
loan is full recourse, bears interest at the rate of 6.28% per annum, is due on
the earlier of termination of Mr. Mallory's employment or July 21, 2000 and is
secured by the shares of Common Stock purchased with the proceeds of such loan.
In connection with the sale of Common Stock in July 1995 to Mr. Manca, an
executive officer of the Company, the Company loaned Mr. Manca $90,000. The loan
is full recourse, bears interest at the rate of 6.28% per annum, is due on the
earlier of termination of Mr. Manca's employment or July 31, 2000 and is secured
by the shares of Common Stock purchased with the proceeds of such loan.
In connection with the sale of Common Stock in August 1995 to Messrs.
Jennings, Johnson and Edwards, each executive officers of the Company, the
Company loaned Messrs. Jennings, Johnson and Edwards $36,000, $82,829 and
$77,704, respectively. The loans are full recourse, bear interest at the rate of
13
<PAGE>
6.04% per annum, are due on the earlier of termination of employment or August
1, 2000 and are secured by the shares of Common Stock purchased with the
proceeds of such loans.
The amounts of outstanding indebtedness, including interest, on the loans to
executive officers described above as of December 31, 1997, which were the
largest aggregate amount of indebtedness owed by each of the officers at any
time, were as follows: Mr. Seidl, $353,380, Mr. Mallory, $98,089, Mr. Manca,
$103,704, Mr. Jennings, $41,266, Mr. Johnson, $94,946 and Mr. Edwards, $89,071.
The terms (including the terms of the promissory notes) of the sale of shares of
Common Stock by the Company to Messrs. Seidl, Mallory, Manca, Johnson and
Edwards were unanimously approved by the Board of Directors of the Company.
14
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by CellNet during each
of the fiscal years ended December 31, 1995, December 31, 1996 and December 31,
1997, to the Chief Executive Officer of CellNet and the four other most highly
compensated executive officers of CellNet during fiscal 1997 (the "Named
Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
-------------------------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER AWARDS($) OPTIONS(#) COMPENSATION(1)
- ------------------------------- --------- ---------- ---------- --------- --------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
John M. Seidl ................. 1997 $ 335,192 -- -- -- -- $ 1,522
Chairman of the Board, 1996 313,673 -- -- -- -- 1,522
President and Chief Executive 1995 300,000 $ 135,000 -- -- -- 1,846
Officer
Robert A. Hayes ............... 1997 197,385 22,500 -- -- -- 1,239
Vice President, Development 1996 176,346 -- -- -- -- 1,101
and Operations 1995 165,000 10,000 -- -- -- 1,429
Phillip H. Mallory ............ 1997 183,096 25,000 -- -- -- 1,217
Vice President and General 1996 163,750 -- -- -- -- 1,049
Manager, Services 1995 -- -- -- -- -- --
Paul G. Manca ................. 1997 183,635 15,000 -- -- -- 1,192
Vice President and Chief 1996 175,501 10,000 -- -- -- 1,088
Financial Officer 1995 110,173 -- -- -- -- 862
David L. Perry ................ 1997 175,000 22,500 -- -- -- 1,103
Vice President, General 1996 176,346 10,000 -- -- -- 1,101
Counsel, Secretary and Chief 1995 135,000 -- -- -- -- 1,261
Administrative Officer
</TABLE>
- ------------------------
(1) Represents premium payments made by the Company for life insurance,
accidental death and dismemberment, and long-term disability policies.
15
<PAGE>
OPTION GRANTS IN FISCAL 1997
The following table sets forth each grant of stock options during the fiscal
year ended December 31, 1997 to the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL INDIVIDUAL GRANTS PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED ----------------------- OPTION TERM(2)
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
- ---------------------------------------- ----------- ----------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John M. Seidl........................... 28,000 3.0% $ 11.50 08/07/07 $ 202,504 $ 513,185
Robert A. Hayes......................... 25,000 2.7 11.50 08/07/07 180,807 458,201
Philip H. Mallory....................... 20,000 2.1 11.50 08/07/07 144,646 366,561
Paul G. Manca........................... 15,000 1.6 11.50 08/07/07 108,484 274,921
David L. Perry.......................... 15,000 1.6 11.50 08/07/07 108,484 274,921
</TABLE>
- ------------------------
(1) Options granted under CellNet's 1994 Stock Plan (the "1994 Plan"). The
option exercise price of all incentive stock options granted under the 1994
Plan is equal to the fair market value of the shares of Common Stock on the
date of grant. The options have a term of ten years and vest at the rate of
10% of the shares after six months from the date of grant and 5% of the
shares every three months thereafter provided the optionee remains in
continuous status as an employee or consultant.
(2) Potential realizable value is based on the assumption that the Common Stock
of CellNet appreciates at the annual rate shown (compounded annually) from
the date of grant until the expiration of the option term. These numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission and do not reflect CellNet's estimate of future stock
price growth. The computation of potential realizable value only includes
the number of securities underlying a grant at fiscal year end.
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 1997
by the Named Executive Officers and the value of such officers' unexercised
options at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE(1) OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 12/31/97(#) 12/31/97($)
ACQUIRED ON VALUE(1) -------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
John M. Seidl.................. -- -- 2,800 25,200 -- --
Robert A. Hayes................ 47,500 $ 473,250 159,750 72,750 $ 1,155,063 $ 342,438
Philip H. Mallory.............. -- -- 10,750 34,250 50,313 93,438
Paul G. Manca.................. -- -- 9,900 29,100 48,300 89,700
David L. Perry................. -- -- 20,750 61,050 113,813 280,913
</TABLE>
- ------------------------
(1) Market value of underlying securities at exercise or year-end 1997, as the
case may be, minus the exercise price, based on a closing price of $7.75.
COMPENSATION OF DIRECTORS
The Company reimburses directors for expenses incurred in attending board
and committee meetings. The directors of the Company did not receive any cash
compensation for services provided as directors during fiscal year 1997, except
for Dr. Draper, who received $3,000 for such services. The Company has granted
Dr. Draper options for the purchase of up to 40,000 shares of the Company's
Common Stock at
16
<PAGE>
$7.625 per share in partial compensation for his services as a director. Options
to purchase 10,000 of the shares vested immediately, and the remaining 30,000
shares will vest at the rate of 2,500 shares per quarter commencing July 24,
1998 such that all shares shall be vested four years from date of grant, subject
to his continuing service as a director. The Company has also agreed to pay Dr.
Draper a fee of $1,000 for each meeting of the Board of Directors or committee
thereof that he attends.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
In connection with Mr. Jennings' resignation on March 15, 1998 and in
consideration of earlier employment arrangements with the Company, the Company
has agreed to provide certain severance benefits to Mr. Jennings, including
continuation of his base salary of $183,768 and certain employee benefits for a
period of one year and accelerated vesting of 40% of the unvested shares of
restricted Common Stock (21,600 shares) and unvested options to purchase Common
Stock (8,940 shares) held by Mr. Jennings as of the date of his resignation. The
Company repurchased at original cost ($0.25 per share) the remaining 32,400
unvested shares of restricted Common Stock held by Mr. Jennings as of the date
of his resignation.
Each of the Named Executive Officers is party to an Employee Severance
Agreement with the Company which provides for accelerated vesting of their
respective stock options and for the lapse of the Company's rights to repurchase
unvested stock under all restricted stock purchase agreements upon the
occurrence of certain events following a change of control of the Company. These
events will occur if: (i) the Named Executive Officer's stock option agreement
or restricted stock purchase agreement is terminated without such officer's
consent, or if the terms of such agreements are not assumed by any successor to
the Company; (ii) the Named Executive Officer does not receive identical
securities or consideration, upon such officer's exercise of options or
restricted stock purchases, as other stockholders are receiving as part of such
change of control; (iii) six months have elapsed following the change of
control, so long as the Named Executive Officer remains employed by the Company;
or (iv) the Named Executive Officer is terminated or constructively terminated
following the change of control.
There are no other employment contracts between CellNet and any of the Named
Executive Officers, and there are no other compensatory plans or arrangements
with respect to a Named Executive Officer which will result in payments upon
resignation, retirement, or any other termination of such executive officer's
employment or from a change of control of CellNet.
EMPLOYEE BENEFIT PLANS
The following is a brief summary of plans in effect during the fiscal year
ended December 31, 1997 under which officers, directors and employees of the
Company received benefits.
INCENTIVE STOCK PLANS
1992 STOCK OPTION PLAN. The Company's 1992 Stock Option Plan (the "1992
Plan") was adopted by the Board of Directors and approved by the Company's
stockholders in September 1992. A total of 6,000,000 shares of Common Stock are
reserved for issuance under the 1992 Plan. As of December 31, 1997, 4,457,197
shares of Common Stock had been issued upon exercise of stock options, and
options to purchase an aggregate of 1,229,395 shares were outstanding at a
weighted average exercise price of $0.2561 per share, of which 302,649 shares
were vested. In connection with the adoption of the 1994 Plan described below,
the 1992 Plan terminated and no additional options may be granted thereunder.
Options previously granted under the 1992 Plan will continue to be governed by
the provisions of such plan.
1994 STOCK PLAN. See Summary of 1994 Plan in Proposal Two.
1996 EMPLOYEE STOCK PURCHASE PLAN. The Company's 1996 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
July 1996 and was approved by the
17
<PAGE>
stockholders in September 1996. A total of 1,200,000 shares of Common Stock are
reserved for issuance under the Purchase Plan. Under the Purchase Plan, the
Company withholds a specified percentage of each salary payment to participating
employees over certain offering periods. Any employee who is then employed for
at least 20 hours per week by the Company (or any majority-owned subsidiary
designated by the Board of Directors from time to time), and who does not own 5%
or more of the total combined voting power or value of all classes of the
capital stock of the Company or of any such subsidiary, is eligible to
participate in the Purchase Plan. Unless the Board of Directors shall determine
otherwise, each offering period runs for six months, from November 1 to April 30
and from May 1 to October 31, except that the first offering period commenced on
September 26, 1996 and ended on April 30, 1997. The price at which Common Stock
may be purchased under the Purchase Plan is equal to 85% of the fair market
value of the Common Stock on the first or last day of the applicable offering
period, whichever is lower. As of December 31, 1997, 163,101 shares of Common
Stock had been issued to employees under the Purchase Plan.
BONUS PLAN
The Board of Directors of the Company adopted a formal Bonus Plan in August
1997 (the "Bonus Plan"). Under the Bonus Plan, the Compensation Committee of the
Board of Directors (the "Committee") establishes a bonus pool for each fiscal
year "Performance Period" and makes bonus "Target Awards" to "Participants"
selected by the Chief Executive Officer from among regular full-time exempt
employees of the Company and its wholly-owned subsidiaries. The Committee also
establishes performance measures for the Company (a "Company Performance Level")
and management establishes goals and objectives for each Participant (a
"Participant Performance Level"). Actual awards are determined on the basis of
the achievement of both Company Performance and Participant Performance Levels
with each given a relative weighting (which may be different for different
Participants) as determined by the Committee. Awards are payable in cash within
60 days after the end of a Performance Period. Provision is made for the
elimination or reduction of actual awards for Company performance below a
"Minimum Company Performance Level" and/or for unsatisfactory Participant
performance. The Bonus Plan applies to the current fiscal year and will continue
until terminated by the Committee. The Committee has broad authority to alter or
amend the Bonus Plan, to construe and interpret its terms, to make adjustments
in certain circumstances to Target Awards, eligibility, and to the amount, time
and manner of payment of awards.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors of the Company is
involved in determining the salary and benefits of the executive officers of the
Company. Under current Company policy, the Chief Executive Officer of the
Company determines the annual compensation level, including bonuses, for all
other executive officers of the Company, and then submits his compensation and
bonus recommendations to the Compensation Committee for their review and
approval. Both the Chief Executive Officer and the Compensation Committee view
the overall financial performance of the Company as a key component in setting
base compensation and bonus levels for executive officers of the Company. Other
factors taken into consideration include salaries of executives at similar
companies located in the same geographical region, as well as the achievement of
individual performance goals for each executive officer. With respect to equity
based compensation, the Compensation Committee reviews proposed grants and
submits them for final approval to the Board of Directors.
The Compensation Committee is also responsible for establishing the
compensation of the Company's Chief Executive Officer. The Compensation
Committee considered several factors as important in determining the Chief
Executive Officer's compensation for fiscal 1997. These factors included
salaries of chief executives at other companies, individual performance and
achievement of the Company's goals and
18
<PAGE>
objectives for fiscal year 1997. The Committee concluded that, on balance, the
Chief Executive's compensation was appropriate in light of what had been
achieved.
MEMBERS OF THE COMPENSATION COMMITTEE:
William C. Edwards, Chairman
Neal M. Douglas
William Hart
19
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative return to the stockholders of the Company's Common Stock with the
cumulative return of the NASDAQ Composite Index and a peer group of comparable
companies selected by the Company and described below (the "Peer Group") for the
period commencing September 27, 1996, the date the Company's Common Stock was
first publicly traded, and ending on December 31, 1997. The graph assumes that
$100 was invested on September 27, 1996 in the Company's Common Stock, the
NASDAQ Composite Index and the Peer Group, and that all dividends were
reinvested. No dividends have been declared or paid on the Company's Common
Stock. With respect to companies in the Peer Group, the returns of each such
company have been weighted to reflect relative stock market capitalization.
Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
The information contained in the performance graph shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG CELLNET, NASDAQ COMPOSITE AND PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CELLNET DATA SYSTEMS, INC. PEER GROUP NASDAQ STOCK MARKET (U.S.)
<S> <C> <C> <C>
9/27/96 $100 $100 $100
9/30/96 83 101 100
12/31/96 77 72 105
3/31/97 39 61 99
6/30/97 65 87 117
9/30/97 66 116 137
12/31/97 41 105 128
</TABLE>
* $100 invested on 9/27/96 in stock or index--including reinvestment of
dividends. Fiscal year ending December 31.
20
<PAGE>
Because the Company's services and customers are highly specialized, the
Company does not believe that there is a single published industry or line of
business index that is appropriate for comparing stockholder return. In lieu of
such a comparable index, the Company has selected a Peer Group of companies that
are involved in providing cellular and other wireless data services. The Peer
Group includes the following companies: Aerial Communications Inc., Clearnet
Communications Inc., Geotek Communications Inc., Itron, Inc., Metricom, Inc.,
Metrocall, Inc., Mobile Telecommunications Technologies Corp., Nextel
Communications, Inc., Omnipoint Corporation, PageMart Wireless, Inc., Powertel,
Inc., and Western Wireless Corporation. Many companies used in the Peer Group
are ones with whom the Company is most frequently compared by investment
analysts. This combination of cellular and other wireless data service providers
has been selected to best represent the Company's highly specialized base of
products, services and customers.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") and the Nasdaq
Stock Market. Executive officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that during fiscal 1997 all filing requirements applicable to
its executive officers and directors and greater than 10% stockholders were
complied with, except for one purchase and two sale transactions by Larsh M.
Johnson which were not reported on a timely basis, but were reported on a timely
filed Form 5.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are therefore urged to execute and
return, at your earliest convenience, the accompanying proxy card in the
envelope which has been enclosed.
THE BOARD OF DIRECTORS
Dated: March 27, 1998
21
<PAGE>
CELLNET DATA SYSTEMS, INC.
--------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 30, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
CellNet Data Systems, Inc., a Delaware corporation (the "Company"), will be
held on Thursday, April 30, 1998, at 8:00 a.m. at the Company's offices at 355
Shoreway Road, San Carlos, California 94070 for the following purposes;
1. To elect Directors to serve for the following year or until their
successors are duly elected.
2. To approve an amendment to the Company's 1994 Stock Plan to
increase the number of shares of Common Stock available for
issuance thereunder by 2,500,000 shares.
3. To approve the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending December 31,
1998.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 4, 1998
are entitled to notice of and to vote at the meeting.
In order to assure your representation at the meeting, PLEASE MARK, SIGN
AND DATE THE PROXY CARD ENCLOSED AND RETURN THE PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE STAMPED ENVELOPE PROVIDED FOR THAT PURPOSE.
All stockholders are cordially invited to attend the meeting. Any
stockholder attending the meeting may vote in person even if he or she
previously returned a Proxy card.
By Order of the Board of Directors
David L. Perry, Secretary
DETACH PROXY CARD HERE
- -------------------------------------------------------------------------------
/ /
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR")
PROPOSAL 1. ELECTION OF THE FOLLOWING PERSONS
AS DIRECTORS OF THE COMPANY:
Paul M. Cook, Neal M. Douglas, E. Linn Draper, Jr.,
William C. Edwards, William Hart, and John M. Seidl
FOR all /X/ WITHHOLD AUTHORITY /X/ *EXCEPTIONS /X/
nominees to vote for all nominees
listed below listed below
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED
BELOW.)
*Exceptions_____________________________________________________________________
PROPOSAL 2. TO APPROVE AN AMENDMENT TO THE COMPANY'S 1994 STOCK PLAN TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR
ISSUANCE THEREUNDER BY 2,500,000 SHARES.
FOR /X/ AGAINST /X/ ABSTAIN /X/
PROPOSAL 3. TO APPROVE THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS.
FOR /X/ AGAINST /X/ ABSTAIN /X/
I/We plan to attend the meeting. CHANGE OF ADDRESS AND
OR COMMENTS MARK HERE /X/
YES /X/ NO /X/
Please sign exactly as your name appears hereon. When signing in a
representative capacity, please give full title.
Dated: ___________________________, 1998
________________________________________
Signature
________________________________________
Signature
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK.
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
CELLNET DATA SYSTEMS, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1998
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of CellNet Data Systems, Inc., a Delaware
corporation, hereby acknowledge(s) receipt of the Notice of and Proxy
Statement for the 1998 Annual Meeting of Stockholders to be held at the
offices of the Company, 355 Shoreway Road, San Carlos, California, on April
30, 1998 at 8:00 a.m. local time, and hereby appoint(s) David L. Perry and
John M. Seidl, and each of them, as Proxies, with power of substitution, to
represent the undersigned at such meeting and at any adjournment(s) thereof,
and to vote all shares of Common Stock which the undersigned is entitled to
vote as designated on the reverse side hereof.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF DIRECTORS AS INDICATED IN PROPOSAL 1, FOR APPROVAL OF THE
AMENDMENT INCREASING THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR
ISSUANCE UNDER THE 1994 STOCK PLAN AS INDICATED IN PROPOSAL 2, FOR APPROVAL OF
THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS AS INDICATED
IN PROPOSAL 3, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
COME BEFORE THE MEETING.
(Continued, and to be dated and signed on reverse side.)
<PAGE>
CELLNET DATA SYSTEMS, INC.
1994 STOCK PLAN
(AMENDED AND RESTATED AS OF FEBRUARY 4, 1998)
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are: to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants, and to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws
of any foreign country or jurisdiction where Options or Stock Purchase Rights
are, or will be, granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means CellNet Data Systems, Inc., a Delaware
corporation.
(h) "CONSULTANT" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services and who is
compensated for such services.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers
<PAGE>
between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options, no
such leave may exceed ninety days, unless reemployment upon expiration of
such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Nonstatutory Stock Option. Neither service
as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the NASDAQ
National Market or The NASDAQ SmallCap Market of The NASDAQ Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for the last market trading day prior to the time of determination, as
reported in THE WALL STREET JOURNAL or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
of a Share of Common Stock shall be the mean between the high bid and low
asked prices for the Common Stock on the last market trading day prior to the
day of determination, as reported in THE WALL STREET JOURNAL or such other
source as the Administrator deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "NOTICE OF GRANT" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(q) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
2
<PAGE>
(s) "OPTION AGREEMENT" means an agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an Option
or Stock Purchase Right.
(v) "OPTIONEE" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "PLAN" means this 1994 Stock Plan.
(y) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
(z) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(aa) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "SECTION 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(cc) "SERVICE PROVIDER" means an Employee, Director or Consultant.
(dd) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "STOCK PURCHASE RIGHT" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 5,500,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
3
<PAGE>
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an
Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the
Plan has terminated); PROVIDED, however, that Shares that have actually been
issued under the Plan, whether upon exercise of an Option or Stock Purchase
Right, shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if Shares of Restricted Stock
are repurchased by the Company at their original purchase price, such Shares
shall become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be
administered by different Committees with respect to different groups of
Service Providers.
(ii) SECTION 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the Plan shall be
administered by the Board or a Committee of two or more "non-employee
directors" within the meaning of Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any
4
<PAGE>
vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right or the
shares of Common Stock relating thereto, based in each case on such factors
as the Administrator, in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right at the then current Fair Market Value if the Fair Market Value
of the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority
to extend the post-termination exercisability period of Options longer than
is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined. All elections by
an Optionee to have Shares withheld for this purpose shall be made in such
form and under such conditions as the Administrator may deem necessary or
advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's
decisions, determinations and interpretations shall be final and binding on
all Optionees and any other holders of Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Service Providers. Incentive Stock Options may be granted
only to Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as
either an
5
<PAGE>
Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 6(a), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair Market Value of
the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than 1,000,000 Shares.
(ii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 13.
(iii) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the canceled Option will be counted against the
limits set forth in subsection (i) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect
for a term of ten (10) years unless terminated earlier under Section 15 of
the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall
be ten (10) years from the date of grant or such shorter term as may be
provided in the Option Agreement. Moreover, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant or such shorter term as may be provided in the Option
Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
6
<PAGE>
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share
on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value
per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is
granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied
before the Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the
time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
(vi) any combination of the foregoing methods of payment.
7
<PAGE>
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and
at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by
the Administrator and permitted by the Option Agreement and the Plan. Shares
issued upon exercise of an Option shall be issued in the name of the Optionee
or, if requested by the Optionee, in the name of the Optionee and his or her
spouse. Until the Shares are issued (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued)
such Shares promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the Shares are issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's
death or Disability, the Optionee may exercise his or her Option within such
period of time as is determined by the Administrator (with such determination
in the case of an Incentive Stock Option not exceeding three (3) months after
the date of such termination exercise his or her Option), to the extent that
he or she is entitled to exercise it on the date of termination (but in no
event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for three (3) months following
the Optionee's termination. If, on the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise
his or her Option at any time within twelve (12) months from the date of
termination, but only to the extent that the Optionee is entitled to exercise
it on the date of termination (and in no event later than the expiration of
the term of the Option as set forth in the Option Agreement). If, on the
date of termination, the Optionee is not entitled to exercise his or her
entire Option, the Shares covered by the
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unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service
Provider, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the Option by
bequest or inheritance, but only to the extent that the Optionee would have
been entitled to exercise the Option on the date of death. If, at the time
of death, the Optionee is not entitled to exercise his or her entire Option,
the Shares covered by the unexercisable portion of the Option shall
immediately revert to the Plan. The Option may be exercised by the executor
or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of
descent or distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under
the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing or electronically, by means of a
Notice of Grant, of the terms, conditions and restrictions related to the
offer, including the number of Shares that the offeree shall be entitled to
purchase, the price to be paid, and the time within which the offeree must
accept such offer. The offer shall be accepted by execution of a Restricted
Stock Purchase Agreement in the form determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination
of the purchaser's service with the Company for any reason (including death
or Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate
determined by the Administrator.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent
with the Plan as may be determined by the Administrator in its sole
discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder
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when his or her purchase is entered upon the records of the duly authorized
transfer agent of the Company. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Stock Purchase
Right is exercised, except as provided in Section 13 of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right
may not be sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or by the laws of descent or distribution
and may be exercised, during the lifetime of the Optionee, only by the
Optionee. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such
additional terms and conditions as the Administrator deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Stock Purchase Right, and the number of shares
of Common Stock which have been authorized for issuance under the Plan but as
to which no Options or Stock Purchase Rights have yet been granted or which
have been returned to the Plan upon cancellation or expiration of an Option
or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify
each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable.
In addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option or Stock
Purchase Right shall lapse as to all such Shares, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option
or Stock Purchase Right will terminate immediately prior to the consummation
of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the
assets of the Company, each
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outstanding Option and Stock Purchase Right shall be assumed or an equivalent
option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an
Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For
the purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned
Stock subject to the Option or Stock Purchase Right immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders
of Common Stock for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale
of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option
or Stock Purchase Right, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
14. DATE OF GRANT. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes
the determination granting such Option or Stock Purchase Right, or such other
later date as is determined by the Administrator. Notice of the
determination shall be provided to each Optionee within a reasonable time
after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to
comply with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of an
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Option or Stock Purchase Right unless the exercise of such Option or Stock
Purchase Right and the issuance and delivery of such Shares shall comply with
Applicable Laws and shall be further subject to the approval of counsel for
the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of
an Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right to represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
is required.
16. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
18. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan
is adopted. Such shareholder approval shall be obtained in the manner and to
the degree required under Applicable Laws.
_______________________________
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February 4, 1998
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