UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
JUNE 8, 2000
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
------------------------------
CELLNET DATA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE COMMISSION FILE NUMBER: 94-2951096
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 000-21409 Identification Number)
125 SHOREWAY ROAD
SAN CARLOS, CALIFORNIA 94070
(Address of principal executive offices, including zip code)
(650) 508-6000
(Registrant's Telephone Number, Including Area Code)
ITEMS 2 AND 3. ACQUISITION OR DISPOSITION OF ASSETS; BANKRUPTCY OR RECEIVERSHIP
(A) BANKRUPTCY FILINGS
As previously reported, on February 4, 2000, CellNet Data Systems,
Inc. ("CellNet"), together with its subsidiaries (collectively, the
"Debtors"), filed voluntary petitions for relief under Chapter 11 of Title 11
of the United States Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy
Code") in the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court") -- IN RE CELLNET DATA SYSTEMS, INC., ET AL.,
DEBTORS, Chapter 11, Case No. 00-00844 (PJW). The directors and officers of
the Debtors have remained in possession during the proceedings, subject to
the supervision and orders of the Court. (See CellNet's Report on Form 8-K
dated and filed on February 7, 2000.)
(B) SCHLUMBERGER ASSET SALE
Debtors filed their petitions pursuant to a proposal letter (the
"Proposal Letter") and an attached summary of terms of an agreement (the
"Summary of Terms") with Schlumberger Limited ("Schlumberger") pursuant to which
Schlumberger, or an entity designated by it, would acquire all or substantially
all of the assets and business operations of the Debtors and certain specified
liabilities related thereto. On March 3, 2000, Schlumberger Resource Management
Services, Inc. (as "Purchaser") and Schlumberger Technology Corporation (its
parent company), each affiliates of Schlumberger, entered into an Asset Purchase
Agreement dated as of March 1, 2000 (as amended, the "Asset Purchase Agreement")
with certain of the Debtors including CellNet (as "Sellers"). The Asset Purchase
Agreement contains the terms under which the Purchaser acquired from the Sellers
substantially all of the assets and business operations of the Debtors and
certain specified liabilities related thereto (the "Schlumberger Asset Sale") on
May 16, 2000. The Schlumberger Asset Sale had a transaction value of
approximately $235 million, which was composed of (a) a cash payment of
$54,941,000; (b) repayment or assumption of secured debt of approximately $118
million; (c) assumed liabilities to employees and key vendors of approximately
$26 million, and (d) forgiveness/assumption of post-petition financing, which
was approximately $36 million at the Schlumberger Asset Sale closing.
Copies of the Proposal Letter and Summary of Terms are attached to
CellNet's Report on Form 8-K dated and filed on February 7, 2000, under Item 7
(c). Copies of the Asset Purchase Agreement and a First Amendment to Asset
Purchase Agreement, without schedules and exhibits, are attached to CellNet's
Report on Form 8-K dated on March 10, 2000 and filed on March 13, 2000, under
Item 7 (c).
(C) BCN ASSET SALE
CN Holdings, Inc. ("CN Holdings"), a wholly-owned subsidiary of
CellNet, and BEn Meters International, Inc. ("BEn"), a wholly-owned subsidiary
of Bechtel Enterprises, Inc. ("Bechtel"), each own a 50% interest in BCN Data
Systems, L.L.C. ("BCN"), an international
2
joint venture formed for the purpose of deploying and operating CellNet's
wireless data communications system in countries outside the United States. The
assets and liabilities associated with Debtors' interests in BCN were excluded
from the Schlumberger Asset Sale. On May 23, 2000, CellNet and CN Holdings
entered into a Purchase Agreement (the "BCN Purchase Agreement") with Bechtel
pursuant to which Bechtel (a) would acquire (i) CN Holdings' interest in BCN,
(ii) CellNet's and CN Holdings' interest under certain contracts related to
BCN's activities, and (iii) all of CellNet's intellectual property rights and
interests (other than those intellectual property rights and interests sold to
the Purchaser under the Schlumberger Asset Sale), and (b) would assume CellNet's
and CN Holdings' liabilities under the contracts being acquired (the "BCN Asset
Sale"). The BCN Asset Sale would have a cash transaction value of at least $2.25
million and may have a cash transaction value of up to $4.5 million if the
Bankruptcy court determines that CellNet (rather than the Purchaser in the
Schlumberger Asset Sale) has the right to future royalties from BCN under the
license agreements between CellNet and BCN (the "License Agreements"). CellNet
has agreed to accept the additional $2.25 million from Bechtel as an advance
payment in full satisfaction of all rights to any future royalty payments under
the License Agreements, subject only to the Court's determination that CellNet
owns such rights following the Schlumberger Asset Sale. BEn and BCN have
acknowledged and agreed to the terms of the BCN Purchase Agreement.
The purchase under the BCN Purchase Agreement is subject to the receipt
of higher or better offers and to Bankruptcy Court approval. The BCN Asset Sale
is presently scheduled for a confirmation hearing before the Bankruptcy Court on
June 13, 2000.
A copy of the BCN Purchase Agreement, without schedules and exhibits,
is attached to this Report on Form 8-K, under Item 7 (c), as Exhibit 99.1.
(D) DISTRIBUTION OF AMOUNTS HELD IN ESCROW
On May 13, 1998, CellNet Funding, LLC ("Funding"), a wholly-owned,
special purpose subsidiary of CellNet, completed the sale of 4,400,000 shares of
its 7% Exchangeable Preferred Securities Mandatorily Redeemable 2010
(Liquidation Preference $25 Per Preferred Security) (the "Preferred
Securities"). The Preferred Securities bear a cumulative dividend quarterly in
arrears on each March 1, June 1, September 1 and December 1, commencing
September 1, 1998. The dividend is payable in cash through June 1, 2001 and
thereafter, in cash or shares of CellNet common stock, at the option of Funding.
The payment of dividends on the Preferred Securities was suspended as of
February 4, 2000 as required under the Bankruptcy Code. The payment of any
further dividends on the Preferred Securities is subject to the approval of the
Bankruptcy Court.
In connection with the sale of the Preferred Securities, Funding
invested an amount in U.S. Treasury securities ("Treasury Strips") expected to
be sufficient, at maturity, to fund the cash payment of the first twelve
quarterly dividends on the Preferred Securities (i.e. from September 1, 1998
through June 1, 2001). Funding invested the balance of the sale proceeds and
certain paid-in capital in CellNet preferred stock. The Treasury Strips were
pledged to The Bank of New York as escrow agent (the "Escrow Agent") pursuant to
an escrow agreement (the "Escrow Agreement") for the benefit of the holders of
the Preferred Securities. The Escrow
3
Agent is required under the Escrow Agreement to release from escrow amounts
sufficient to pay quarterly dividends on the Preferred Securities through June
1, 2001. As of April 30, 2000, the market value of the Treasury Strips and
invested cash held by the Escrow Agent under the Escrow Agreement amounted to
approximately $11.3 million.
The CellNet Preferred Stock is exchangeable, at the option of Funding,
at any time prior to June 1, 2010 into shares of CellNet common stock at an
exchange rate based on the exchange rate, subject to adjustment, of the
Preferred Securities (presently, 1.8328 shares of CellNet common stock for each
Preferred Security, equivalent to an exchange price of $13.64 per share).
Holders of the Preferred Securities may tender Preferred Securities to Funding
for the purpose of making such an exchange. As of May 16, 2000, 60,424 Preferred
Securities had been exchanged for CellNet common stock, leaving 4,339,576
Preferred Securities then outstanding. Following such an exchange at the option
of any holder of Preferred Securities, dividends cease to accrue on the
Preferred Securities exchanged, the holder is no longer entitled to participate
in the proceeds from the Treasury Strips pertaining to the Preferred Securities
exchanged, and Funding is entitled to retain the related proceeds.
On May 16, 2000, counsel for CellNet, Funding, the Unofficial Committee
of Holders of Preferred Securities (the "Unofficial Committee") and the Escrow
Agent entered into a "Stipulation Modifying Automatic Stay By and Among CellNet
Funding, LLC, CellNet Data Systems, Inc., The Bank of New York, as Escrow Agent,
and The Unofficial Committee of Holders of Preferred Securities of CellNet
Funding, LLC" (the "Stipulation"), subject to the approval of the Bankruptcy
Court, pursuant to which (a) an amount equal to the March 1, 2000 cash dividend
on the Preferred Securities would be paid to holders of record as of the
effective date of an approval by the Bankruptcy Court (as defined in the
Stipulation, the "Approval Date"), (b) the remaining Treasury Strips would be
liquidated not later than the fifth business day after the Approval Date (the
"Distribution Date"), and (c) the Escrow Agent would distribute on the
Distribution Date all funds then in escrow as follows: first to the Escrow Agent
and counsel to the Unofficial Committee in respect of their fees and costs;
second to CellNet in the amount of $200,000 to cover the costs of winding-up the
affairs of Funding; and third (pro rata on the basis of the 4,400,000 Preferred
Securities originally issued) to the record holders of the Preferred Securities
outstanding on the Distribution Date and to CellNet in respect of the Preferred
Securities previously exchanged for CellNet common stock.
The matter is presently scheduled for a hearing before the Bankruptcy
Court on June 13, 2000. If the Stipulation is approved, it is expected that a
distribution would be made in a relatively short time.
A copy of the Stipulation is attached to this Report on Form 8-K, under
Item 7 (c) as Exhibit 99.2.
(E) DISCLOSURE STATEMENT FOR JOINT CONSOLIDATED LIQUIDATING PLAN OF
REORGANIZATION AND JOINT CONSOLIDATED LIQUIDATING PLAN OF
REORGANIZATION
On June 2, 2000, Debtors filed with the Bankruptcy Court a Disclosure
Statement for Joint Consolidated Liquidating Plan of Reorganization (the
"Disclosure Statement") and a Joint
4
Consolidated Liquidating Plan of Reorganization (the "Plan of
Reorganization"). The Disclosure Statement and the Plan of Reorganization are
attached to this Report on Form 8-K, under Item 7 (c) as Exhibit 99.3 and
Exhibit 99.4, respectively. Reference is made to each such document for an
understanding of how the Plan of Reorganization, if adopted, will affect the
interests of security holders.
INVESTORS SHOULD READ THE DISCLOSURE STATEMENT AND THE PLAN OF REORGANIZATION
CAREFULLY. THE PLAN OF REORGANIZATION, IF ADOPTED, WILL EXTINGUISH THE CELLNET
COMMON STOCK AND THE FUNDING PREFERRED SECURITIES. AFTER THE PAYMENT OF ESTATE
ADMINISTRATIVE EXPENSES AND THE SATISFACTION OF CREDITORS' CLAIMS IN PART, NO
AMOUNTS WILL BE AVAILABLE FOR DISTRIBUTION TO HOLDERS OF THE CELLNET COMMON
STOCK OR TO HOLDERS OF THE FUNDING PREFERRED SECURITIES (OTHER THAN AMOUNTS HELD
IN ESCROW FOR THE PAYMENT OF CASH DIVIDENDS ON THE PREFERRED SECURITIES, IF AND
TO THE EXTENT SUCH AMOUNTS ARE ORDERED BY THE BANKRUPTCY COURT TO BE PAID OUT TO
HOLDERS OF THE PREFERRED SECURITIES). UNDER THE PLAN OF REORGANIZATION, THE
HOLDERS OF CELLNET'S 14% SENIOR DISCOUNT NOTES AND DEBTORS' OTHER CREDITORS WILL
RECEIVE ONLY A FRACTION OF THE AMOUNTS OWED TO THEM.
5
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
99.1 BCN Purchase Agreement dated May 23, 2000.
99.2 Stipulation dated May 16, 2000.
99.3 Disclosure Statement dated June 2, 2000.
99.4 Plan of Reorganization dated June 2, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CellNet Data Systems, Inc.
(Registrant)
Date: June 8, 2000
/s/ David L. Perry
-----------------------
David L. Perry
Vice President and Secretary
6