<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [_]
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 (S)240.14a-11(c) or (S)240.14a-12
Tut 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 OF TUT SYSTEMS, INC.]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 17, 2000
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Tut
Systems, Inc., a Delaware corporation, will be held on Wednesday, May 17, 2000
at 10:00 a.m., local time, at the Marriott Hotel Walnut Creek, 2355 North Main
Street, Walnut Creek, California, for the following purposes:
1. To elect three (3) Class II directors for a term of three years and
until their successors are duly elected and qualified;
2. To ratify the appointment by our Board of Directors of
PricewaterhouseCoopers LLP as our independent auditors for the fiscal
year ending December 31, 2000; and
3. 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 20, 2000 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to vote,
sign, date and return the enclosed Proxy 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 previously returned a Proxy.
By order of the Board of Directors of
Tut Systems, Inc.
/s/ Nelson Caldwell
Nelson Caldwell
Vice President Finance, Chief
Financial Officer and Secretary
Pleasant Hill, California
April 12, 2000
<PAGE>
TUT SYSTEMS, INC.
PROXY STATEMENT
FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of Tut Systems, Inc. for use at
our Annual Meeting of Stockholders to be held on Wednesday, May 17, 2000 at
10:00 a.m., or at any adjournment thereof, for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Stockholders. Our Annual
Meeting will be held at the Marriott Hotel Walnut Creek, 2355 North Main
Street, Walnut Creek, California. Our headquarters are located at 2495 Estand
Way, Pleasant Hill, California 94523. Our telephone number at that location is
(925) 682-6510.
These proxy solicitation materials were mailed on or about April 12, 2000
to all stockholders entitled to vote at our Annual Meeting.
Record Date; Outstanding Shares
Stockholders of record at the close of business on March 20, 2000 are
entitled to notice of and to vote at the Meeting. As of March 20, 2000,
12,565,138 shares of our common stock, $0.001 par value, were issued and
outstanding. The closing price of our common stock on March 20, 2000, as
reported by Nasdaq, was $62.00 per share.
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 us or our transfer agent
a written notice of revocation or a duly executed proxy bearing a later date
or by attending the Annual Meeting and voting in person.
Voting and Solicitation
On all matters other than the election of directors, each share has one
vote. See "ELECTION OF DIRECTORS--Required Vote."
The cost of soliciting proxies will be borne by us. We have retained the
services of American Stock Transfer & Trust Company to aid in the solicitation
of proxies. We will reimburse American Stock Transfer & Trust Company for
reasonable out-of-pocket expenses. In addition, we 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 our directors, officers and
regular employees, without additional compensation, personally or by
telephone, telegram, telefax or otherwise.
Deadline for Receipt of Stockholder Proposals
Proposals of our stockholders which are intended to be presented by such
stockholders at our next Annual Meeting of Stockholders to be held in 2001
must be received by us no later than December 13, 2000 in order that they may
be considered for possible inclusion in the proxy statement and form of proxy
relating to that meeting.
In addition, our Bylaws establish an advance notice procedure with regard
to certain matters, including stockholder proposals not included in our proxy
statement, to be brought before an annual meeting of stockholders. For
nominations or other business to be properly brought before the meeting by a
stockholder, such stockholder must provide written notice delivered to our
Secretary 90 days in advance of the annual or special
<PAGE>
meeting, which notice must contain specified information concerning the
matters to be brought before such meeting and concerning the stockholder
proposing such matters. In the event that less than 100 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received not later than the
close of business on the tenth day following the earlier of the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A copy of the full text of the Bylaw provision discussed
above may be obtained by writing to our Secretary. All notices of proposals by
stockholders, whether or not included in our proxy materials, should be sent
to Tut Systems, Inc., 2495 Estand Way, Pleasant Hill, California 94523.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the meeting. If a stockholder intends to submit a
proposal at the next annual meeting of stockholders, which is not eligible for
inclusion in the proxy statement relating to that meeting, the stockholder
must give notice to us in accordance with the requirements set forth in the
Securities Exchange Act of 1934, as amended, no later than February 26, 2001.
If a stockholder does not comply with the foregoing notice provision, the
proxy holders will be allowed to use their discretionary voting authority when
and if the proposal is raised at the next annual meeting of stockholders.
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 our
common stock issued and outstanding on March 20, 2000. Shares that are voted
"FOR", "AGAINST" or "ABSTAIN" on a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote, or votes cast, at our Annual Meeting with respect to such
matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, we believe 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 matter (other than the election of directors). In the
absence of controlling precedent to the contrary, we intend to treat
abstentions in this manner. Accordingly, with the exception of the proposal
for the election of directors, abstentions will have the same effect as a vote
against the proposal. Because directors are elected by a plurality vote,
abstentions in the election of directors have no impact once a quorum exists.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes may 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. Broker non-votes with respect to proposals set
forth in this Proxy Statement will therefore be counted only for purposes of
determining the presence or absence of a quorum and will not be considered
votes cast. Accordingly, broker non-votes will not affect the determination as
to whether the requisite majority of votes cast has been obtained with respect
to a particular matter.
Fiscal Year End
Our fiscal year ends on December 31. Our last fiscal year ended on December
31, 1999.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers,
directors and persons who own more than 10% 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. Such executive
officers, directors and ten-percent stockholders are also required by SEC
rules to furnish us with copies of all forms that they file pursuant to
Section 16(a). Based solely on our review of copies of such forms we received,
or on written representations from certain reporting persons that no other
reports were required for such persons, we believe that, during 1999 all of
the Section 16(a) filing requirements applicable to our executive officers,
directors and 10% stockholders were complied with.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
General
Our Board of Directors is currently comprised of nine (9) directors who are
divided equally into three classes with overlapping three-year terms. A
director serves in office until his or her respective successor is duly
elected and qualified or until his or her earlier death or resignation. Any
additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible,
each class will consist of an equal number of directors.
Nominees for Class II Directors
Three Class II directors are to be elected at the Annual Meeting for a
three-year term ending in 2003. Our Board of Directors has nominated NEAL
DOUGLAS, GEORGE MIDDLEMAS AND MATTHEW TAYLOR for re-election as Class II
directors. Unless otherwise instructed, the persons named in the enclosed
proxy intend to vote proxies received by them for the re-election of Messrs.
Douglas, Middlemas and Taylor. We expect that each of Messrs. Douglas,
Middlemas and Taylor will accept such nomination; however, in the event that
any nominee is unable to or declines to serve as a director at the time of the
Annual Meeting, proxies will be voted for a substitute nominee or nominees
designated by our present Board of Directors. The term of office of each
person elected as a director will continue until such director's term expires
in 2003 or until such director's successor has been elected and qualified.
Information Regarding Nominees and Other Directors
Set forth below is certain information regarding the nominees for Class II
directors and each of our other directors whose term of office continues after
the Annual Meeting. Information as to the stock ownership of each director and
all of our current directors and executive officers as a group is set forth
below under "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT".
<TABLE>
<CAPTION>
Director
Name Age Principal Occupation Since
---- --- -------------------- --------
<S> <C> <C> <C>
Class I Directors
Brion Applegate......... 46 Managing General Partner of Spectrum Equity 1996
Investors, L.P.
Clifford H. Higgerson... 60 General Partner of Vanguard Venture Partners and a 1993
Partner of Communications Ventures, Inc.
David Spreng............ 38 Managing General Partner of Crescendo Venture 1994
Management LLC
Class II Directors
Neal Douglas............ 41 Managing General Partner of Spectrum Equity 1997
Investors, L.P. and a General Partner of AT&T
Ventures
George Middlemas........ 53 Managing General Partner of Apex Partners 1995
Matthew Taylor.......... 41 Chief Technical Officer of the Company 1993
Class III Directors
Salvatore D'Auria....... 44 Chairman of the Board, President and Chief 1994
Executive Officer of the Company
Roger Moore............. 58 President, Chief Executive Officer and a Director 1997
of Illuminet, Inc.
Saul Rosenzweig......... 74 General Partner of Rosetree Partners and President 1993
of RZGroup, Inc.
</TABLE>
3
<PAGE>
INCUMBENT CLASS I DIRECTORS WHOSE TERMS EXPIRE IN 2002
Brion Applegate has served as one of our directors since August 1996. Mr.
Applegate was a co-founder of Spectrum Equity Investors and has served as a
Managing General Partner since February 1993. Prior to that time, he was a
General Partner of funds managed by Burr, Egan, Deleage & Co., a venture
capital firm, from 1982 to 1993. Since August 1998, Mr. Applegate has been a
director of Network Access Solutions, a provider of digital subscriber line-
enabled networking solutions for businesses. Mr. Applegate holds a B.A. in
Liberal Arts from Colgate University and an M.B.A. from Harvard University.
Clifford H. Higgerson has served as one of our directors since July 1993.
Since 1991, Mr. Higgerson has been a general partner of Vanguard Venture
Partners, a venture capital firm specializing in high technology start-ups.
Since 1987, Mr. Higgerson has also been a partner of Communications Ventures,
Inc. Mr. Higgerson also is a director of Advanced Fibre Communications, Ciena
Corporation, a manufacturer of multiplexing systems, and Digital Microwave
Corporation. Mr. Higgerson earned his B.S. in Electrical Engineering from the
University of Illinois and an M.B. A. in Finance from the University of
California at Berkeley.
David Spreng has served as one of our directors since February 1994. Mr.
Spreng has served as the Managing General Partner of Crescendo Venture
Management, LLC since September 1998. Mr. Spreng served as President of IAI
Ventures, Inc. from March 1996 to September 1998 and served in various
capacities at Investment Advisers, Inc. since 1989 Mr. Spreng is also a
director of GalaGen, Inc., a pharmaceutical company, and PACE Health
Management. Mr. Spreng holds a B.S. in Finance and Accounting from the
University of Minnesota.
NOMINEES FOR CLASS II DIRECTORS FOR A TERM EXPIRING IN 2003
Neal Douglas has served as one of our directors since December 1997. Since
December 1999, he has been a Managing General Partner of Spectrum Equity
Investors, and since January 1993, he has been a General Partner of AT&T
Ventures, a venture capital firm. From May 1989 to January 1993, Mr. Douglas
was a partner of New Enterprise Associates, a venture capital firm.
Additionally, he was a Member of the Technical Staff at Bell Laboratories. He
also serves as a director of Cellnet Data Systems, Inc., a provider of fixed
network wireless information services, FVC.COM, Inc., an Internet video
applications company, Netro Corporation, a provider of wireless networking
equipment, Software.com, a provider of Internet messaging services and several
privately held companies. Mr. Douglas holds a B.S. in Electrical Engineering
from Cornell University, an M.S. in Electrical Engineering from Stanford
University, and an M.B.A. from the University of California at Los Angeles.
George Middlemas has served as one of our directors since April 1995. Mr.
Middlemas has been managing General Partner of Apex Partners, a venture
capital firm, since 1991. Prior to that time, Mr. Middlemas served as Vice
President and principal with Inco Venture Capital Management, and a vice
president and member of the investment committee of Citicorp Venture Capital.
Mr. Middlemas also serves on the Boards of Directors of Pure Cycle
Corporation, a water and water recycling technology company, Online Resources
& Communications Corporation, a provider of electronic commerce solutions,
Data Critical Corporation, a provider of wireless communication and
information systems which allow access to critical health information, and
Qorus.com, Inc., a provider of Internet protocol-based communications
solutions. Mr. Middlemas holds an M.B.A. from Harvard University, an M.A. in
Political Science from the University of Pittsburgh and a B.A. in History and
Political Science from The Pennsylvania State University.
Matthew Taylor is a co-founder of the Company and has served as our Chief
Technical Officer since August 1994 and one of our directors since July 1993.
From August 1994 to January 2000, Mr. Taylor was Chairman of our Board of
Directors and our Secretary. From April 1989 to August 1994, Mr. Taylor was
our President and Chief Executive Officer. Prior to that time, Mr. Taylor was
the Vice President of Engineering and a co-founder of Alameda Instruments,
Inc., a semiconductor equipment company, from 1987 to 1989. Mr. Taylor holds a
B.S. in Biology and an M.S. in Engineering Science from the University of
California at Berkeley.
4
<PAGE>
INCUMBENT CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 2001
Salvatore D'Auria has served as our President, Chief Executive Officer and
one of our directors since August 1994. Since January 2000, Mr. D'Auria has
served as Chairman of our Board of Directors. He served as our Chief Operating
Officer from May 1994 to August 1994. From August 1993 to May 1994, Mr.
D'Auria performed various consulting services for networking software
companies. Mr. D'Auria joined Central Point Software in October 1989 as
Director of Product Marketing and was appointed as Vice President of Marketing
in April 1990, and held various Vice President positions until August 1993.
From 1980 to 1989, Mr. D'Auria served in various marketing and management
positions at Hewlett-Packard. Mr. D'Auria holds a B.S. in Physics from
Clarkson University.
Roger Moore has served as one of our directors since March 1997. Mr. Moore
has served as President and Chief Executive Officer of Illuminet, Inc., a
provider of network, database and billing services to the communications
industry, since October 1998, and as a director of Illuminet since July 1998.
Mr. Moore also served as President and Chief Executive Officer of Illuminet
from January 1996 to August 1998. From September 1998 to October 1998, Mr.
Moore served as President, Chief Executive Officer and a director of VINA
Technologies, Inc., a telecommunications equipment company. From November 1985
to December 1995, Mr. Moore served in various executive capacities at Northern
Telecom Ltd., including Vice President, Major Accounts and President, Northern
Telecom Japan. Mr. Moore holds a B.S. in General Science from Virginia
Polytechnic Institute and State University.
Saul Rosenzweig has served as one of our directors since July 1993. Mr.
Rosenzweig has been a general partner of Rosetree Partners, a venture
investing group, since 1982. He has also served as President and Chief
Executive Officer of Snap Software from 1994 to 1996, and as President of
RZGroup, Inc., a communications management firm, since 1981. Mr. Rosenzweig
holds B.S. degrees in Naval Science and in Industrial Management from Georgia
Institute of Technology.
There are no family relationships among any of the Company's directors or
executive officers.
Board Meetings and Committees
Our Board of Directors held a total of six meetings during 1999. During
1999, no director other than Clifford H. Higgerson attended fewer than 75% of
the meetings of our Board of Directors. No director attended fewer than 75% of
the meetings of committees, if any, upon which such director served. Certain
matters approved by our Board of Directors were approved by unanimous written
consent.
The Audit Committee of our Board of Directors currently consists of
Clifford H. Higgerson, Saul Rosenzweig and David Spreng. Our Audit Committee
reviews our annual audit and meets with our independent auditors to review our
internal accounting procedures and financial management practices. Our Audit
Committee held a total of four meetings during 1999.
The Compensation Committee of our Board of Directors currently is composed
of Brion Applegate, Neal Douglas and Roger Moore. Our Compensation Committee
makes recommendations concerning salaries, stock options, incentives and other
forms of compensation for our directors, officers and other employees, subject
to ratification by our full Board of Directors. Our Compensation Committee is
also empowered to administer our various stock plans. Our Compensation
Committee held a total of ten meetings during 1999.
Our Board of Directors does not have a nominating committee or any
committee performing such function.
Director Compensation
Our directors currently receive no cash fees for services provided in that
capacity but are reimbursed for out-of-pocket expenses they incur in
connection with their attendance at meetings of our Board of Directors. In
5
<PAGE>
addition, in the past, we have granted certain of our directors stock options
for their service on our Board. We do not intend to pay cash fees for the
services of our Board members in the immediate future, nor to provide for the
automatic grant of stock options to our directors. However, our directors are
eligible to receive discretionary option grants pursuant to our 1998 Stock
Plan and our employee directors are also eligible to participate in our 1998
Employee Stock Purchase Plan.
Compensation Committee Interlocks and Insider Participation
The members of our Compensation Committee are Messrs. Applegate, Douglas
and Moore. None of the members of our Compensation Committee is currently or
has been, at any time since our formation as a company, one of our officers or
employees. During 1999, none of our executive officers (i) served as a member
of the compensation committee (or other board committee performing similar
functions or, in the absence of any such committee, the board of directors) of
another entity, one of whose executive officers served on our Compensation
Committee, (ii) served as a director of another entity, one of whose executive
officers served on our Compensation Committee, or (iii) served as a member of
the compensation committee (or other board committee performing similar
functions or, in the absence of any such committee, the board of directors) of
another entity, one of whose executive officers served as one of our
directors.
Required Vote
If a quorum is present and voting, the three nominees for director
receiving the highest number of votes will be elected to our Board of
Directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no other legal
effect under Delaware law. See "INFORMATION CONCERNING SOLICITATION AND
VOTING--QUORUM; ABSTENTIONS; BROKER NON-VOTES."
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF
THE NOMINEES LISTED ABOVE.
6
<PAGE>
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Our Board of Directors has selected PricewaterhouseCoopers LLP as our
independent auditors to audit our financial statements for our fiscal year
ending December 31, 2000. PricewaterhouseCoopers LLP (or its predecessor,
Coopers & Lybrand L.L.P.) has audited our financial statements since 1992. Our
Board of Directors recommends that stockholders vote for ratification of such
appointment. In the event of a negative vote or ratification, our Board of
Directors will reconsider its selection. A representative of
PricewaterhouseCoopers LLP is expected to be available at our Annual Meeting
with the opportunity to make a statement if such representative desires to do
so, and is expected to be available to respond to appropriate questions.
Required Vote
Although stockholder approval is not required for the appointment of
PricewaterhouseCoopers LLP since our Board of Directors has the responsibility
for selecting auditors, our Board of Directors has conditioned its appointment
of our independent auditors upon the receipt of the affirmative vote of a
majority of the votes duly cast at our Annual Meeting. In the event that our
stockholders do not approve the selection of PricewaterhouseCoopers LLP, our
Board of Directors will reconsider its selection.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR
INDEPENDENT AUDITORS FOR THE 2000 FISCAL YEAR.
7
<PAGE>
OTHER INFORMATION
Executive Officers
In addition to Messrs. D'Auria and Taylor, the following persons are
executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Sanford Benett........... 51 Chief Operating Officer
Nelson Caldwell.......... 43 Vice President of Finance, Chief Financial Officer
and Secretary
Allen Purdy.............. 50 Vice President of Sales
Mark Carpenter........... 39 Vice President of Marketing
Thomas Warner............ 43 Vice President of Engineering
Craig Bender............. 57 Vice President of Market Development
Avi Caspi................ 48 Vice President of Operations
</TABLE>
Sanford Benett has served as our Chief Operating Officer since February
2000. Mr. Benett served as President and Chief Operating Officer of FreeGate
Corporation from June 1999 until February 2000. He also served as Vice
President of Engineering of FreeGate from December 1998 until June 1999. From
December 1997 to December 1998, Mr. Benett worked as an independent
consultant. Mr. Benett also served as Vice President and General Manager of
the Newton Business Division of Apple Computer from June 1995 until December
1997. He also served as Director of Software Engineering in the Newton
Business Division from January 1994 until June 1995. Prior to that time he
held various positions at GO Corporation, Datacopy/Xerox, TransImage
Corporation, Tandem Computers and the Mitre Corporation. Mr. Benett holds a
B.S. in Mathematics and an M.S. in Computer Science from the University of
Maryland.
Nelson Caldwell has served as our Vice President of Finance and Chief
Financial Officer since June 1997. Since January 2000, Mr. Caldwell has served
as our Secretary. From May 1995 to May 1997, Mr. Caldwell served as Chief
Financial Officer and Secretary of Telechips Corporation, a computer telephony
device company. Mr. Caldwell also served as the interim President and Chief
Executive Officer and a director of Telechips from February 1997 to May 1997.
Telechips filed for bankruptcy under Chapter 7 of the Federal Bankruptcy Code
on June 30, 1997. Prior to that time, Mr. Caldwell held various positions at
Coopers & Lybrand L.L.P. from June 1989 through April 1995, most recently as
Manager in the Business Assurance practice. Mr. Caldwell holds a B.S. in
Business Administration from California State University, Chico, and is a
Certified Public Accountant.
Allen Purdy has served as our Vice President of Sales since January 1997.
From November 1992 to January 1997, Mr. Purdy was Regional Sales Manager and,
most recently, Director of Sales of Applied Digital Access, Inc., a provider
of network management and testing equipment for the telecommunications
industry, and was a Regional Sales Manager with TeleSciences, Inc. from June
1989 to November 1992. Mr. Purdy holds a B.S. in Industrial Engineering from
Rutgers University and an M.B.A. from Rider College.
Mark Carpenter has served as our Vice President of Marketing since March
2000. From April 1999 to March 2000, Mr. Carpenter was Senior Director of
Marketing, New Desktop Product Marketing at Compaq Computer Corporation. From
April 1997 to March 1999, Mr. Carpenter was Director of Engineering, Internet
and Home Networking at Compaq. Prior to that time, Mr. Carpenter was Senior
Manager, Emerging Products, in the Consumer Division of IBM Corporation from
January 1996 to March 1997, and Lead Architect, Embedded Network Systems, at
IBM from January 1994 to January 1996. Mr. Carpenter holds a B.S. in Computer
Science from Worcester Polytechnic Institute.
Thomas Warner has served as our Vice President of Engineering since
February 1997. Prior to that time, Mr. Warner served in various positions at
Ericsson Fiber Access, a division of Ericsson Inc. from March 1990 through
February 1997, most recently as Vice President of Systems Management. Mr.
Warner holds a B.S.E.E. from the University of Illinois at Champaign-Urbana.
Craig Bender has served as our Vice President of Market Development since
June 1997. Prior to that time, Mr. Bender was with Integrated Network
Corporation where he served as Vice President of Marketing from 1988
8
<PAGE>
to 1992, as Vice President of International Business Development from 1992 to
1996 and as Vice President of Integrated Network Corporation's DAGAZ division
until 1997. Mr. Bender holds a B.S.E.E. from Syracuse University, an M.S.E.E.
from the University of California at Los Angeles and an AT&T-sponsored
Executive M.B.A. from Pace University.
Avi Caspi has served as our Vice President of Operations since November
1999. From June 1999 until November 1999, Mr. Caspi worked as an independent
consultant, and from February 1998 to June 1999, he was Vice President of
Operations for Netro Corporation, a wireless equipment company. From November
1997 to February 1998, he worked as an independent consultant. Mr. Caspi was
Vice President of Quality and Director of Manufacturing Operations for Packard
Bell NEC from November 1991 to November 1997. Prior to that time, he held
various positions with Alps Electrics, Allegretti & Company and Rain Bird
Corporation. Mr. Caspi holds an M.B.A. from Pepperdine University, an M.S. in
Industrial and Systems Engineering from the University of Southern California,
a B.S. in Industrial Engineering from California State Polytechnic University
and a B.S. in Practical Mechanical Engineering from ORT Tel-Aviv Technical
Institute in Israel.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 31, 1999 certain information
with respect to the beneficial ownership of our common stock by (i) each
person known by us to own beneficially more than 5% of the outstanding shares
of our common stock, (ii) each of our directors, (iii) our President and each
of our four other most highly compensated executive officers and (iv) all of
our directors and executive officers as a group. Except as otherwise
indicated, and subject to applicable community property laws, the persons
named below have sole voting and investment power with respect to all shares
of common stock held by them.
Applicable percentage ownership in the table is based on 11,940,610 shares
of common stock outstanding as of December 31, 1999.
<TABLE>
<CAPTION>
Number of
Shares Percentage
Beneficially of
Beneficial Owner Owned Ownership
---------------- ------------ ----------
<S> <C> <C>
5% Beneficial Owners
Microsoft Corporation (1)............................. 1,083,503 9.1%
Vanguard IV, L.P. (2)................................. 658,591 5.5%
Officers and Directors
Clifford H. Higgerson (3)............................. 658,591 5.5%
George Middlemas (4).................................. 313,826 2.6%
Neal Douglas (5)...................................... 312,500 2.6%
Salvatore D'Auria (6)................................. 207,583 1.7%
Matthew Taylor (7).................................... 188,612 1.6%
Saul Rosenzweig (8)................................... 79,913 *
Thomas Warner (9)..................................... 47,416 *
Nelson Caldwell (10).................................. 25,683 *
Allen Purdy (11)...................................... 20,686 *
Roger Moore (12)...................................... 8,083 *
Brion Applegate....................................... 955 *
David Spreng.......................................... -- --
All officers and directors as a group (15 persons)
(13)................................................. 1,893,941 15.5%
</TABLE>
- --------
* Less than 1%.
(1) The address of record for Microsoft Corporation is One Microsoft Way,
Building 8, Redmond, WA 98502-6399.
9
<PAGE>
(2) The address of record for Vanguard IV, L.P. is 555 University Avenue,
Palo Alto, CA 94301.
(3) Consists of 658,591 shares held by Vanguard IV, L.P. Mr. Higgerson is a
general partner of Vanguard IV, L.P. Mr. Higgerson disclaims beneficial
ownership of these shares except to the extent of his proportional
partnership interest therein.
(4) Includes of 301,731 shares held by Apex Investment Funds. Mr. Middlemas
is the Managing General Partner of Apex Investment Funds. Mr. Middlemas
disclaims beneficial ownership of these shares except to the extent of
his proportional partnership interest therein.
(5) Consists of 312,500 shares held by AT&T Ventures. Mr. Douglas is a
general partner of AT&T Ventures. Mr. Douglas disclaims beneficial
ownership of these shares except to the extent of his proportional
partnership interest therein.
(6) Includes 181,701 shares issuable pursuant to options or rights
exercisable within 60 days of December 31, 1999.
(7) Includes 7,604 shares issuable pursuant to options exercisable within 60
days of December 31, 1999.
(8) Consists of 79,913 shares held by Rosetree Partners General Partnership.
Mr. Rosenzweig is a general partner of Rosetree Partners General
Partnership. Mr. Rosenzweig disclaims beneficial ownership of these
shares except to the extent of his proportional partnership interest
therein.
(9) Includes 10,724 shares issuable pursuant to options exercisable within 60
days of December 31, 1999.
(10) Includes 14,408 shares issuable pursuant to options exercisable within 60
days of December 31, 1999.
(11) Includes 19,662 shares issuable pursuant to options exercisable within 60
days of December 31, 1999.
(12) Includes 7,083 shares issuable pursuant to options exercisable within 60
days of December 31, 1999.
(13) Includes an aggregate of 250,485 shares issuable pursuant to options
exercisable within 60 days of December 31, 1999. Also includes an
aggregate of 301,731 shares held by Apex Investment Funds, of which
George Middlemas, our director, is Managing General Partner, 658,591
shares held by Vanguard IV, L.P. and 312,500 shares held by AT&T
Ventures, of which Neal Douglas, our director, is a general partner.
10
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows the compensation earned by our Chief Executive
Officer and our four other most highly compensated executive officers for
services to us in all capacities during each of the years ended December 31,
1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
------------------------------------ -----------------------
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation($)(1) Options Compensation
------------------ ---- -------- -------- ------------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Salvatore D'Auria....... 1999 $224,230 $211,721 -- 125,000 --
President and Chief 1998 187,500 110,000 -- 75,000 $18,230(2)
Executive Officer 1997 138,803 12,500 -- -- 31,250(2)
Matthew Taylor.......... 1999 $153,891 35,625 -- 5,000 --
Chief Technical 1998 149,808 35,100 -- 12,500 --
Officer 1997 145,986 16,875 -- -- --
Allen Purdy............. 1999 $142,308 96,668 -- 15,000 --
Vice President 1998 138,962 71,875 -- 12,500 --
of Sales 1997 113,096 70,837 -- 56,250 --
Nelson Caldwell(3)...... 1999 $142,846 46,188 -- 30,000 --
Vice President, Finance 1998 118,442 31,625 -- 12,500 --
and Chief Financial 1997 52,489 14,771 -- 37,500 --
Officer
Thomas Warner........... 1999 $140,000 35,438 -- 2,000 --
Vice President 1998 140,000 25,875 -- 13,750 --
of Engineering 1997 111,211 22,563 -- 70,000 --
Nicholas Berberi(4)..... 1999 $141,037 19,750 -- -- --
1998 129,600 16,900 -- 5,000 --
1997 115,943 16,715 -- 6,250 --
</TABLE>
- --------
(1) Other annual compensation in the form of perquisite and other personal
benefits, securities or property has been omitted in those cases where the
aggregate amount of such compensation is the lesser of either $50,000 or
10% of the total of annual salary and bonus for the executive officer.
(2) Represents the principal portion of certain indebtedness between the
Company and Mr. D'Auria which was forgiven during each of 1998 and 1997
pursuant to a loan agreement and secured promissory note for an aggregate
of $125,000. The loan did not bear interest. Pursuant to the loan
agreement, we forgave 25% of the principal amount of the loan each year.
The loan has been discharged in full.
(3) Mr. Caldwell has served as our Vice President of Finance and Chief
Financial Officer since June 1997. His 1997 compensation reflects the fact
that he joined us in June 1997.
(4) Mr. Berberi served as one of our officers from September 1995 until
September 1999. In 1997, he was one of the four other most highly
compensated executive officers.
11
<PAGE>
Stock Option Grants and Exercises
The following table sets forth information for the year ended December 31,
1999 with respect to each grant of stock options to our Chief Executive
Officer and our four other most highly compensated executive officers.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to for Option Term(4)
Options Employees in Exercise Price Expiration ---------------------
Name Granted(1) 1999(2) per Share(3) Date 5% 10%
---- ---------- ------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Salvatore D'Auria....... 125,000 14.7% $22.94 8/10/09 $1,803,355 $4,570,057
Matthew Taylor.......... 5,000 0.6% 15.00 1/26/09 47,167 119,531
Allen Purdy............. 5,000 0.6% 15.00 1/26/09 47,167 119,531
10,000 1.2% 22.94 8/10/09 144,268 365,605
Nelson Caldwell......... 5,000 0.6% 15.00 1/26/09 47,167 119,531
25,000 2.9% 22.94 8/10/09 360,671 914,011
Thomas Warner........... 2,000 0.2% 15.00 1/26/09 18,867 47,812
</TABLE>
- --------
(1) The options granted to Messrs. D'Auria, Taylor, Purdy, Caldwell and Warner
vest as to one-fourth of the shares after one year and thereafter as to
1/48th of the shares for each month which expires from the date of grant.
(2) In 1999 we granted employees, consultants and directors options to
purchase an aggregate of 848,900 shares of our common stock.
(3) The exercise price per share of each option was equal to the fair value of
our common stock based on the closing price per share of our common stock
as quoted on the Nasdaq National Market on the trading day prior to the
date of grant.
(4) In accordance with the rules of the Securities and Exchange Commission,
shown are the gains or "option spreads" that would exist for the
respective options granted. These gains are based on the assumed rates of
annual compound stock price appreciation of 5% and 10% from the date the
option was granted over the full option term. These assumed annual
compound rates of stock price appreciation are mandated by the rules of
the SEC and do not represent our estimate or projection of future prices
of our common stock.
AGGREGATE OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options at In-the-Money Options at
Shares December 31, 1999 December 31, 1999(1)
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Salvatore D'Auria....... 33,750 $776,189 178,576 165,625 $9,576,138 $8,881,641
Matthew Taylor.......... -- -- 5,729 11,771 307,218 631,220
Allen Purdy............. 31,300 998,648 15,444 37,006 828,185 1,984,447
Nelson Caldwell......... 6,477 119,586 10,969 51,356 588,213 2,753,966
Thomas Warner........... 22,968 597,624 6,693 29,865 358,912 1,601,511
</TABLE>
- --------
(1) The fair market value of our common stock based on the closing price of
our common stock as quoted on the Nasdaq National Market on December 31,
1999 was $53.63 per share.
12
<PAGE>
CERTAIN TRANSACTIONS
As part of our acquisition of FreeGate Corporation, completed on February
14, 2000, we assumed a note receivable from Sanford Benett, our Chief
Operating Officer, in the amount of $143,453, bearing interest at 7% per annum
and due upon the earlier of the sale of our common stock received by Mr.
Benett as part of the acquisition or December 2003.
We intend to enter into a loan agreement and secured promissory note with
Mark Carpenter, our Vice President of Marketing, in the amount of $150,000 to
be used toward the purchase of Mr. Carpenter's principal residence. The loan
will be forgiven at a rate of 25% per annum and will not bear interest.
In the past, we have granted options to our executive officers and
directors. We intend to grant options to our officers and directors in the
future. See "Proposal One--Director Compensation" and "EXECUTIVE
COMPENSATION--Stock Option Grants and Exercises."
We have entered into indemnification agreements with our officers and
directors containing provisions which may require us, among other things, to
indemnify our officers and directors against certain liabilities that may
arise by reason of their status or service as officers or directors (other
than liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified. We also intend to execute such agreements
with our future directors and executive officers.
All of our securities referenced above were purchased or sold at prices
equal to the fair market value of such securities, as determined by our Board
of Directors, on the date of issuance.
13
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company as well as the compensation plans
and specific compensation levels for executive officers. It also administers
the Company's employee stock benefit plan for executive officers. The
Compensation Committee is currently composed of independent, non-employee
directors who, except as disclosed under "Compensation Committee Interlocks
and Insider Participation," have no interlocking relationships as defined by
the Securities and Exchange Commission.
The Compensation Committee believes that the compensation of the executive
officers, including that of the Chief Executive Officer (collectively the
"Executive Officers"), should be influenced by the Company's performance. The
Committee establishes the salaries and bonuses of all of the Executive
Officers by considering (i) the Company's financial performance for the past
year, (ii) the achievement of certain objectives related to the particular
Executive Officer's area of responsibility, (iii) the salaries and bonuses of
executive officers in similar positions of comparably-sized companies and (iv)
the relationship between revenue and executive officer compensation. The
Committee believes that the Company's executive officer salaries and bonuses
in 1999 were comparable in the industry for similarly-sized businesses.
In addition to salary and bonus, the Committee, from time to time, grants
options to Executive Officers. The Committee thus views option grants as an
important component of its long-term, performance-based compensation
philosophy. Since the value of an option bears a direct relationship to the
Company's stock price, the Committee believes that options motivate Executive
Officers to manage the Company in a manner which will also benefit
shareholders. As such, options are granted at the current market price. And
one of the principal factors considered in granting options to an Executive
Officer is the Executive Officer's ability to influence the Company's long-
term growth and profitability.
Compensation Committee of the Board
of Directors
Brion Applegate
Roger Moore
Neal Douglas
THE FOREGOING COMPENSATION COMMITTEE REPORT SHALL NOT BE DEEMED TO BE
"SOLICITING MATERIAL" OR TO BE FILED WITH THE SEC, NOR SHALL SUCH INFORMATION
BE INCORPORATED BY REFERENCE INTO ANY PAST OR FUTURE FILING UNDER THE
SECURITIES ACT OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY
SPECIFICALLY INCORPORATES IT BY REFERENCE INTO SUCH FILING.
14
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return to stockholders on
our common stock with the cumulative total return of the Nasdaq Stock Market
Index-U.S. and the Hambrecht & Quist Technology Index. The graph assumes that
$100 was invested on January 29, 1999, the date of our initial public
offering, in our common stock, the Nasdaq Stock Market Index-U.S. and the
Hambrecht & Quist Technology Index, including reinvestment of dividends. No
dividends have been declared or paid on our common stock. Historic stock price
performance is not necessarily indicative of future stock price performance.
Total Return Analysis
01/29/1999 12/31/1999
- ------------------------------------------------------------------------------
- --
Tut Systems $100.00 $93.26
- ------------------------------------------------------------------------------
- --
H&Q Technology Index $100.00 $196.11
- ------------------------------------------------------------------------------
- --
Nasdaq Composite $100.00 $162.85
- ------------------------------------------------------------------------------
- --
THE INFORMATION CONTAINED IN THE STOCK PERFORMANCE GRAPH SHALL NOT BE
DEEMED TO BE "SOLICITING MATERIAL" OR TO BE FILED WITH THE SEC, NOR SHALL SUCH
INFORMATION BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE
SECURITIES ACT OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY
SPECIFICALLY INCORPORATES IT BY REFERENCE INTO SUCH FILING.
15
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any other matters to be presented at
our Annual Meeting. If any other matters properly come before our Annual
Meeting, it is the intention of the persons named in the enclosed form of 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 in the
envelope which has been enclosed
THE BOARD OF DIRECTORS
Pleasant Hill, California
Dated: April 12, 2000
16
<PAGE>
Appendix A
PROXY TUT SYSTEMS, INC. PROXY
Annual Meeting of Stockholders - May 17, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TUT SYSTEMS, INC.
The undersigned stockholder of Tut Systems, Inc., a Delaware Corporation
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement, each dated April 12, 2000, and the 1999 Annual Report to
Stockholders, and appoints Salvatore D'Auria and Nelson Caldwell, or either of
them, as the proxies and attorneys-in-fact, with full power to each of
substitution on behalf and in the name of the undersigned to vote and otherwise
represent all of the shares registered in the name of the undersigned at the
2000 Annual Meeting of Stockholders of the Company to be held on Wednesday, May
17, 2000 at 10:00 a.m. (local time) at the Marriott Hotel Walnut Creek, 2355
North Main Street, Walnut Creek, California, and any adjournment thereof with
the same effect as if the undersigned were present and voting such shares, on
the following matters and in the following manner:
TO ASSURE YOUR REPRESENTATION AT THE
ANNUAL MEETING, PLEASE MARK, SIGN AND
DATE THIS PROXY AND
RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
(Continue and to be signed on reverse side.)
<PAGE>
TUT SYSTEMS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. (X)
<TABLE>
<S> <C> <C> <C>
1. The election of the following persons as Class FOR WITHHOLD FOR ALL
II directors of Tut Systems, Inc. to serve for a ALL ALL (Except Nominee(s)
term of three years and until their successors written below)
shall be duly elected and qualified - Nominees: ( ) ( ) ( )
Neal Douglas, George Middlemas and Matthew Taylor.
2. To ratify the appointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as independent
auditors for Tut Systems, Inc. for the fiscal ( ) ( ) ( )
year ending December 31, 2000.
3. To vote or otherwise represent the shares on FOR AGAINST ABSTAIN
any other business which may properly come before
the meeting or any adjournment thereof, according ( ) ( ) ( )
to their discretion and in their discretion.
</TABLE>
The shares represented by this proxy will be voted in accordance with the
specification made. If no specification is made, the shares represented by this
proxy will be voted for each of the above persons and proposals, and for or
against such other matters as may properly come before the meeting as the
proxyholders deem advisable.
Dated: _________________, 2000
Signature(s)
--------------------------------
--------------------------------
(Title, if appropriate)
---------------------
Sign exactly as your name(s) appear on the stock certificate. A corporation is
requested to sign its name by its President or other authorized officer, with
the office held designated. Executors, administrators, trustees, etc., are
requested to so indicate when signing, if stock is registered in two names, both
should sign.
I plan to attend the meeting: Yes ____ No _____
