<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
CIDCO INCORPORATED
- --------------------------------------------------------------------------------
(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]
May 1, 1997
To Our Stockholders:
On behalf of the Board of Directors, I cordially invite you to attend the
1997 Annual Meeting of the Stockholders of CIDCO Incorporated. The Annual
Meeting will be held at 10:00 A.M., Local Time, on Thursday, May 29, 1997, at
the Company's offices, 220 Cochrane Circle, Morgan Hill, California. Your Board
of Directors and management look forward to greeting personally those
stockholders who are able to attend the meeting.
At the meeting, in addition to electing two directors and ratifying the
appointment of auditors, you will be asked to consider and vote upon two stock
option proposals. The first would amend the Company's Amended and Restated 1993
Stock Option Plan to increase the amount of common stock available for the grant
of options under the plan; the second would amend the Company's 1994 Directors'
Stock Option Plan to increase the number of shares of common stock available for
the grant of options under the Plan and to provide for the automatic
acceleration of the vesting of all options granted under the Plan in the event
of a change in control of the Company. These proposals are more fully discussed
in the accompanying Proxy Statement, which you are urged to read carefully. Your
Board of Directors recommends a vote FOR the election of directors and FOR both
stock option proposals.
It is important that your shares are represented and voted at the meeting
whether or not you plan to attend. Accordingly, you are requested to sign, date
and mail the enclosed proxy card in the postpaid envelope provided at your
earliest convenience.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
Sincerely,
[LOGO]
Daniel L. Eilers
President and Chief Executive Officer
<PAGE>
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1997
------------------------
Morgan Hill, California
May 1, 1997
The Annual Meeting of Stockholders of CIDCO Incorporated, a Delaware
corporation (the "Company") will be held at the Company's offices, 220 Cochrane
Circle, Morgan Hill, California on Thursday, May 29, 1997 at 10:00 a.m., Local
Time, for the following purposes:
1. To elect two directors, each for a three-year term;
2. To consider and act upon the proposal to amend the Company's Amended and
Restated 1993 Stock Option Plan (the "1993 Plan") to increase by 750,000
shares the amount of the Company's Common Stock available for the grant
of options under the 1993 Plan;
3. To consider and act upon the proposal to amend the Company's 1994
Directors' Stock Option Plan (the "Directors' Option Plan") to increase
by 150,000 shares the amount of the Company's Common Stock available for
the grant of options under the Directors' Option Plan and to provide for
the automatic acceleration of the vesting of all options granted under
the Directors' Option Plan in the event of a change in control of the
Company;
4. To ratify the appointment of auditors; and
5. To act upon any other matters that may properly be brought before the
meeting and any adjournment thereof.
Stockholders of record at the close of business on April 29, 1997 will be
entitled to notice of and to vote at the meeting.
By order of the Board of Directors,
[LOGO]
Richard D. Kent
Secretary and Chief Financial Officer
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED FOR THAT PURPOSE.
<PAGE>
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1997
------------------------
This Proxy Statement is being furnished to stockholders of CIDCO
Incorporated, a Delaware corporation ("Cidco" or the "Company"), in connection
with the Annual Meeting of Stockholders (the "Annual Meeting") to be held at
10:00 A.M., Local Time, on Thursday, May 29, 1997 at the offices of the Company,
220 Cochrane Circle, Morgan Hill, California, and at any adjournment thereof.
The Cidco Board of Directors is soliciting proxies to be voted at the Annual
Meeting.
This Proxy Statement and Notice of Meeting, the proxy card and Cidco's
Annual Report to Stockholders are expected to be sent to stockholders beginning
on May 1, 1997.
PROXY PROCEDURE
Only stockholders of record at the close of business on April 29, 1997 (the
"Record Date") are entitled to notice of and to vote in person or by proxy at
the Annual Meeting.
When a proxy card is returned properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions marked on
the proxy card. If a stockholder does not return a signed proxy card or does not
attend the Annual Meeting and vote in person, his or her shares will not be
voted. If a stockholder attends the Annual Meeting, he or she may vote by
ballot.
Stockholders are urged to mark the boxes on the enclosed proxy card to
indicate how their shares are to be voted. If a stockholder returns a signed and
dated proxy card but does not mark the boxes, the shares represented by that
proxy card will be voted for the election as directors of the nominees herein
and for the amendments to the plans proposed herein. The Board of Directors is
currently unaware of any other matters to be presented for action at the Annual
Meeting, but the proxy card gives the individuals named as proxies discretionary
authority to vote the shares represented thereby on any such other matter that
is properly presented for action at the Annual Meeting. A stockholder may revoke
his or her proxy at any time before it is voted by: (i) giving notice in writing
to the Secretary of Cidco, (ii) granting a proxy bearing a later date; or (iii)
appearing in person and voting at the Annual Meeting.
COST OF SOLICITATION
Proxies may be solicited by telephone or other means by directors, officers
or regular employees of Cidco, who will not be specially compensated therefor.
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Cidco has also retained D.F. King & Co., Inc. to assist in the
solicitation of proxies, at an estimated cost of $7,500, plus reimbursement of
reasonable out of pocket expenses. Cidco will reimburse brokerage houses and
other custodians, nominees and fiduciaries for their expenses in accordance with
the regulations of the Securities and Exchange Commission concerning the
forwarding of proxies and proxy material to the beneficial owners of stock.
VOTING
The outstanding voting stock of Cidco as of April 25, 1997 (the "Measurement
Date") consisted of 13,987,086 shares of Common Stock, par value $.01 per share
(the "Common Stock"). Each share of Common Stock is entitled to one vote upon
each matter to come before the Annual Meeting.
Directors of the Company will be elected by a plurality of the votes of the
shares present or represented by proxy at the Annual Meeting, i.e., each share
of Common Stock entitles the holder to cast one vote for each of two persons,
and the persons who receive the two highest totals of votes (whether or not a
majority) will be elected. Thus, stockholders who do not vote, or who withhold
their vote from one or more nominees named herein and who do not vote for
another person, will not affect the outcome of the election provided that a
quorum is present at the Annual Meeting.
<PAGE>
Ratification of the appointment of auditors, and approval of the plan
amendments proposed herein, require the affirmative vote of a majority of the
shares present in person or represented by proxy at the Annual Meeting. Thus, a
shareholder who is not present, in person or by proxy, at the Meeting will not
affect the outcome of the votes, provided that a quorum is present at the Annual
Meeting; however, a stockholder who is present, in person or by proxy, at the
Annual Meeting, and who does not vote or votes to abstain on the proposals to
ratify the auditors and approve the plan amendments will in effect be voting
against those proposals.
A broker who is the record owner of shares of Common Stock beneficially
owned by a customer will have discretionary authority to vote such shares in the
election of directors and on the ratification of the appointment of auditors
proposal herein, if the broker has not received voting instructions from the
beneficial owner by the tenth day before the meeting, provided that this Proxy
Statement has been transmitted to the beneficial owner at least 15 days before
the Annual Meeting. Except as set forth in the foregoing sentence, a broker who
is the record owner of shares of Common Stock beneficially owned by a customer
will not have discretionary authority to vote such shares for or against
approval and adoption of the other proposals herein ("Nondiscretionary
Proposals"), in the absence of instructions from the beneficial owners. Votes
which are not cast for this reason ("broker non-votes") will not be counted in
favor of such Nondiscretionary Proposals. Since the approval and adoption of the
Nondiscretionary Proposals requires the affirmative vote of a majority of the
outstanding shares of Common Stock, broker non-votes will have the same effect
as votes against such approval and adoption.
PROXY STATEMENT PROPOSALS
At the annual meeting each year, the Board of Directors submits to
stockholders its nominees for election as directors. Stockholders also vote to
ratify or reject the auditors selected by the Audit Committee of the Board of
Directors. In addition, the Board of Directors may submit other matters to the
stockholders for action at the annual meeting.
Stockholders of Cidco also may submit proposals for inclusion in the proxy
material. These proposals must meet the stockholder eligibility and other
requirements of the Securities and Exchange Commission. In order to be included
in the Company's 1998 proxy material, a stockholder's proposal must be received
not later than December 12, 1997 at the Company's headquarters, 220 Cochrane
Circle, Morgan Hill, California 95037, Attention: Secretary.
ITEM 1.
ELECTION OF DIRECTORS
Cidco's Board of Directors is divided into three classes. Each class of
directors is elected for a three-year term. Paul G. Locklin and Joseph A.
Graziano are the two nominees for election by Cidco's stockholders as directors
at this Annual Meeting. Mr. Locklin and Mr. Graziano are currently directors.
Mr. Locklin was previously elected by stockholders prior to the Company's
initial public offering and Mr. Graziano was appointed by the other directors on
April 14, 1997. If re-elected, Mr. Locklin and Mr. Graziano will each serve for
a term of three years which expires at the Annual Meeting of Stockholders in
2000 or when their respective successors are elected and qualified. Proxies
cannot be voted for a greater number of persons than the number of nominees set
forth herein.
The Board recommends a vote FOR the election of both Mr. Locklin and Mr.
Graziano.
A short biography follows of Mr. Locklin, Mr. Graziano and of each of the
other current directors as of the date of this Proxy Statement.
Paul G. Locklin, age 51, a co-founder of the Company, was President, Chief
Executive Officer and a director of the Company since its incorporation in 1988.
On March 12, 1997, Mr. Locklin became Co-Chairman of the Board of the Company
and he became Chairman of the Board of the Company on
2
<PAGE>
April 16, 1997. Effective March 17, 1997, Mr. Locklin resigned his positions as
President and Chief Executive Officer of the Company and is currently serving as
a consultant to the Company. Mr. Locklin received a B.S. degree in marketing
from California State University at Hayward.
Joseph A. Graziano, age 53, became a director of the Company in April 1997.
From June 1989 to December 1995 he was Executive Vice President and Chief
Financial Officer of Apple Computer, Inc. and he served as a director of Apple
Computer from June 1993 to October 1995. From May 1987 to June 1989 Mr. Graziano
served as the Chief Financial Officer of Sun Microsystems, Inc. Mr. Graziano
also currently serves as a director of Pixar Animation Studios, Inc. and
IntelliCorp, Inc. He received a B.S. degree in accounting from Merrimack College
and is a certified public accountant.
Daniel L. Eilers, age 42, became the President, Chief Executive Officer and
a director of the Company on March 17, 1997. Prior to the Company, Mr. Eilers
served as President and Chief Executive Officer of NAT Systems International,
Inc., a privately held enterprise software company. Prior thereto he spent 10
years at Apple Computer, Inc. where he held various executive positions,
including Senior Vice President of Worldwide Marketing and Customer Solutions,
Vice President of Strategy and Corporate Development and Vice President of
Strategic Investments. Mr. Eilers also served as President and Chief Executive
Officer of Claris Corporation from 1991 through 1995. He received a B.A. degree
from the University of Washington and an M.B.A. degree from Stanford University.
Scott C. McDonald, age 43, became a director of the Company in November,
1996. He served as the Chief Operating Officer, Chief Financial Officer and
Secretary of the Company from October, 1993 to December 12, 1996. Mr. McDonald
currently serves as a consultant to the Company. From March 1993 through
September 1993, he was employed by PSI Integration, Inc., a producer of
Macintosh desktop and powerbook modems, most recently as President. From
February 1989 to February 1993, Mr. McDonald served as Chief Financial Officer
and Vice President of Finance and Administration of Integrated Systems, Inc., a
company that develops and markets engineering software products. Mr. McDonald
received a B.S. degree in accounting from Akron University and an M.B.A. degree
from Golden Gate University.
Richard M. Moley, age 57, became a director of the Company in January 1994.
From 1986 through the date of its acquisition by Cisco Systems, Inc. in 1996, he
was the Chairman of the Board, Chief Executive Officer and President of
StrataCom, Inc., a manufacturer of cell switching systems that integrate
multimedia communications over high speed digital lines, and thereafter he has
been a Senior Vice President of Cisco Systems, Inc. He also serves as a director
of Linear Technologies Corporation. Mr. Moley received a B.S. degree from
Manchester University, England, an MSEE degree from Stanford University and an
M.B.A. degree from the University of Santa Clara.
Ernest K. Jacquet, age 48, has been a director of the Company since May
1993. Since April 1990, he has been a general partner of Summit Partners, a
venture capital partnership that is the general partner of Summit Ventures III,
L.P. and Summit Investors II, L.P. which were principal stockholders of the
Company prior to its initial public offering. Mr. Jacquet received B.S.E. and
M.S.E. degrees, cum laude, from the University of Michigan and an M.B.A. degree
from Stanford Business School.
The terms of Messrs. Eilers and McDonald will expire at the 1998 annual
meeting and the terms of Messrs. Moley and Jacquet will expire at the 1999
annual meeting.
BOARD OF DIRECTORS
The business and affairs of the Company are managed under the direction of
the Board of Directors, currently composed of five non-employee directors and
one employee director (Mr. Eilers) as of the date of this Proxy Statement. The
Board of Directors establishes the overall policies and standards for Cidco and
reviews the performance of management.
3
<PAGE>
In 1996, the Board of Directors held eight meetings and acted pursuant to
written consent seven times. In 1996, each director attended all of the meetings
of the Board and all of the meetings of Committees of the Board on which such
directors served.
COMMITTEES OF THE BOARD
The Board of Directors has established three Committees and has assigned
certain responsibilities to each of those Committees. Messrs. McDonald, Jacquet
and Moley currently serve as members of the Audit and Compensation Committees
and Messrs. Jacquet and Moley currently serve as members of the Stock Option
Committee. With the changes which have recently occurred in the composition of
the Company's Board of Directors, it is expected that changes will be made in
these Committee assignments.
AUDIT COMMITTEE
The Audit Committee met twice in 1996. The duties of the Audit Committee
include the recommendation of the appointment of independent public accountants
for Cidco, review of the scope of audits proposed by the independent public
accountants, review of internal audit reports on various aspects of corporate
operations and consultations with the independent public accountants on matters
relating to internal financial controls and procedures.
COMPENSATION COMMITTEE
The Compensation Committee met once during 1996, and met in January 1997 to
approve final 1996 compensation for the executive officers of the Company. The
functions of this Committee include the review and approval of compensation of
the Company's officers, the review of and recommendations concerning directors'
compensation and consultation on organizational matters.
STOCK OPTION COMMITTEE
The Stock Option Committee is responsible for administering the Company's
1993 Plan, including approving stock option grants to officers and employees of
the Company. The Committee acted pursuant to written consent twelve times during
1996.
DIRECTORS' COMPENSATION
Directors who are also employees of Cidco are not paid any fees or other
remuneration for service on the Board or on any Board Committee. Effective
January 1, 1997, the non-employee Directors of the Company are being paid
(unless the Board specifically determines otherwise with respect to any such
person) Director's fees at the rate of $10,000 per annum (payable quarterly in
arrears) for serving as Directors of the Company. The Company also reimburses
all of its directors for their out-of-pocket expenses incurred in the
performance of their duties as directors of the Company.
The 1994 Directors' Stock Option Plan (the "Directors' Option Plan") is
described herein under the caption "Item 3--Proposal to Amend the 1994
Directors' Stock Option Plan." Scott C. McDonald and Ernest K. Jacquet each
received a grant of 33,325 options under the Directors' Option Plan in 1996.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the number of shares of the Company's Common Stock
beneficially owned by each person known by the Company, as of the Measurement
Date, to beneficially own more than five percent of the outstanding Common
Stock, by each individual director and executive officer named in this Proxy
Statement, and by all of the current directors and executive officers as a
group. In each case, except as otherwise disclosed in the footnotes to the
table, the shares listed are owned directly by the individual or
4
<PAGE>
group members named in the table, which have sole voting and dispositive power
with respect to such shares.
<TABLE>
<CAPTION>
NUMBER OF % OF SHARES
NAME SHARES OUTSTANDING
- ----------------------------------------------------------------- ---------- -------------
<S> <C> <C>
Paul G. Locklin.................................................. 1,159,501(1) 8.29
Robert L. Diamond................................................ 518,577(2) 3.71
Ernest K. Jacquet................................................ 6,665(3) *
Richard M. Moley................................................. 36,680(4) *
Thomas C. Bristovish............................................. -- *
Daniel L. Eilers................................................. 30,060(5) *
Edward Forker.................................................... -- *
Scott C. McDonald................................................ 16,665(5) *
Timothy J. Dooley................................................ 11,280(6) *
J.&W. Seligman & Co. Incorporated................................ 2,878,255(7) 20.58
The Kaufmann Fund, Inc........................................... 1,504,500(8) 10.76
SMALLCAP World Fund, Inc......................................... 913,000(9) 6.53
All current directors and executive officers as a group (8
persons)....................................................... 1,260,851 10) 8.94
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes 100,000 shares issuable upon exercise of currently exercisable
options, 10,000 shares owned by the Matthew Locklin Trust, for which Mr.
Locklin serves as Trustee and has sole voting and dispositive power and
50,000 shares, as to which Mr. Locklin disclaims beneficial ownership, owned
by his father, Harry Locklin. The address for Mr. Locklin is c/o CIDCO
Incorporated, 220 Cochrane Circle, Morgan Hill, California 95037.
(2) The address for Mr. Diamond is c/o RDI Electronics Inc., 400 Columbus
Avenue, Valhalla, New York 10595.
(3) All of these shares are issuable upon exercise of options which are
currently exercisable. Mr. Jacquet is also a general partner of a
partnership which beneficially owns 140,222 shares of the Common Stock and
has shared voting power and no dispositive power over such shares.
(4) 26,680 of these shares are issuable upon exercise of options which are
either currently exercisable or become exercisable within 60 days of the
Record Date.
(5) All of these shares are issuable upon exercise of options which are either
currently exercisable or become exercisable within 60 days of the Record
Date.
(6) Includes 304 shares issuable upon exercise of options which are either
currently exercisable or become exercisable within 60 days of the Record
Date.
(7) Information as to J.&W. Seligman & Co. Incorporated ("Seligman") was derived
from its Statement on Schedule 13G, as amended February 12, 1997 filed with
the Securities and Exchange Commission. Such Statement disclosed that
Seligman is an investment advisor. Seligman has sole voting power over
2,110,725 of these shares and sole dispositive power over 2,208,508 of these
shares. The address for Seligman is 100 Park Avenue, New York, New York
10017.
(8) Information as to the Kaufmann Fund, Inc. ("Kaufmann") was derived from its
Statement on Schedule 13G dated August 7, 1996 filed with the Securities and
Exchange Commission. Such Statement disclosed that Kaufmann is an investment
company. The address for Kaufmann is 140 East 45th Street, 43rd Floor, New
York, New York 10017.
5
<PAGE>
(9) Information as to SMALLCAP World Fund, Inc. ("SMALLCAP") was derived from
its Statement on Schedule 13G dated February 12, 1997 filed with the
Securities and Exchange Commission. Such Statement disclosed that SMALLCAP
is an investment company and that Capital Research and Management Company (a
wholly-owned subsidiary of The Capital Group Companies, Inc.) is investment
advisor to SMALLCAP. SMALLCAP has sole dispositive power and no voting power
over these shares. The address for SMALLCAP is 333 South Hope Street, Los
Angeles, California 90071.
(10) See Notes (1) through (6). Includes 180,374 shares issuable upon exercise
of options which are either currently, or become exercisable within 60 days
of the Record Date.
DIRECTOR AND EXECUTIVE OFFICER SECURITIES REPORTS
The Federal securities laws require Cidco directors and executive officers,
and persons who own more than 5% of Cidco's Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of any equity securities of the Company. To Cidco's
knowledge, based solely on review of the copies of such reports furnished to it
and representations that no other reports were required, all persons subject to
these reporting requirements filed the required reports on a timely basis
except: (i) Mr. Robert Diamond, former Chairman of the Board of the Company, did
not timely file one report on Form 4 for three open market sales of Common
Stock, namely, a May 6, 1996 sale of 10,000 shares of Cidco Common Stock for
$36.00 per share, a May 7, 1996 sale of 10,000 shares of Cidco Common Stock for
$35.75 dollars per share, a May 8,1996 sale of 20,000 shares of Cidco Common
Stock for $34.75 per share, (ii) Mr. Scott McDonald, a Director failed to timely
file one report on Form 4 for an April 30, 1996 exercise of 8,676 options
granted to Mr. McDonald under Cidco's 1993 Amended Employee Stock Option Plan
the ("ESOP"), and the subsequent open market sale of such shares by Mr. McDonald
for $35.50 per share, (iii) Mr. Edward Forker, Vice President of International
Sales, failed to timely file three reports on Form 4 for a February 1, 1996
grant to Mr. Forker of 15,000 options under the ESOP, a July 3, 1996 grant to
Mr. Forker of 25,000 options under the ESOP, a July 26, 1996 purchase by Mr.
Forker of 1,300 shares of Cidco Common Stock at $19.31 per share in an open
market transaction, and the November 14, 1996 sale by Mr. Forker of 1,300 shares
of Cidco Common Stock for $19.32 per share, (iv) Mr. Thomas Bristovish, Vice
President of Sales, failed to timely file one report on Form 4 for a May 2, 1996
exercise of 2,170 options granted under the ESOP and the subsequent open market
sale of the shares so acquired for $36.50 per share, and a May 6, 1996 exercise
of 8,331 options granted under the ESOP and the subsequent open market sale of
the shares so acquired for $36.50 per share, (v) Mr. Timothy Dooley, Vice
President of Sales, failed to timely file two reports on Form 4 for a July 1,
1996 purchase of 943 shares of Cidco Common Stock under Cidco's 1994 Employee
Stock Purchase Plan ("ESPP") for $22.525 per share, a November 27, 1996 exercise
by Mr. Dooley of 10,033 options granted under the ESOP, (vi) Mr. Mark Sherman,
Vice President of Operations, failed to timely file two reports on Form 4 for a
February 16, 1996 exercise of 1,500 options granted under the ESOP and the
subsequent open market sale of the shares so acquired for $36.25 per share, and
a May 21, 1996 exercise by Mr. Sherman of 1,500 options granted under the ESOP
and the subsequent open market sale by Mr. Sherman of the shares so acquired for
$40.00 per share, (vii) Mr. Steven Landry, Senior Vice President and Technical
Officer, failed to timely file three reports on Form 4 for a May 6, 1996
exercise of 2,500 options granted under the ESOP and the subsequent open market
sale of the shares so acquired for $36.00 per share, a May 7, 1996 exercise by
Mr. Landry of 5,000 options granted under the ESOP and the subsequent open
market sale of the shares so acquired for $35.75 per share, a May 13, 1996
exercise by Mr. Landry of 30,000 options granted under the ESOP and the
subsequent open market sale of the shares so acquired for $39.50 per share, a
May 15, 1996 exercise by Mr. Landry of 10,000 options granted under the ESOP and
the subsequent open market sale of the shares so acquired for $37.00 per share,
a June 28, 1996 purchase by Mr. Landry of 659 shares of Cidco Common Stock under
the ESPP at $22.525 per share and a December 31, 1996 purchase by Mr. Landry of
284 shares of Cidco Common Stock under the ESPP at $14.875 per share, (viii) Mr.
Richard D. Kent, Chief Financial Officer, failed to timely file three reports on
Form 4 for a May 10, 1996 exercise of 1250 options granted under the ESOP and
the subsequent open market sale of the shares
6
<PAGE>
so acquired for $36.25 per share (with respect to 900 of such shares) and
$36.125 per share (with respect to 350 of such shares), a July 1, 1996 purchase
by Mr. Kent of 198 shares of Cidco Common Stock at $22.525 per share under the
ESPP and a December 31, 1996 purchase by Mr. Kent of 211 shares of Cidco Common
Stock at $14.875 per share under the ESPP, (ix) Mr. Ian Laing, Executive Vice
President of Research and Development, failed to timely file one Form 4 for an
August 1, 1996 grant to Mr. Laing of 50,000 options under the ESOP, and (x) Mr.
Marvin Tseu, Executive Vice President of Sales and Marketing, failed to timely
file one report on Form 4 for the August 1, 1996 grant to Mr. Tseu of 60,000
options under the ESOP. All of the foregoing transactions were reported on Form
5s filed by the foregoing executives in January and February, 1997.
EXECUTIVE COMPENSATION
The following table summarizes the compensation of the Chief Executive
Officer, the Chairman, the next three most highly compensated executive officers
of the Company in 1996 and one former executive officer, Mr. Scott C. McDonald,
who would otherwise have been includable among the top five most highly
compensated executive officers had he not resigned his executive officer
positions with the Company on December 12, 1996, prior to the end of the
Company's fiscal year 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
SECURITIES ALL OTHER
NAME AND TOTAL CASH OTHER ANNUAL UNDERLYING COMPEN-
PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION COMPENSATION(1) OPTIONS SATION(2)
- ------------------------------------- --------- --------- --------- ------------- ----------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul G. Locklin...................... 1996 $ 247,627 -- $ 247,627 $ 9,615 -- $ 1,500
President and CEO (Until March 17, 1995 188,295 $ 188,295 376,590 $ 8,540 50,000 630
1997) 1994 180,000 135,000 315,000 $ 9,607 100,000 1,500
Robert L. Diamond.................... 1996 247,627 -- 247,627 $ 7,801 -- 1,500
Chairman (until April 14, 1997) 1995 188,295 188,295 376,590 $ 5,033 50,000 630
1994 180,000 135,000 315,000 $ 5,947 100,000 1,500
Timothy J. Dooley.................... 1996 184,616 -- 184,616 -- -- 1,500
Vice President-Sales 1995 175,000 122,500 297,500 -- 35,000 630
1994 356,000 -- 356,000 -- -- --
Thomas C. Bristovish................. 1996 184,616 -- 184,616 -- -- 1,500
Vice President-Sales 1995 175,000 87,500 262,500 -- 20,000 630
1994 135,000 36,180 171,180 -- 25,000 --
Edward Forker........................ 1996 170,000 -- 15,000 -- 1,500
Vice President-International Sales 1995 98,600 29,580 25,000 -- --
1994 -- -- -- -- --
Scott C. McDonald.................... 1996 184,616 -- 184,616 -- -- 1,500
Executive Vice President, COO, CFO 1995 160,750 100,000 260,750 -- 30,000 630
(until December 12, 1996) 1994 135,500 68,250 203,750 -- 67,000 --
</TABLE>
- ------------------------
(1) Represents depreciation on automobiles provided to Messrs. Locklin and
Diamond by the Company.
(2) Annual employer contributions to the Company's 401(k) savings and
profit-sharing plan.
7
<PAGE>
EMPLOYMENT CONTRACTS
The Company entered into employment agreements with each of the executive
officers listed in the above Summary Compensation Table (the "named executive
officers"). Each of the agreements provides for payment of a base salary and
specified benefits and includes noncompetition and nondisclosure covenants which
continue for specified periods after the cessation of employment, regardless of
the reason for such cessation. Each of the agreements provide that, if the
Company terminates the executive's employment without cause or such person
voluntarily resigns for reasons specified in the agreement (including various
changes in his duties with the Company, a reduction in his base salary or
benefits, a change in his principal work location or a material uncured breach
of the agreement by the Company), such person will be entitled to continue to
receive the full amount of his base salary and any other benefits to which he
would have otherwise been entitled for a period of one year in the case of
Messrs. Locklin and Diamond (six months in the case of Messrs. Bristovish,
Dooley and Forker) from the date of such termination or resignation, provided
that if comparable employment is obtained during such period the base salary
payments (but not benefits) are discontinued. Mr. McDonald resigned as an
executive officer of the Company, effective December 12, 1996, and ceased to be
an employee in January, 1997 although he remains a member of the Company's Board
of Directors.
In March 1997 the Company entered into an employment agreement with Daniel
L. Eilers with respect to his employment as President and Chief Executive
Officer of the Company. This agreement provides for payment of a base salary,
minimum bonus payments upon achievement of Company earnings targets and
specified benefits. It includes noncompetition and nondisclosure covenants which
continue for one year after the cessation of employment. The agreement with Mr.
Eilers provides that if the Company terminates his employment without cause or
as a result of his permanent disability or if he voluntarily resigns for reasons
specified in the agreement, Mr. Eilers will be entitled to a lump sum severance
payment in the amount of his base salary and target bonus and other benefits to
which he would have otherwise been entitled for a period of one year from the
date of such termination or resignation. In addition, if Mr. Eilers' employment
is terminated in connection with a change of control of the Company, and if any
excise tax is due as a result of "excess parachute payments" under the Internal
Revenue Code of 1996, as amended, the Company will make a cash payment to Mr.
Eilers to cover payment of such excise tax. Also in March 1997, Mr. Eilers was
granted a ten-year stock option to purchase up to 600,000 shares of the
Company's Common Stock at an exercise price of $14.25 per share, vesting in
equal monthly installments over the five years ending in March, 2002. This stock
option was not issued under either of the Company's stock option plans and the
Company has filed a Form S-8 Registration Statement with the Securities and
Exchange Commission covering the shares issuable upon exercise of Mr. Eilers'
stock option.
STOCK OPTIONS
During 1996, the Company granted stock options to purchase the indicated
number of shares to the named executive officers listed in the compensation
table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
---------------------------------------------------- ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM
OPTIONS IN FISCAL EXERCISE EXPIRATION --------------------
NAME GRANTED (1) YEAR PRICE (2) DATE 5% 10%
- ------------------------------------------------------ ----------- ------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Edward Forker......................................... 15,000 2.94% $ 27.50 2/1/06 259,421 657,401
</TABLE>
- ------------------------
(1) The option in this table becomes exercisable in three cumulative
installments on each of the first through third anniversary date of the date
of grant (February 1, 1996).
(2) 100% of fair market value of a share of the Company's Common Stock on the
date of grant.
8
<PAGE>
The following table provides information as to options exercised by each of
the named executive officers during 1996 and the number and value of options
held by such officers at fiscal year end measured in terms of the closing price
of Cidco Common Stock on December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND OPTION VALUES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SHARES UNDERLYING IN-THE-MONEY
OPTIONS
UNEXERCISED OPTIONS AT DECEMBER
AT DECEMBER 31, 1996 31, 1996(2)
---------------------------- -----------
<S> <C> <C> <C> <C> <C>
VALUE
SHARES ACQUIRED REALIZED
ON EXERCISE (1) EXERCISABLE UNEXERCISABLE EXERCISABLE
----------------- ----------- ----------- --------------- -----------
Robert L. Diamond.................... -- -- 116,667 33,333 $1,650,000
Paul G. Locklin...................... -- -- 116,667 33,333 1,650,000
Timothy J. Dooley.................... 10,033 $ 166,849 11,977 23,327 5,016
Thomas C. Bristovish................. 15,001 232,289 5 21,661 --
Edward Forker........................ -- -- 8,338 31,662 --
Scott C. McDonald.................... 33,676 1,023,544 39,989 26,660 449,874
<CAPTION>
<S> <C>
UNEXERCISABLE
-------------------
Robert L. Diamond.................... --
Paul G. Locklin...................... --
Timothy J. Dooley.................... --
Thomas C. Bristovish................. --
Edward Forker........................ --
Scott C. McDonald.................... --
</TABLE>
- ------------------------
(1) Aggregate market value, on the date of exercise, of the shares acquired less
the aggregate exercise price paid for such shares.
(2) Difference between the aggregate market value of the underlying shares
(based on the closing price of $17.50 on December 31, 1996) and the
aggregate exercise price of such shares.
OPTION REPRICING
The following is a report of the Stock Option Committee of the Board of
Directors.
On January 21, 1997, the per share exercise price of those of the
outstanding options issued under the Company's 1993 Plan (except for options to
purchase an aggregate of 100,000 shares granted to Messrs. Locklin and Diamond,
which were not repriced and were subsequently surrendered for cancellation in
March 1997), to purchase up to 715,582 shares of Common Stock (based on the
unexercised portion of the original grants), which were issued at per share
exercise prices in excess of $12.43 was reduced to $12.43, the fair market value
of Common Stock on such date, with three year vesting beginning anew from such
date. Participants in the Company's 1993 Plan who remained employees of the
Company and who, by February 28, 1997, surrendered for cancellation their
original option agreements related to options meeting the requirements set forth
above, were eligible for the repricing detailed herein. The Stock Option
Committee of the Company's Board of Directors took this action in an effort to
restore morale and incentivization of the Company's employees, particularly in
light of the fact that no employee bonuses were paid for 1996 (this being the
first time in the Company's history that no bonuses were paid).
9
<PAGE>
The following table sets forth information regarding repricings of options
made to any of the named executive officers of the Company in connection with
the foregoing. The Company has never previously repriced an option.
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES EXERCISE PRICE OF
UNDERLYING PRICE AT STOCK AT NEW
OPTIONS TIME OF TIME OF EXERCISE
NAME AND TITLE DATE REPRICED(1)(#) REPRICING($) REPRICING PRICE ($ )
- ---------------------------- --------- ------------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Paul G. Locklin............. -- -- -- -- --
Robert L. Diamond........... -- -- -- -- --
Timothy J. Dooley........... 1/21/97 35,000 $ 24.95 $ 12.43 $ 12.43
Edward Forker............... 1/21/97 25,000 30.62 12.43 12.43
1/21/97 15,000 27.50 12.43 12.43
Thomas C. Bristovish........ 1/21/97 13,330 18.68 12.43 12.43
1/21/97 8,336 24.95 12.43 12.43
Scott C. McDonald........... -- -- -- -- --
<CAPTION>
LENGTH OF
OPTION
ORIGINAL
TERM REMAINIG
AT TIME OF
NAME AND TITLE REPRICING (YEARS)
- ---------------------------- -------------------------
<S> <C>
Paul G. Locklin............. --
Robert L. Diamond........... --
Timothy J. Dooley........... 8
Edward Forker............... 8
9
Thomas C. Bristovish........ 7
8
Scott C. McDonald........... --
</TABLE>
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") reviews and approves annual
salary range adjustments for Cidco's executive management. The Committee
evaluates the performance and reviews and approves increases to the base
compensation of executive management of Cidco. The Committee periodically
reports to the Board on its activities.
COMPENSATION PHILOSOPHY
The Committee bases its compensation decisions on its executive compensation
philosophy, which relates the level of compensation to Cidco's success in
meeting its annual and long-term performance goals, rewards individual
achievement and seeks to attract and retain qualified executives. Cidco normally
seeks to position its executive compensation, which includes salary and
incentive awards, slightly above the median range of compensation levels for
other high-technology companies identified by the Company management and Radford
Associates, an employment compensation consulting firm, as competitors for
employee talent. These companies include Aspect Telecommunications, Centigram
Communications, Digital Microwave, Global Village Communications, Network
Equipment Technologies, Symmetricom and Standford Telecom. Because no bonuses
were awarded in 1996, Cidco executive compensation for 1996 was in all cases
below the 25th percentile for the group. This resulted from the Company's
failure to meet its 1996 net income targets as described below.
EXECUTIVE COMPENSATION
In determining whether the total compensation of the Company's executives,
including its Chief Executive Officer, should be greater than the base
compensation provided to such executive officers under their employment
agreements, the Committee takes into account individual performance, performance
of the operations directed by that executive and the positioning of compensation
in relation to the established salary range. In determining the overall increase
in an executive's total compensation package, base salary plus incentive
compensation, the Committee also takes into account Cidco's philosophy of
seeking to compensate its executives at or slightly above the median range of
compensation for executives employed by companies in the aforementioned
high-technology group. The Committee reviewed Mr. Locklin's performance during
1996 based upon Cidco's financial performance in terms of revenue and income
growth, return on equity, total stockholder return and earnings per share.
In January, 1996, the Committee considered that it was appropriate to
establish the amount of 1996 cash bonuses for its executive officers based upon
1996 performance. It was determined that the level of
10
<PAGE>
such bonuses would be dependent upon the Company meeting the net income target
set forth in the Preliminary 1996 Financial Forecast distributed to the Board at
the time of its January, 1996 meeting. By unanimous action on January 26, 1996,
the Committee determined that target 1996 cash bonuses to be paid to the
Company's executive officers should range up to a maximum of $300,000 for the
President and Chief Executive Officer and Chairman of the Board if Net Income
targets were exceeded by 20%. Because the Company's 1996 net income was below
the forecasted target, no bonuses were paid by the Company to any of its
executive officers or to any other employees of the Company in 1996. The
Committee believes that this type of bonus program based on attaining
established financial targets properly aligns the interests of the Company's
executive officers with the interests of stockholders.
Ernest K. Jacquet (Chairman)
Scott C. McDonald
Richard M. Moley
Compensation Committee
11
<PAGE>
PERFORMANCE GRAPH
The graph below compares the annual change in the cumulative total return on
the Cidco Common Stock with the annual change in the cumulative total return on
the Nasdaq Stock Market-US Index and the Hambrecht & Quist Technology Index for
the period since the Company's initial public offering on March 3, 1994. The
graph assumes that $100 was invested in Cidco Common Stock on March 3, 1994 and
in each index on March 28, 1994 and that all dividends were reinvested.
COMPARISON OF 33 MONTH CUMULATIVE TOTAL RETURN*
AMONG CIDCO INCORPORATED, THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CIDCO INCORPORATED NASDAQ STOCK MARKET-US HAMBRECHT & QUIST TECHNOLOGY
<S> <C> <C> <C>
3/3/94 100 100 100
Dec-94 193 97 108
Dec-95 170 137 162
Dec-96 117 168 195
</TABLE>
* $100 INVESTED ON 3/3/94 IN STOCK OR INDEX INCLUDING REINVEMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
CERTAIN TRANSACTIONS
The Company's Valhalla, New York offices are located in a building owned by
the two adult sons of Mr. Diamond, who was the Chairman of the Company until
March 12, 1997, when he became Co-Chairman of the Company, serving in such
capacity until his resignation from the Board of Directors and as an executive
officer on April 14, 1997. The lease expires on May 1, 2000, and currently
provides for an annual rental of $226,624.
ITEM 2.
PROPOSAL TO AMEND THE 1993 STOCK OPTION PLAN
The Board of Directors of the Company has unanimously adopted, subject to
shareholder approval, an amendment to the Company's Amended and Restated 1993
Stock Option Plan (the "1993 Plan") to increase by 750,000 shares the amount of
the Company's Common Stock available for the grant of options under the 1993
Plan. The 1993 Plan was originally adopted by the Company's Board of Directors
and approved by its shareholders on May 1, 1993. The 1993 Plan has proven to be
a valuable tool in attracting and retaining key employees. The Board believes
that, in view of the substantial past growth of the Company and the need to
continue to hire additional qualified employees to bring about further growth,
the authority given to the Stock Option Committee of the Board under the 1993
Plan should be expanded to increase the number of options which may be granted
under the 1993 Plan. The Board believes that such
12
<PAGE>
authority (i) will provide the Company with significant means to attract and
retain talented personnel, (ii) will result in saving cash, which otherwise
would be required to maintain current key employees, and adequately attract and
reward additional key personnel, and (iii) consequently will prove beneficial to
the Company's ability to be competitive.
The Board recommends a vote FOR the proposal.
The 1993 Plan provides for the granting to key employees of incentive stock
options ("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and for the granting of
options which do not qualify as Incentive Stock Options ("Nonstatutory Options")
to key employees and consultants. The 1993 Plan is administered by the Stock
Option Committee of the Board of Directors, which determines the terms and
conditions of the options granted under the 1993 Plan, including the exercise
price, number of shares subject to the option and the vesting schedule for
exercisability thereof. A total of 2,150,000 shares of Common Stock have been
reserved for issuance under the 1993 Plan, not including the 750,000 shares
which are the subject of this proposal. At the Measurement Date, 2,083,400
shares of Common Stock were subject to outstanding options and 66,600 shares
remained available for future grant. Management of the Company believes that the
750,000 shares which are the subject of this proposal will be sufficient to
cover expected option grants during the one year period following the 1997
Annual Meeting.
The exercise price of all Incentive Stock Options granted under the 1993
Plan must be at least equal to the fair market value of the Common Stock of the
Company on the date of grant. The exercise price of all Nonstatutory Options
granted under the 1993 Plan must be at least 85% of the fair market value of the
Company's Common Stock on the date of grant. To date, no options have been
granted at exercise prices less than fair market value on the date of grant as
determined by the Stock Option Committee. The terms of options granted under the
1993 Plan may not exceed 10 years. Shares subject to options under the 1993 Plan
may be purchased for cash or, with the consent of the Stock Option Committee, in
exchange for shares of the Company's Common Stock or by a promissory note. The
1993 Plan may be amended, suspended or terminated by the Board, but no such
action may impair rights under a previously granted option. No options may be
granted under the 1993 Plan after May 4, 2003.
In the event the Company is acquired by merger, consolidation or asset sale,
each outstanding option under the 1993 Plan that is not to be assumed by the
successor corporation or replaced with a comparable option to purchase shares of
the capital stock of the successor corporation will automatically become
exercisable in full. Any options assumed or replaced in connection with such
acquisition may, in the Stock Option Committee's discretion, be subject to
immediate acceleration, and any unvested shares that do not vest at the time of
such acquisition may be subject to full and immediate vesting, in the event the
optionee's service with the successor entity is subsequently terminated within a
specified period following the acquisition. In connection with a hostile change
in control of the Company (whether by hostile tender offer for more than 50% of
the outstanding common stock or proxy contest for the election of Board
members), the Stock Option Committee will have the discretionary authority to
provide for automatic acceleration of outstanding options under the 1993 Plan.
TAX CONSEQUENCES. Options granted under the 1993 Plan are either incentive
stock options meeting the requirements set forth in section 422 of the Code
("ISOs") or options which do not qualify as ISOs ("nonqualified options"). For
federal income tax purposes, assuming that the Common Shares acquired by the
holder of an ISO are not disposed of within two years from the date the option
was granted or one year from the date the option was exercised, the Company
receives no deduction either upon the grant or the exercise of an ISO or upon a
subsequent sale of the shares by the optionee. The optionee realizes no income
of regular federal income tax purposes either at the time of the grant or the
time of exercise of the ISO. Instead, the optionee realizes gain or loss only
upon his or her subsequent sale of the option shares, and the optionee's gain or
loss, in the amount of the difference between the sale price and the option
exercise price, will be treated as long-term capital gain or loss.
13
<PAGE>
If, however, the shares are disposed of within either the two-and one-year
periods mentioned above (a "disqualifying disposition"), the excess, if any, of
the fair market value of the shares on the date of exercise over the option
exercise price will be treated as ordinary income to the optionee in the year of
the disqualifying disposition. In addition, if a disqualifying disposition for
more than the fair market value of the shares on the date of exercise, the
excess of the amount realized over the fair market value will be treated as a
short-term or long-term capital gain realized by the optionee, depending upon
the length of time and shares are held. If a disqualifying disposition is for
less than the fair market value of such shares on the date of exercise, the
amount treated as ordinary income realized by the optionee will be limited to
the excess of the amount realized over the option exercise price, and if the
disqualifying disposition is for less than the option exercise price, the
optionee will realize no ordinary income, but rather a short-term or long-term
capital loss, depending upon the length of time the shares are held, equal to
the difference between the option exercise price and the amount realized. The
Company will be entitled, in the year of a disqualifying disposition, to a
deduction equal to the amount that the optionee must treat as ordinary income.
In the case of a nonqualified option, the optionee does not realize any
taxable income upon the grant of the option. Upon exercise of a nonqualified
option, the optionee realizes ordinary income in an amount generally measured by
the excess, if any, of the fair market value of the shares on the date of
exercise over the option exercise price. The Company will be entitled to a
deduction in the same amount as the ordinary income realized by the optionee.
Upon the sale of such shares, the optionee will realize short-term or long-term
capital gain or loss, depending upon the length of time the shares are held.
Such gain or loss will be measured by the difference between the sale price of
the shares and the market price of the shares on the date of exercise.
ITEM 3.
PROPOSAL TO AMEND THE 1994 DIRECTORS' STOCK OPTION PLAN
The Board of Directors of the Company has unanimously adopted, subject to
shareholder approval, an amendment to the Company's 1994 Directors' Stock Option
Plan (the "Directors' Option Plan") to increase by 150,000 shares the amount of
the Company's Common Stock available for the grant of options under the
Directors' Option Plan. The Directors' Option Plan was originally adopted by the
Company's Board of Directors and approved by its Shareholders. The Directors'
Option Plan has proven to be a valuable tool in attracting and retaining outside
Directors of the Company. The Board believes that, in view of the need to
continue to attract and retain the best available personnel for service as
Directors of the Company, the authority given to the Board of Directors under
the Directors' Option Plan should be expanded to increase the number of options
which may be granted under the Directors' Option Plan. The Board believes that
such authority (i) will provide the Company with significant means to attract
and retain talented personnel for service as Directors of the Company, (ii) will
result in saving cash, which otherwise would be required to maintain current
outside Directors, and adequately attract and reward future outside Directors,
and (iii) consequently will prove beneficial to the Company's ability to be
competitive.
The Board of Directors of the Company has also unanimously adopted, subject
to shareholder approval, an amendment to Section 11 of the Directors' Option
Plan to provide that in the event of any "Change in Control" of the Company (as
defined below), with or without the approval of the Board, each outstanding
option under the Directors' Option Plan shall automatically accelerate in full
and unvested shares shall vest in full immediately. For purposes of this
proposed amendment to the Directors' Option Plan, a "Change in Control" shall be
deemed to have occurred if any person, or any two or more persons acting as a
group, and all affiliates of such person or persons, who prior to such time
owned less than fifty percent (50%) of the then outstanding Common Stock of the
Company, shall acquire such additional shares of the Company's Common Stock in
one or more transactions, or series of transactions, such that following such
transaction or transactions, such person or group and affiliates beneficially
own more than fifty percent (50%) of the Company's Common Stock outstanding.
Prior to adoption of the amendment
14
<PAGE>
that is the subject of this foregoing proposal, the Directors' Option Plan only
provided for automatic acceleration of options granted thereunder in the event
of a hostile Change of Control of the Company, creating a conflict of interest
for the directors if a third party approached the Company with a proposal for a
business combination.
If the proposed amendment is approved by the Company's shareholders, Section
11 of the Directors' Option Plan shall read in its entirety as follows:
"11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the shareholders of the Company, the number of shares
of Common Stock covered by each outstanding Option, and the number of shares
of Common Stock which have been authorized for issuance under the Plan but
as to which no Options have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option, as well as the price
per share of Common Stock covered by each such outstanding Option, 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.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Board and give each
Optionee the right to exercise his or her Option as to all or any part of
the Optioned Stock, included Shares as to which the Option would not
otherwise be exercisable. In the event of a proposed sale or conveyance of
all or substantially all of the assets of the Company, or the merger or
consolidation of the Company with or into another corporation, each
outstanding Option shall be assumed or an equivalent option shall be
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that such successor corporation refuses
to assume such Option or to substitute an equivalent option, such Option
may, at the discretion of the Board, accelerate in full upon the
consummation of the merger or sale of assets. The Board shall also have the
power and right, but not the obligation, to accelerate the exercisability of
any options, notwithstanding any limitations in this Plan upon a Change in
Control (as defined herein). In the event of a Change in Control of the
Company, each outstanding option under this Plan shall automatically
accelerate in full and unvested shares shall vest in full immediately. For
purposes of this Plan, a "Change in Control" shall be deemed to have
occurred if any person, or any two or more persons acting as a group, and
all affiliates of such person or persons, who prior to such time owned less
than fifty percent (50%) of the then outstanding Common Stock of the
Company, shall acquire such additional shares of the Company's Common Stock
in one or more transactions, or series of transactions, such that following
such transaction or transactions, such person or group and affiliates
beneficially own more than fifty percent (50%) of the Company's Common Stock
outstanding."
The Board recommends a vote FOR the proposal.
DIRECTORS' OPTION PLAN
The Directors' Option Plan provides for the granting to outside Directors of
the Company of Nonstatutory Options. The Directors' Option Plan is administered
by the Board of Directors, which
15
<PAGE>
determines the terms and conditions of the options granted under the Directors'
Option Plan, including the exercise price, number of shares subject to the
option and the vesting schedule for exercisability thereof. A total of 100,000
shares of Common Stock have previously been reserved for issuance under the
Directors' Option Plan. At the Measurement Date, all 100,000 shares of Common
Stock were subject to outstanding options so that no shares remained available
for future grant.
The exercise price of all Nonstatutory Stock Options granted under the
Directors' Option Plan must be at least equal to the fair market value of the
Common Stock of the Company on the date of grant. The terms of options granted
under the Directors' Option Plan may not exceed 5 years. Shares subject to
options under the Directors' Option Plan may be purchased for cash or, with the
consent of the Board of Directors, in exchange for shares of the Company's
Common Stock or by a promissory note. The Directors' Option Plan may be amended,
suspended or terminated by the Board of Directors, but no such action may impair
rights under a previously granted option. No options may be granted under the
Directors' Option Plan after January 11, 2004.
In the event the Company is acquired by merger, consolidation or asset sale,
each outstanding option under the Directors' Option Plan that is not to be
assumed by the successor corporation or replaced with a comparable option to
purchase shares of the capital stock of the successor corporation may, at the
discretion of the Board of Directors under the current provisions of the Plan,
accelerate in full. In connection with a change in control of the Company, the
Board of Directors currently has the discretionary authority to provide for
automatic acceleration of outstanding options under the Directors' Option Plan.
In the event of a hostile change in control of the Company (whether by hostile
tender offer for more than 50% of the outstanding common stock or proxy contest
for the election of Board members, or other means lacking the approval of the
Board of Directors), each outstanding option under the Directors' Option Plan as
currently in effect would automatically accelerate in full and unvested shares
would vest in full immediately.
ITEM 4.
APPOINTMENT OF AUDITORS
The following resolution will be offered by the Board of Directors at the
Annual meeting.
RESOLVED: That the appointment of Price Waterhouse LLP by the Board of
Directors of the Company to conduct the annual audit of the financial
statements of CIDCO Incorporated for the year ending December 31, 1997 is
ratified, confirmed and approved.
The Board of Directors Recommends a Vote FOR the Foregoing Proposal:
The Board of Directors of the Company first appointed Price Waterhouse LLP
("Price Waterhouse"), independent public accountants, as its auditors in 1993
and reappointed the firm as auditors in 1994, 1995 and 1996. As a result of
Price Waterhouse's knowledge of Cidco's operations and reputation in the
auditing field, the Board of Directors is convinced that the firm has the
necessary personnel, professional qualifications and independence to act as
Cidco's auditors.
In the event this resolution does not receive the necessary vote for
adoption, or if for any reason Price Waterhouse ceases to act as auditors for
Cidco, the Board of Directors of the Company will appoint other independent
public accountants as auditors.
Representatives of Price Waterhouse will attend the Annual Meeting. They
will have the opportunity to make a statement and also will be available to
respond to appropriate questions from stockholders at the Annual Meeting.
16
<PAGE>
OTHER MATTERS
The Board of Directors does not intend to bring any matters before the
Annual Meeting other than those specifically set forth in the notice of the
Annual Meeting and knows of no matters to be brought before the Annual Meeting
by others. If any other matters properly come before the Annual Meeting, it is
the intention of the persons named in the accompanying proxy to vote such proxy
in accordance with the judgment of the Board of Directors.
Financial statements for Cidco are included in Cidco's Annual Report to
Stockholders for the year 1996 which was mailed to the stockholders beginning
May 1, 1997.
A COPY OF CIDCO'S 1996 ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE TO THOSE STOCKHOLDERS WHO
WOULD LIKE MORE DETAILED INFORMATION CONCERNING THE COMPANY. TO OBTAIN A COPY,
PLEASE WRITE TO: RICHARD D. KENT, SECRETARY, CIDCO INCORPORATED, 220 COCHRANE
CIRCLE, MORGAN HILL, CALIFORNIA 95037.
By Order of the Board of Directors,
[LOGO]
Richard D. Kent
Secretary and Chief Financial Officer
Dated: May 1, 1997
17
<PAGE>
CIDCO INCORPORATED
220 COCHRANE CIRCLE, MORGAN HILL, CALIFORNIA 95037
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Daniel L. Eilers and Richard D. Kent, or
either of them, attorneys or attorney of the undersigned, for and in the name(s)
of the undersigned, with power of substitution and revocation in each to vote
any and all shares of Common Stock, par value $.01 per share, of CIDCO
Incorporated (the "Company"), which the undersigned would be entitled to vote as
fully as the undersigned could if personally present at the Annual Meeting of
Stockholders of the Company to be held on May 29, 1997 at 10:00 A.M., Local
Time, at the Company's offices, 220 Cochrane Circle, Morgan Hill, California,
and at any adjournment or adjournments therof, and hereby revoking any prior
proxies to vote said stock, upon the following items of business more fully
described in the notice of and proxy statement for such Annual Meeting (receipt
of which is hereby acknowledged):
The Board of Directors recommends a vote FOR each of the following
proposals.
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR the nominees listed below WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY BELOW) TO VOTE FOR BOTH NOMINEES BELOW: / /
/ /
</TABLE>
PAUL G. LOCKLIN AND JOSEPH A. GRAZIANO
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name above.
(2) To amend the Company's Amended and Restated 1993 Stock Option Plan (the
"1993 Plan") to increase by 750,000 shares the amount of the Company's Common
Stock available for the grant of options under the 1993 Plan.
/ / FOR / / AGAINST / / ABSTAIN
(3) To amend the Company's 1994 Directors' Stock Option Plan (the
"Directors' Option Plan") to increase by 150,000 shares the amount of the
Company's Common Stock available for the grant of options under the Directors'
Option Plan and to provide for the automatic acceleration of the vesting of all
options granted under the Directors' Option Plan in the event of a change in
control of the Company;
/ / FOR / / AGAINST / / ABSTAIN
(4) To ratify the appointment of Price Waterhouse LLP to act as the
Company's independent auditors for 1997.
/ / FOR / / AGAINST / / ABSTAIN
(5) To transact such other business as may properly come before the meeting
or any adjournment thereof.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED ABOVE. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR (I) THE ELECTION OF THE TWO
DIRECTORS NAMED ABOVE IN ITEM 1; (II) THE AMENDMENT OF THE COMPANY'S AMENDED AND
RESTATED 1993 STOCK OPTION PLAN TO INCREASE BY 750,000 SHARES THE AMOUNT OF THE
COMPANY'S COMMON STOCK AVAILABLE FOR THE GRANT OF OPTIONS UNDER THE PLAN; (III)
THE AMENDMENT OF THE COMPANY'S 1994 DIRECTORS' STOCK OPTION PLAN TO INCREASE BY
150,000 SHARES THE AMOUNT OF THE COMPANY'S COMMON STOCK AVAILABLE FOR THE GRANT
OF OPTIONS UNDER THE DIRECTORS' OPTION PLAN AND TO PROVIDE FOR THE AUTOMATIC
ACCELERATION OF THE VESTING OF ALL OPTIONS GRANTED UNDER THE DIRECTORS' OPTION
PLAN IN THE EVENT OF A CHANGE IN CONTROL OF THE COMPANY; AND (IV) RATIFICATION
OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR 1997; AND (V) THE TRANSACTION OF SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
DATED _______________________, 1997
___________________________________
___________________________________
Signature(s)
___________________________________
Signatures, if held jointly
(Please sign exactly as name(s)
appear(s) hereon. When signing as
attorney, executor, administrator,
trustee, guardian, or as an officer
signing for a corporation, please
give full title under signature.)
