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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1997.
OR
[ ] Transition report pursuant to Section 13(d) or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________
to__________.
Commission file number: 0-23296
CIDCO INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3500734
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
220 Cochrane Circle
Morgan Hill, CA 95037
(Address of principal executive offices and zip code)
(408) 779-1162
(Registrant's telephone number, including area code)
--------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
-------- --------
The number of shares outstanding of the Registrant's Common Stock on May 7, 1997
was 14,418,298.
<PAGE>
CIDCO INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION Page
ITEM 1. Financial Statements:
Balance sheet at March 31, 1997
and December 31, 1996 ................................3
Income statement for the three months
ended March 31, 1997 and 1996 ........................4
Statement of cash flows for the three months
ended March 31, 1997 and 1996 ........................5
Notes to financial statements ...........................6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........7
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K ..........................10
SIGNATURES ...................................................................11
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CIDCO INCORPORATED
BALANCE SHEET
(in thousands, except per share data; unaudited)
March 31, December 31,
1997 1996
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 24,417 $ 26,509
Short-term investments .............................. 36,060 38,560
Accounts receivable, net of allowance
for doubtful accounts of $3,618 and $2,966 ........ 60,379 48,242
Inventories ......................................... 9,178 14,555
Deferred tax asset .................................. 5,086 5,086
Other current assets ................................ 2,417 1,284
--------- ---------
Total current assets .............................. 137,537 134,236
Property and equipment, net ............................ 13,325 14,118
Other assets ........................................... 4,038 4,259
--------- ---------
$ 154,900 $ 152,613
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................... $ 20,428 $ 16,880
Accrued liabilities ................................. 7,192 6,211
Accrued taxes payable ............................... 2,473 676
--------- ---------
Total current liabilities ......................... 30,093 23,767
--------- ---------
Stockholders' equity:
Common stock, $.01 par value; 35,000 shares
authorized, 14,452 and 14,399 shares issued ....... 145 144
Additional paid-in capital .......................... 88,065 87,725
Treasury stock, at cost (692 shares) ................ (8,723) --
Retained earnings ................................... 45,320 40,977
--------- ---------
Total stockholders' equity ....................... 124,807 128,846
--------- ---------
$ 154,900 $ 152,613
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
CIDCO INCORPORATED
INCOME STATEMENT
(in thousands, except per share data; unaudited)
Three months ended
March 31,
-----------------------------
1997 1996
---------- -------
Sales .................................. $ 77,030 $ 51,686
Cost of sales .......................... 42,783 29,063
--------- ---------
Gross margin ........................... 34,247 22,623
--------- ---------
Operating expenses:
Research and development ........... 4,060 3,124
Selling and marketing .............. 20,428 7,263
General and administrative ......... 2,890 1,686
--------- ---------
27,378 12,073
--------- ---------
Income from operations ................. 6,869 10,550
Other income, net ...................... 459 400
--------- ---------
Income before income taxes ............. 7,328 10,950
Provision for income taxes ............. 2,931 4,380
--------- ---------
Net income ............................ $ 4,397 $ 6,570
========= =========
Earnings per share ..................... $ 0.30 $ 0.44
========= =========
Weighted average shares................. 14,678 15,016
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
CIDCO INCORPORATED
STATEMENT OF CASH FLOWS
(in thousands; unaudited)
<CAPTION>
Three months ended
March 31,
1997 1996
---------- -------
<S> <C> <C>
Cash flows provided by operating activities:
Net income ................................................ $ 4,397 $ 6,570
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization .......................... 1,552 1,300
Equity in losses of affiliate .......................... 387 --
Changes in assets and liabilities:
Accounts receivable ................................... (12,137) 7,398
Inventories ........................................... 5,377 5,831
Other current assets .................................. (1,133) (110)
Other assets .......................................... (166) (1,504)
Accounts payable ...................................... 3,548 (3,639)
Accrued liabilities ................................... 981 (3,703)
Accrued taxes payable ................................. 1,797 4,234
-------- --------
Net cash provided by operating activities ......... 4,603 16,377
-------- --------
Cash flows provided by (used in) investing activities:
Acquisition of property and equipment ..................... (759) (611)
Sale (purchase) of short-term investments, net ............ 2,446 (5,045)
-------- --------
Net cash provided by (used in)investing activities 1,687 (5,656)
-------- --------
Cash flows provided by (used in) financing activities:
Issuance of Common Stock .................................. 341 654
Purchase of treasury stock ................................ (8,723) --
-------- --------
Net cash provided by (used in) financing activities (8,382) 654
-------- --------
Net increase (decrease) in cash and cash equivalents ......... (2,092) 11,375
Cash and cash equivalents at beginning of period ............. 26,509 19,290
-------- --------
Cash and cash equivalents at end of period ................... $ 24,417 $ 30,665
======== ========
Supplemental disclosure of cash flow information:
Cash paid for income taxes ................................ $ 1,134 $ 146
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
NOTE 1. BASIS OF PRESENTATION
The accompanying financial information is unaudited, but, in the opinion of
management, reflects all adjustments (which include only normal recurring
adjustments) necessary to present fairly the Company's financial position,
operating results and cash flows for those periods presented. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. The financial information should be read in conjunction
with the audited financial statements and notes thereto for the year ended
December 31, 1996 included in the Company's most recent Annual Report on Form
10-K filed with the Securities and Exchange Commission. Results for the interim
period are not necessarily indicative of results for the entire year.
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("FAS 128"), "Earnings Per Share." This
statement is effective for the Company's quarter ending December 31, 1997. The
Statement redefines earnings per share under generally accepted accounting
principles. Under the new standard, primary earnings per share is replaced by
basic earnings per share and fully diluted earnings per share is replaced by
diluted earnings per share.
The unaudited pro forma basic and diluted earnings per share for the three
months ended March 31, 1997 and 1996 computed in accordance with FAS 128 are as
follows:
Three months ended
March 31,
--------------------
1997 1996
----- -----
Basic earnings per share.................. $ 0.31 $ 0.46
Diluted earnings per share................ 0.30 0.44
NOTE 3. COMMON STOCK
On January 27, 1997, the Company announced its plans to purchase up to 1 million
shares of its outstanding Common Stock. As of March 31, 1997, the Company had
repurchased 691,600 shares at an aggregate purchase price of $8.7 million.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition And Results
of Operations
The following information should be read in conjunction with the interim
financial statements and the notes thereto in Part I, Item 1 of this Quarterly
Report.
Background
The Company's sales and distribution channels include direct marketing
fulfillment programs, standard fulfillment of telephone company orders, and
wholesale shipments directly to telephone companies ("Direct to Telco"), retail
stores ("Retail"), international accounts and OEM customers. Direct marketing
fulfillment programs are sales campaigns run by the Company involving the use of
television and radio advertising, consumer mailings and telemarketing to sell
services which utilize the Company's products and are offered as an agent for
the Regional Bell Operating Companies (each an "RBOC") and independent telephone
operating companies (each an "Independent Telco"). Fulfillment sales, excluding
the direct marketing programs, occur when the Company receives an order either
electronically or through an on-line transfer of the customer by the RBOC or
Independent Telco, and the Company ships the requested product directly to the
customer. In the case of standard fulfillment sales, the RBOC or Independent
Telco generates the order by performing the marketing activities themselves.
Standard fulfillment sales accounted for 43%, 68% and 50% of sales in 1996, 1995
and 1994, respectively. Direct marketing fulfillment sales totaled 25%, 2% and
0% of sales in 1996, 1995 and 1994, respectively. In the first quarter of 1997,
standard fulfillment sales accounted for 39% of sales and direct marketing
fulfillment sales totaled 50% of sales.
The discussion and analysis which follows in this Quarterly Report and in other
reports and documents of the Company and oral statements made on behalf of the
Company by its management and others may contain trend analysis and other
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 which reflect the Company's current views with respect to
future events and financial results. These include statements regarding the
Company's earnings, growth and expansion plans, financial targets and forecasts,
and similar matters which are not historical facts. The Company reminds
stockholders that forward-looking statements are merely predictions and
therefore are inherently subject to uncertainties and other factors which could
cause the actual future events or results to differ materially from those
described in the forward looking statements. These uncertainties and other
factors include, among other things, business conditions and growth in the
telecommunications industry and general economies, both domestic and
international; lower than expected customer orders; competitive factors; changes
in product mix or distribution channels; performance and financial capabilities
of suppliers and third party contractors; and technological difficulties and
resource constraints encountered in developing new products. The forward-looking
statements contained in this Quarterly Report and made elsewhere by or on behalf
of the Company should be considered in light of these factors.
<PAGE>
Results of Operations
The following table sets forth for the periods indicated the percentage of sales
represented by certain line items in the Company's income statement:
As a Percentage of Sales
Three months ended
March 31,
-----------------------
1997 1996
------ ------
Sales .......................................... 100.0% 100.0%
Cost of sales .................................. 55.5 56.2
------ ------
Gross margin ................................... 44.5 43.8
------ ------
Operating expenses:
Research and development .................... 5.3 6.0
Selling and marketing ....................... 26.5 14.1
General and administrative .................. 3.8 3.3
------ ------
35.6 23.4
------ ------
Income from operations ......................... 8.9 20.4
Other income, net............................... 0.6 0.8
------ ------
Income before income taxes ..................... 9.5 21.2
Provision for income taxes ..................... 3.8 8.5
------ ------
Net income ..................................... 5.7% 12.7%
====== ======
Sales
Sales are recognized upon shipment of the product to the customer less reserves
for anticipated returns or retention of certain services provided by the RBOCs
and customer credit worthiness. Sales increased 49% to $77 million in the first
quarter of 1997 from $52 million in the first quarter of 1996, primarily due to
higher unit adjunct sales through the Company's direct marketing programs for
Caller ID services on behalf of Southwestern Bell and GTE. Additionally,
standard fulfillment sales to US West and Nynex customers contributed to the
increase. These increases were offset by a significant decrease in sales to
Ameritech customers, as well as a decrease in the Direct to Telco and Retail
channels. The Company's unit sales of corded feature phones declined
significantly due to the RBOC's increased focus on promotions utilizing adjunct
products, as well as a decrease in the market price for corded phones. The
Company's unit sales of cordless phones were lower due to supply problems with
its Asian contract manufacturers. The average selling price of units sold
decreased to $34 per unit from $45 per unit due to the change in mix between
phones and adjuncts. Adjunct sales accounted for 96 percent of sales in the
first quarter of 1997 compared to 56 percent of sales in the same period of
1996.
Gross margin
Cost of sales includes primarily the cost of finished goods purchased from the
Company's offshore contract manufacturers, costs associated with procuring and
warehousing the Company's inventory and royalties payable on licensed technology
used in the Company's products. Gross margin as a percentage of sales increased
to 44.5% in the first quarter of 1997 from 43.8% in the first quarter of 1996.
This increase primarily represented increased sales through the Company's direct
marketing programs, which typically have higher gross margins. This increase was
offset by a $4.3 million charge to write down to net realizable value certain of
the Company's inventory and a number of large fulfillment programs which
provided free freight to the customer. The Company expects gross margins to vary
in the future due to changes in sales mix by distribution channel and product
mix. The Company believes gross margins may decline over time as a result of
increased pricing pressures and changes in sales mix.
<PAGE>
Research and development expenses
Research and development expenses represent primarily salaries for personnel,
associated benefits and tooling and supplies for research and development
activities. The Company's policy is to expense all research and development
expenditures as incurred except for certain investments for tooling. Research
and development expenses increased to $4.1 million in the quarter ended March
31, 1997 from $3.0 million in the first quarter of 1996. This increase primarily
resulted from increased spending on development projects, such as ADSI phones,
cordless telephones and advanced screen phones which provide access to the
Internet. Specifically, $0.4 million was related to the Company's equity
interest in InfoGear which is developing the software for its Internet product.
This amount will increase during the remainder of 1997. Research and development
expenses as a percentage of sales decreased to 5.3% in the quarter ended March
31, 1997 from 6.0% in the like period of 1996. The Company expects that research
and development spending will increase slightly during the remainder of 1997.
Selling and marketing expenses
Selling and marketing expenses represent primarily personnel costs, telephone
and electronic data exchange expenses, promotional costs and travel expenses.
Selling and marketing expenses increased to $20.4 million in the quarter ended
March 31, 1997 from $7.3 million in the comparable period of 1996. As a
percentage of sales, selling and marketing expenses increased to 26.5% in the
quarter ended March 31, 1997 from 14.1% in the like period of 1996. These
increases were due principally to the Company's increased promotion of
intelligent network services through several direct mail, direct response
television and telemarketing campaigns resulting in increased advertising and
telemarketing agency costs. The Company expects that selling and marketing
expenses as a percentage of sales will remain approximately the same due to the
anticipated continued reliance on direct marketing activities during the
remainder of 1997.
General and administrative expenses
General and administrative expenses represent primarily salaries, benefits and
other expenses associated with the finance and administrative functions of the
Company. General and administrative expenses increased to $2.9 million in the
quarter ended March 31, 1997 from $1.7 million in the comparable period of 1996.
As a percentage of sales, general and administrative expenses increased to 3.8%
in the quarter ended March 31, 1997 from 3.3% in the comparable period of 1996.
These increases reflect a one time charge on contractually obligated expenses
incurred as part of the relinquishment of day-to-day duties of certain
executives and increased legal costs. The Company believes that general and
administrative expenditures will decrease from first quarter spending levels
during the remainder of 1997.
Provision for income taxes
The provision for income taxes in the quarters ended March 31, 1997 and 1996
reflects a rate of 40%.
Liquidity and capital resources
The Company had working capital of $107.4 million as of March 31, 1997 as
compared to $110.5 million at December 31, 1996. The Company's current ratio
decreased to 4.6 to 1, as of March 31, 1997, from 5.6 to 1, as of December 31,
1996. The Company's cash, cash equivalents and short-term investments decreased
$4.6 million during the quarter ended March 31, 1997 primarily due to the
Company's repurchase of 691,600 shares of its common stock for $8.7 million,
offset by cash provided by operating activities of $4.6 million. Cash generated
by operations of $4.6 million resulted primarily from net income of $4.4
million, decreased inventory balances of $5.4 million and increased payable and
accrued liabilities balances of $6.3 million, offset by increased accounts
receivable balances of $12.1 million.
The Company has a credit line of $25 million which is secured by the Company's
assets. The interest rate on the line is the bank's prime rate less 0.25%. The
Company had not borrowed any funds under the line as of March 31, 1997.
Capital expenditures in 1997 (which are budgeted to be approximately $7 million)
are expected to be funded from working capital currently available. The Company
believes its current cash, cash equivalents, short-term investments and line of
credit will satisfy the Company's working capital and capital expenditure
requirements through the end of 1997.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits at page 12 below.
(b) Reports on Form 8-K.
The Company filed one report on Form 8-K during the three
months ended March 31, 1997 pertaining to the declaration
by the Company's Board of Directors of a dividend of one
preferred share purchase right for each outstanding share
of the Company's Common Stock.
<PAGE>
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 thereunto duly authorized.
CIDCO INCORPORATED
May 12, 1997 By:/s/Daniel L. Eilers
- ------------ -------------------
Date Daniel L. Eilers
President and Chief Executive Officer
May 12, 1997 /s/Richard D. Kent
- ------------ ------------------
Date Richard D. Kent
Vice President Finance and Administration
and Chief Financial Officer
<PAGE>
<TABLE>
CIDCO INCORPORATED
INDEX TO EXHIBITS
<CAPTION>
Exhibits Page
-------- ----
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation. (1) --
3.2 Amended and Restated By-Laws (1). --
4.1 Second Amendment to Revolving Credit Loan Agreement dated
October 13, 1995 between Registrant and Comerica Bank. (4) --
10.4 Patent License Agreement dated as of May 1, 1989 between the
Registrant and American Telephone and Telegraph Company. (1) --
10.5 Form of Indemnification Agreement. (1) --
10.13 Agreement effective as of December 21, 1992 between
the Registrant and SBC Communications. (1), (2) --
10.14 Lease dated August 15, 1993 between Thoits Bros., Inc. and
the Registrant for 220 Cochrane Circle.(1) --
10.16 Lease dated May 31, 1994, between Thoits Bros., Inc. and
the Registrant for 225 Cochrane Circle, Units A, B, C, D, and
E. (4) --
10.17 Sublease dated November 18, 1994, between Thoits Bros. and
the Registrant for 180 Cochrane Circle.(3) --
10.18 Lease dated November 1, 1994, between Thoits Bros., Inc.
and the Registrant for 105 Cochrane Circle, Units A, B, C, D,
and E.(3) --
10.19 Registrant's Amended and Restated 1993 Stock Option Plan. (1) --
10.20 Registrant's 1994 Directors' Stock Option Plan. (1) --
10.21 Registrant's 1994 Employee Stock Purchase Plan. (1) --
10.22 Agreement dated January 1, 1995 between the Registrant and
Ameritech Services, Inc. (5) --
10.23 Standard Form of Office Lease between Registrant and 400
Columbus Avenue, LCC dated May 19, 1995. (5) --
10.24 Employment Agreement dated June 28, 1996 between Registrant and
Ian Laing. 14
10.25 Employment Agreement dated July 29, 1996 between Registrant and
Marv Tseu. 19
10.26 Employment Agreement dated December 16, 1996 between Registrant
and Richard D. Kent 24
10.27 Employment Agreement dated March 17, 1997 between Registrant
and Daniel L. Eilers. 29
10.28 Option Agreement dated March 12, 1997 between Registrant and
Daniel L. Eilers. 35
11.1 Computation of Earnings Per Share. 41
</TABLE>
(1) Incorporated herein by reference to the Company's registration statement
on Form S-1, Registration File No. 33-74114.
(2) Confidential treatment has been granted with respect to certain portions
of this document.
(3) Incorporated herein by reference to the Company's Form 10-K for the year
ended December 31, 1994.
(4) Incorporated herein by reference to the Company's Form 10-Q for the
quarter ended September 30, 1995.
(5) Incorporated herein by reference to the Company's Form 10-Q for the
quarter ended June 30, 1996
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT dated as of June 28, 1996 between CIDCO Incorporated, a Delaware
corporation (the "Company"), and Ian Laing (the "Employee").
WHEREAS, the Employee has been hired as a key
employee of the Company; and
WHEREAS, the Company is engaged in a highly
technical and competitive business.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
1. Employment and Term.
The Company hereby agrees to employ the Employee during the period commencing as
of the date hereof and continuing until this Agreement is terminated pursuant to
the terms hereof, to serve as the Company's Executive Vice President of R&D and
in such other executive managerial position or positions with the Company or its
subsidiaries or affiliates as shall hereafter be designated by the Board of
Directors of the Company, to perform such managerial duties consistent with the
usual duties of an officer of his status. Such employment shall, except as
otherwise stated herein, be on the same terms and conditions as Employee is
currently employed by the Company. The Employee hereby accepts such employment
and agrees to devote his full business time exclusively to the faithful and
diligent performance of the duties provided herein and agrees in connection with
the performance of such duties to act in a manner consistent with the primary
objective of maximizing the profitability of the Company.
2. Compensation.
(a)Salary. The Company shall compensate the Employee with a base salary
of at least $185,000 (representing the Employee's base salary for 1996), subject
to annual review by the Company's Compensation Committee, with a minimum annual
increase in 1997 and subsequent years to reflect the percentage increase in the
cost of living during the preceding year as reflected in the All Items Consumer
Price Index for all urban consumers in the San Francisco-Oakland-San Jose,
California area as published by the United States Bureau of Labor Statistics.
Payment shall be made in 26 installments.
(b)Benefits. The Employee shall be entitled to participate in such
pension plans, 401(k) plans, group health, accident or life insurance plans,
group medical and hospitalization plans, stock option plans, stock purchase
plans and other similar benefits, as may hereafter be available to the
executives of the Company. It is understood that, except as set forth herein,
the Company does not by reason of this Agreement obligate itself to make such
benefits available to its employees.
(c)Expenses. The Company shall pay or reimburse the Employee for all
expenses normally reimbursed by the Company and reasonably incurred by him in
furtherance of his duties hereunder including, without limitation, expenses for
traveling, meals, hotel accommodations and the like upon submission by him of
vouchers or an itemized list thereof prepared in compliance with such rules
relating thereto as the Board may, from time to time, adopt and as may be
required in order to permit such payments as proper deductions to the Company
under the Internal Revenue Code of 1986, as amended, and the rules and
regulations adopted pursuant thereto now or hereafter in effect.
<PAGE>
(d)Vacations. During each year of employment (including the current year
ending December 31, 1996), the Employee shall be entitled to paid vacations for
an aggregate of the greater of (A) two weeks, or (B) such period as may be
provided from time to time in the Company's vacation policy. The Company shall
not pay the Employee any additional compensation for any vacation time not used
by the Employee.
(e)Bonuses. In addition to Employee's base salary, for the calendar
years ending December 31, 1996 and 1997, Employee shall be entitled to receive
as an annual bonus, $50,000, pro rated for such portion of such calendar year
during which Employee was employed by the Company. In addition to the foregoing,
Employee may also receive bonuses in such amounts, at such times and upon such
terms as the Board may in its sole discretion, without any obligation to do so,
determine and award.
3. Termination.
(a) This Agreement shall be terminated upon the happening of any of the
following events: (i) whenever the Company or the Employee shall give written
notice terminating this Agreement; (ii) upon the death of the Employee; or (iii)
upon the Permanent Disability (as such term is defined in Section 3(d) hereof)
of the Employee.
(b) In the event that the Employee's employment with the Company is
terminated by the Company without Cause (as defined in Section 3(c) hereof) or
is terminated by the Employee for Good Reason (as defined in Section 3(e)
hereof), then for a period of twelve months following the date his employment is
so terminated, the Employee shall continue to receive the full amount of his
then current base salary, plus any cost of living increase granted to him by the
Company through the date of such termination of employment, plus all other
benefits to which the Employee is entitled pursuant to Section 2(b) hereof
(including, without limitation, continuation of the Employee's participation in
the Company's pension, 401(k) plan, insurance, medical, stock option, stock
purchase and other benefit plans as if the Employee's employment continued
throughout such twelve month period), provided, however, that if during such
twelve month period the Employee obtains reasonably comparable employment with
another employer, then the Employee's continuing base salary payments hereunder
shall cease upon the date of commencement of such comparable employment (but the
Employee's right to continued participation in Company benefits shall
nevertheless continue until the end of such twelve month period).
(c) For purposes hereof, "Cause" shall mean any of the following: (i)
the intentional failure, neglect or refusal of the employee to substantially
fulfill his material duties as an employee; (ii) a material breach of any
fiduciary duty or other material dishonesty by the employee with respect to the
Company or any affiliate thereof resulting in actual material harm to the
Company or such affiliate; or (iii) the conviction of the employee for a
fraudulent act or felony.
(d) For purposes hereof, "Permanent Disability" shall mean the total
incapacitation of the Employee so as to preclude performance of the duties of
his employment hereunder for an aggregate period of four months in any twelve
month period.
(e) For purposes hereof, "Good Reason" shall exist if the company shall:
(i) be in breach of or default under any material provision of this Agreement
and not cure such breach within 30 days of receiving notice of such breach from
the Employee; (ii) change the principal work location of the Employee without
the consent of the Employee, which consent may be withheld by the Employee for
any reason; (iii) materially change the duties of the Employee without the
Employee's consent, which consent may be withheld by the Employee for any
reason; (iv) reduce the Employee's base salary or benefits without the
Employee's consent, which consent may be withheld by the Employee for any
reason; or (v) become insolvent or bankrupt or file a voluntary or involuntary
petition in bankruptcy or make an assignment for the benefit of creditors or
consent to the appointment of a trustee or receiver.
<PAGE>
4. Noncompetition and Nonintervention.
(a) While in the employ of the Company, the Employee agrees to devote
substantially all of his entire time, attention and energies to the performance
of the business of the Company and the Employee shall not, directly or
indirectly, alone or as a member of any partnership or other business
organization, or as a partner, officer, director, employee, stockholder,
consultant or agent of any other corporation, partnership or other business
organization, be actively engaged in or concerned with any other duties or
pursuits which interfere with the performance of his duties as an Employee of
the Company, or which, even if noninterfering, may be contrary to the best
interests of the Company.
(b) For a period of one year after the termination or cessation of the
Employee's employment with the Company for any reason (including termination of
employment by the Company without Cause), the Employee shall not, directly or
indirectly, alone or as a member of any partnership or other business
organization, or as a partner, officer, director, employee, stockholder,
consultant or agent of any corporation, partnership or business organization,
engage in any business activity which is directly or indirectly in competition
with the products or services being developed, manufactured, marketed, provided
or sold by the Company or which is directly or indirectly detrimental to the
business of the Company. For a period of eighteen months after the termination
or cessation of the Employee's employment with the Company for any reason
(including termination of employment by the Company without Cause) the Employee
shall not, directly or indirectly, alone or as a member of any partnership or
other business organization, or as a partner, officer, director, employee,
stockholder, consultant or agent of any corporation, partnership or business
organization (i) request or cause any customer of the Company to cancel or
terminate any business relationship with the Company, or (ii) solicit or
otherwise cause any employee of the Company to terminate such employee's
relationship with the Company. For the purposes of this Section 4(b), a business
shall be deemed to be in competition with the Company only if the products or
services of such business are substantially similar in function or capability to
the products or services then being developed, manufactured, marketed, provided
or sold by the Company, and are marketed to substantially the same type of user
as that to which the products and services of the Company are marketed or
proposed to be marketed.
5. Confidential Information.
(a) The Employee will not at any time, whether during or after the
termination or cessation of his employment, reveal to any person, association or
company any of the trade secrets or confidential information concerning the
organization, business or finances of the Company so far as they have come or
may come to his knowledge, except as may be required in the ordinary course of
performing his duties as an employee of the Company or except as may be in the
public domain through no fault of the Employee, and the Employee shall keep
secret all matters entrusted to him and shall not use or attempt to use any such
information in any manner which may injure or cause loss or may be calculated to
injure or cause loss whether directly or indirectly to the Company.
(b) The Employee agrees that during his employment he shall not make,
use or permit to be used any notes, memoranda, drawings, specifications,
programs, data or other materials of any nature relating to any matter within
the scope of the business of the Company or concerning any of its dealings or
affairs otherwise than for the benefit of the Company. The Employee shall not,
after the termination or cessation of his employment, use or permit to be used
any such notes, memoranda, drawings, specifications, programs, data or other
materials, it being agreed that any of the foregoing shall be and remain the
sole and exclusive property of the Company and that immediately upon the
termination or cessation of his employment the Employee shall deliver all of the
foregoing, and all copies thereof, to the Company, at its main office.
<PAGE>
6. Patent and Copyright Assignment.
The Employee agrees to assign and transfer to the Company or its designee,
without any separate remuneration or compensation, his entire right, title and
interest in and to all Inventions and Works in the Field (as hereinafter
defined), together with all United States and foreign rights with respect
thereto, and at the Company's expenses to execute and deliver all appropriate
patent and copyright applications for securing United States and foreign patents
and copyrights on such Inventions and Works, and to perform all lawful acts,
including giving testimony, and to execute and deliver all such instruments,
that may be necessary or proper to vest all such Inventions and Works in the
Field and patents and copyrights with respect thereto in the Company, and to
assist the Company in the prosecution or defense of any interference which may
be declared involving any said patent applications or patents or copyright
applications or copyrights. For the purposes of this Agreement, the words
"Inventions and Works" shall include any discovery, process, design,
development, improvement, application, technique, program or invention, whether
practice or not, conceived or made by the Employee, individually or jointly with
others (whether on or off the Company's premises or during or after normal
working hours), on or after July 15, 1996 while in the employ of the Company,
provided, however, that no discovery, process, design, development, improvement,
application, technique, program or invention reduced to practice or conceived by
the Employee off the Company's premises and after normal working hours shall be
deemed to be included in the term "Inventions and Works" unless directly or
indirectly related to the business then being conducted by the Company or any
business which the Company is then actively exploring (collectively, the
"Field").
7. Binding Effect.
This Agreement shall inure to the benefit of and shall be binding upon the
parties hereto and the Company's successors or assigns (whether resulting from
any reorganization, consolidation or merger of the Company or any business to
which all or substantially all of the assets of the Company are sold) and the
Employee's heirs, executors and legal representatives.
8. Entire Agreement.
This Agreement contains the entire agreement and understanding of the parties
with respect to the subject matter hereof, supersedes all prior agreements and
understandings with respect thereto and cannot be modified, amended, waived or
terminated, in whole or in part, except in writing signed by the party to be
charged.
9. Right to Injunction.
The Employee acknowledges and agrees that the services rendered and to be
rendered to the Company by him are of a specialized and unique character and
that irreparable and immediate damage will result to the Company if Employee
fails to, refuses to or neglects to perform his agreements and obligations
hereunder. In the event of such a failure, refusal or neglect by the Employee,
the Company shall be entitled to injunctive relief or any other legal or
equitable remedies including the recovery, by appropriate action, of the amount
of the actual damage caused by the Company by any such failure, refusal or
neglect by the Employee. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of any other
remedy at law or in equity for the same event or any other event.
10. Miscellaneous.
(a)Amendments. No amendment, modification or waiver of any of the terms
of this Agreement shall be valid unless made in writing and signed by the
Employee and the Company.
(b)Successors in Interest. All provisions of this Agreement shall
survive the termination or cessation of the Employee's employment with the
Company and shall be binding upon and inure to the benefit of and be enforceable
by and against the respective heirs, executors, administrators, personal
representatives, successors and assigns of either of the parties to this
agreement.
<PAGE>
(c)Waiver. The waiver by the Company of a breach of this Agreement by
the Employee shall not operate or be construed as a waiver of any subsequent
breach by the Employee.
(d)Severability. If any provision of this Agreement shall contravene any
law or any particular state where the Employee shall perform services for the
Company, then this Agreement shall be first construed to be limited in scope and
duration so as to be enforceable in that state, and if still unenforceable,
shall then be construed as if such provision is not contained herein.
(e)Governing Law. This Agreement shall be governed by the laws of the
State of New York without regard to the conflict of laws principles thereof.
(f)Counterparts. This Agreement may be executed in two or more
counterparts, and by each party on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first above written.
CIDCO INCORPORATED
By: /s/Paul G. Locklin
------------------
Paul G. Locklin
President and CEO
/s/Ian Laing
------------------
Ian Laing
<PAGE>
Execution Copy
EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 29, 1996 between CIDCO Incorporated, a Delaware
corporation (the "Company"), and Marv Tseu (the "Employee").
WHEREAS, the Employee has been hired as a key
employee of the Company; and
WHEREAS, the Company is engaged in a highly
technical and competitive business.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
1. Employment and Term.
The Company hereby agrees to employ the Employee during the period commencing as
of the date hereof and continuing until this Agreement is terminated pursuant to
the terms hereof, to serve as the Company's Executive Vice President of Sales
and Marketing and in such other executive managerial position or positions with
the Company or its subsidiaries or affiliates as shall hereafter be designated
by the Board of Directors of the Company, to perform such managerial duties
consistent with the usual duties of an officer of his status. Such employment
shall, except as otherwise stated herein, be on the same terms and conditions as
Employee is currently employed by the Company. The Employee hereby accepts such
employment and agrees to devote his full business time exclusively to the
faithful and diligent performance of the duties provided herein and agrees in
connection with the performance of such duties to act in a manner consistent
with the primary objective of maximizing the profitability of the Company.
2. Compensation.
(a)Salary. The Company shall compensate the Employee with a base salary
of at least $190,000 (representing the Employee's base salary for 1996), subject
to annual review by the Company's Compensation Committee, with a minimum annual
increase in 1997 and subsequent years to reflect the percentage increase in the
cost of living during the preceding year as reflected in the All Items Consumer
Price Index for all urban consumers in the San Francisco-Oakland-San Jose,
California area as published by the United States Bureau of Labor Statistics.
Payment shall be made in 26 installments.
(b)Benefits. The Employee shall be entitled to participate in such
pension plans, 401(k) plans, group health, accident or life insurance plans,
group medical and hospitalization plans, stock option plans, stock purchase
plans and other similar benefits, as may hereafter be available to the
executives of the Company. It is understood that, except as set forth herein,
the Company does not by reason of this Agreement obligate itself to make such
benefits available to its employees.
(c)Expenses. The Company shall pay or reimburse the Employee for all
expenses normally reimbursed by the Company and reasonably incurred by him in
furtherance of his duties hereunder including, without limitation, expenses for
traveling, meals, hotel accommodations and the like upon submission by him of
vouchers or an itemized list thereof prepared in compliance with such rules
relating thereto as the Board may, from time to time, adopt and as may be
required in order to permit such payments as proper deductions to the Company
under the Internal Revenue Code of 1986, as amended, and the rules and
regulations adopted pursuant thereto now or hereafter in effect.
<PAGE>
(d)Vacations. During each year of employment (including the current year
ending December 31, 1996), the Employee shall be entitled to paid vacations for
an aggregate of the greater of (A) two weeks, or (B) such period as may be
provided from time to time in the Company's vacation policy. The Company shall
not pay the Employee any additional compensation for any vacation time not used
by the Employee.
(e)Bonuses. In addition to Employee's base salary, for the calendar year
ending December 31, 1996 Employee shall be entitled to receive an annual bonus
of $125,000, pro rated for such portion of such calendar year during which
Employee was employed by the Company. In addition to the foregoing, Employee may
also receive bonuses in such amounts, at such times and upon such terms as the
Board may in its sole discretion, without any obligation to do so, determine and
award.
3. Termination.
(a) This Agreement shall be terminated upon the happening of any of the
following events: (i) whenever the Company or the Employee shall give written
notice terminating this Agreement; (ii) upon the death of the Employee; or (iii)
upon the Permanent Disability (as such term is defined in Section 3(d) hereof)
of the Employee.
(b) In the event that the Employee's employment with the Company is
terminated by the Company without Cause (as defined in Section 3(c) hereof) or
is terminated by the Employee for Good Reason (as defined in Section 3(e)
hereof), then for a period of six months following the date his employment is so
terminated, the Employee shall continue to receive the full amount of his then
current base salary, plus any cost of living increase granted to him by the
Company through the date of such termination of employment, plus all other
benefits to which the Employee is entitled pursuant to Section 2(b) hereof
(including, without limitation, continuation of the Employee's participation in
the Company's pension, 401(k) plan, insurance, medical, stock option, stock
purchase and other benefit plans as if the Employee's employment continued
throughout such six month period), provided, however, that if during such six
month period the Employee obtains reasonably comparable employment with another
employer, then the Employee's continuing base salary payments hereunder shall
cease upon the date of commencement of such comparable employment (but the
Employee's right to continued participation in Company benefits shall
nevertheless continue until the end of such six month period).
(c) For purposes hereof, "Cause" shall mean any of the following: (i)
the intentional failure, neglect or refusal of the employee to substantially
fulfill his material duties as an employee; (ii) a material breach of any
fiduciary duty or other material dishonesty by the employee with respect to the
Company or any affiliate thereof resulting in actual material harm to the
Company or such affiliate; or (iii) the conviction of the employee for a
fraudulent act or felony.
(d) For purposes hereof, "Permanent Disability" shall mean the total
incapacitation of the Employee so as to preclude performance of the duties of
his employment hereunder for an aggregate period of four months in any twelve
month period.
(e) For purposes hereof, "Good Reason" shall exist if the company shall:
(i) be in breach of or default under any material provision of this Agreement
and not cure such breach within 30 days of receiving notice of such breach from
the Employee; (ii) change the principal work location of the Employee without
the consent of the Employee, which consent may be withheld by the Employee for
any reason; (iii) materially change the duties of the Employee without the
Employee's consent, which consent may be withheld by the Employee for any
reason; (iv) reduce the Employee's base salary or benefits without the
Employee's consent, which consent may be withheld by the Employee for any
reason; or (v) become insolvent or bankrupt or file a voluntary or involuntary
petition in bankruptcy or make an assignment for the benefit of creditors or
consent to the appointment of a trustee or receiver.
<PAGE>
4. Noncompetition and Nonintervention.
(a) While in the employ of the Company, the Employee agrees to devote
substantially all of his entire time, attention and energies to the performance
of the business of the Company and the Employee shall not, directly or
indirectly, alone or as a member of any partnership or other business
organization, or as a partner, officer, director, employee, stockholder,
consultant or agent of any other corporation, partnership or other business
organization, be actively engaged in or concerned with any other duties or
pursuits which interfere with the performance of his duties as an Employee of
the Company, or which, even if noninterfering, may be contrary to the best
interests of the Company.
(b) For a period of one year after the termination or cessation of the
Employee's employment with the Company for any reason (including termination of
employment by the Company without Cause), the Employee shall not, directly or
indirectly, alone or as a member of any partnership or other business
organization, or as a partner, officer, director, employee, stockholder,
consultant or agent of any corporation, partnership or business organization,
engage in any business activity which is directly or indirectly in competition
with the products or services being developed, manufactured, marketed, provided
or sold by the Company or which is directly or indirectly detrimental to the
business of the Company. For a period of eighteen months after the termination
or cessation of the Employee's employment with the Company for any reason
(including termination of employment by the Company without Cause) the Employee
shall not, directly or indirectly, alone or as a member of any partnership or
other business organization, or as a partner, officer, director, employee,
stockholder, consultant or agent of any corporation, partnership or business
organization (i) request or cause any customer of the Company to cancel or
terminate any business relationship with the Company, or (ii) solicit or
otherwise cause any employee of the Company to terminate such employee's
relationship with the Company. For the purposes of this Section 4(b), a business
shall be deemed to be in competition with the Company only if the products or
services of such business are substantially similar in function or capability to
the products or services then being developed, manufactured, marketed, provided
or sold by the Company, and are marketed to substantially the same type of user
as that to which the products and services of the Company are marketed or
proposed to be marketed.
5. Confidential Information.
(a) The Employee will not at any time, whether during or after the
termination or cessation of his employment, reveal to any person, association or
company any of the trade secrets or confidential information concerning the
organization, business or finances of the Company so far as they have come or
may come to his knowledge, except as may be required in the ordinary course of
performing his duties as an employee of the Company or except as may be in the
public domain through no fault of the Employee, and the Employee shall keep
secret all matters entrusted to him and shall not use or attempt to use any such
information in any manner which may injure or cause loss or may be calculated to
injure or cause loss whether directly or indirectly to the Company.
(b) The Employee agrees that during his employment he shall not make,
use or permit to be used any notes, memoranda, drawings, specifications,
programs, data or other materials of any nature relating to any matter within
the scope of the business of the Company or concerning any of its dealings or
affairs otherwise than for the benefit of the Company. The Employee shall not,
after the termination or cessation of his employment, use or permit to be used
any such notes, memoranda, drawings, specifications, programs, data or other
materials, it being agreed that any of the foregoing shall be and remain the
sole and exclusive property of the Company and that immediately upon the
termination or cessation of his employment the Employee shall deliver all of the
foregoing, and all copies thereof, to the Company, at its main office.
<PAGE>
6. Patent and Copyright Assignment.
The Employee agrees to assign and transfer to the Company or its designee,
without any separate remuneration or compensation, his entire right, title and
interest in and to all Inventions and Works in the Field (as hereinafter
defined), together with all United States and foreign rights with respect
thereto, and at the Company's expenses to execute and deliver all appropriate
patent and copyright applications for securing United States and foreign patents
and copyrights on such Inventions and Works, and to perform all lawful acts,
including giving testimony, and to execute and deliver all such instruments,
that may be necessary or proper to vest all such Inventions and Works in the
Field and patents and copyrights with respect thereto in the Company, and to
assist the Company in the prosecution or defense of any interference which may
be declared involving any said patent applications or patents or copyright
applications or copyrights. For the purposes of this Agreement, the words
"Inventions and Works" shall include any discovery, process, design,
development, improvement, application, technique, program or invention, whether
practice or not, conceived or made by the Employee, individually or jointly with
others (whether on or off the Company's premises or during or after normal
working hours), on or after July 15, 1996 while in the employ of the Company,
provided, however, that no discovery, process, design, development, improvement,
application, technique, program or invention reduced to practice or conceived by
the Employee off the Company's premises and after normal working hours shall be
deemed to be included in the term "Inventions and Works" unless directly or
indirectly related to the business then being conducted by the Company or any
business which the Company is then actively exploring (collectively, the
"Field").
7. Binding Effect.
This Agreement shall inure to the benefit of and shall be binding upon the
parties hereto and the Company's successors or assigns (whether resulting from
any reorganization, consolidation or merger of the Company or any business to
which all or substantially all of the assets of the Company are sold) and the
Employee's heirs, executors and legal representatives.
8. Entire Agreement.
This Agreement contains the entire agreement and understanding of the parties
with respect to the subject matter hereof, supersedes all prior agreements and
understandings with respect thereto and cannot be modified, amended, waived or
terminated, in whole or in part, except in writing signed by the party to be
charged.
9. Right to Injunction.
The Employee acknowledges and agrees that the services rendered and to be
rendered to the Company by him are of a specialized and unique character and
that irreparable and immediate damage will result to the Company if Employee
fails to, refuses to or neglects to perform his agreements and obligations
hereunder. In the event of such a failure, refusal or neglect by the Employee,
the Company shall be entitled to injunctive relief or any other legal or
equitable remedies including the recovery, by appropriate action, of the amount
of the actual damage caused by the Company by any such failure, refusal or
neglect by the Employee. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of any other
remedy at law or in equity for the same event or any other event.
10. Miscellaneous.
(a)Amendments. No amendment, modification or waiver of any of the terms
of this Agreement shall be valid unless made in writing and signed by the
Employee and the Company.
(b)Successors in Interest. All provisions of this Agreement shall
survive the termination or cessation of the Employee's employment with the
Company and shall be binding upon and inure to the benefit of and be enforceable
by and against the respective heirs, executors, administrators, personal
representatives, successors and assigns of either of the parties to this
agreement.
<PAGE>
(c)Waiver. The waiver by the Company of a breach of this Agreement by
the Employee shall not operate or be construed as a waiver of any subsequent
breach by the Employee.
(d)Severability. If any provision of this Agreement shall contravene any
law or any particular state where the Employee shall perform services for the
Company, then this Agreement shall be first construed to be limited in scope and
duration so as to be enforceable in that state, and if still unenforceable,
shall then be construed as if such provision is not contained herein.
(e)Governing Law. This Agreement shall be governed by the laws of the
State of New York without regard to the conflict of laws principles thereof.
(f)Counterparts. This Agreement may be executed in two or more
counterparts, and by each party on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first above written.
CIDCO INCORPORATED
By: /s/Paul G. Locklin
------------------
Paul G. Locklin
President and CEO
/s/Marv Tseu
------------------
Marv Tseu
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT dated as of December, 16, 1996 between CIDCO Incorporated, a Delaware
corporation (the "Company"), and Rick Kent (the "Employee").
WHEREAS, the Employee has been hired as a key
employee of the Company; and
WHEREAS, the Company is engaged in a highly
technical and competitive business.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
1. Employment and Term.
The Company hereby agrees to employ the Employee during the period commencing as
of the date hereof and continuing until this Agreement is terminated pursuant to
the terms hereof, to serve as the Company's Vice President Finance &
Administration and CFO in such other executive managerial position or positions
with the Company or its subsidiaries or affiliates as shall hereafter be
designated by the Board of Directors of the Company, to perform such managerial
duties consistent with the usual duties of an officer of his status. Such
employment shall, except as otherwise stated herein, be on the same terms and
conditions as Employee is currently employed by the Company. The Employee hereby
accepts such employment and agrees to devote his full business time exclusively
to the faithful and diligent performance of the duties provided herein and
agrees in connection with the performance of such duties to act in a manner
consistent with the primary objective of maximizing the profitability of the
Company.
2. Compensation.
(a)Salary. The Company shall compensate the Employee with a base salary
of at least $160,000 (representing the Employee's base salary for 1996), subject
to annual review by the Company's Compensation Committee, with a minimum annual
increase in 1997 and subsequent years to reflect the percentage increase in the
cost of living during the preceding year as reflected in the All Items Consumer
Price Index for all urban consumers in the San Francisco-Oakland-San Jose,
California area as published by the United States Bureau of Labor Statistics.
Payment shall be made in 26 installments.
(b)Benefits. The Employee shall be entitled to participate in such
pension plans, 401(k) plans, group health, accident or life insurance plans,
group medical and hospitalization plans, stock option plans, stock purchase
plans and other similar benefits, as may hereafter be available to the
executives of the Company. It is understood that, except as set forth herein,
the Company does not by reason of this Agreement obligate itself to make such
benefits available to its employees.
(c)Expenses. The Company shall pay or reimburse the Employee for all
expenses normally reimbursed by the Company and reasonably incurred by him in
furtherance of his duties hereunder including, without limitation, expenses for
traveling, meals, hotel accommodations and the like upon submission by him of
vouchers or an itemized list thereof prepared in compliance with such rules
relating thereto as the Board may, from time to time, adopt and as may be
required in order to permit such payments as proper deductions to the Company
under the Internal Revenue Code of 1986, as amended, and the rules and
regulations adopted pursuant thereto now or hereafter in effect.
<PAGE>
(d)Vacations. During each year of employment (including the current year
ending December 31, 1996), the Employee shall be entitled to paid vacations for
an aggregate of the greater of (A) two weeks, or (B) such period as may be
provided from time to time in the Company's vacation policy. The Company shall
not pay the Employee any additional compensation for any vacation time not used
by the Employee.
(e)Bonuses. In addition to the foregoing, Employee may also receive
bonuses in such amounts, at such times and upon such terms as the Board may in
its sole discretion, without any obligation to do so, determine and award.
3. Termination.
(a) This Agreement shall be terminated upon the happening of any of the
following events: (i) whenever the Company or the Employee shall give written
notice terminating this Agreement; (ii) upon the death of the Employee; or (iii)
upon the Permanent Disability (as such term is defined in Section 3(d) hereof)
of the Employee.
(b) In the event that the Employee's employment with the Company is
terminated by the Company without Cause (as defined in Section 3(c) hereof) or
is terminated by the Employee for Good Reason (as defined in Section 3(e)
hereof), then for a period of six months following the date his employment is so
terminated, the Employee shall continue to receive the full amount of his then
current base salary, plus any cost of living increase granted to him by the
Company through the date of such termination of employment, plus all other
benefits to which the Employee is entitled pursuant to Section 2(b) hereof
(including, without limitation, continuation of the Employee's participation in
the Company's pension, 401(k) plan, insurance, medical, stock option, stock
purchase and other benefit plans as if the Employee's employment continued
throughout such six month period), provided, however, that if during such six
month period the Employee obtains reasonably comparable employment with another
employer, then the Employee's continuing base salary payments hereunder shall
cease upon the date of commencement of such comparable employment (but the
Employee's right to continued participation in Company benefits shall
nevertheless continue until the end of such six month period).
(c) For purposes hereof, "Cause" shall mean any of the following: (i)
the intentional failure, neglect or refusal of the employee to substantially
fulfill his material duties as an employee; (ii) a material breach of any
fiduciary duty or other material dishonesty by the employee with respect to the
Company or any affiliate thereof resulting in actual material harm to the
Company or such affiliate; or (iii) the conviction of the employee for a
fraudulent act or felony.
(d) For purposes hereof, "Permanent Disability" shall mean the total
incapacitation of the Employee so as to preclude performance of the duties of
his employment hereunder for an aggregate period of four months in any twelve
month period.
(e) For purposes hereof, "Good Reason" shall exist if the company shall:
(i) be in breach of or default under any material provision of this Agreement
and not cure such breach within 30 days of receiving notice of such breach from
the Employee; (ii) change the principal work location of the Employee without
the consent of the Employee, which consent may be withheld by the Employee for
any reason; (iii) materially change the duties of the Employee without the
Employee's consent, which consent may be withheld by the Employee for any
reason; (iv) reduce the Employee's base salary or benefits without the
Employee's consent, which consent may be withheld by the Employee for any
reason; or (v) become insolvent or bankrupt or file a voluntary or involuntary
petition in bankruptcy or make an assignment for the benefit of creditors or
consent to the appointment of a trustee or receiver.
<PAGE>
4. Noncompetition and Nonintervention.
(a) While in the employ of the Company, the Employee agrees to devote
substantially all of his entire time, attention and energies to the performance
of the business of the Company and the Employee shall not, directly or
indirectly, alone or as a member of any partnership or other business
organization, or as a partner, officer, director, employee, stockholder,
consultant or agent of any other corporation, partnership or other business
organization, be actively engaged in or concerned with any other duties or
pursuits which interfere with the performance of his duties as an Employee of
the Company, or which, even if noninterfering, may be contrary to the best
interests of the Company.
(b) For a period of one year after the termination or cessation of the
Employee's employment with the Company for any reason (including termination of
employment by the Company without Cause), the Employee shall not, directly or
indirectly, alone or as a member of any partnership or other business
organization, or as a partner, officer, director, employee, stockholder,
consultant or agent of any corporation, partnership or business organization,
engage in any business activity which is directly or indirectly in competition
with the products or services being developed, manufactured, marketed, provided
or sold by the Company or which is directly or indirectly detrimental to the
business of the Company. For a period of eighteen months after the termination
or cessation of the Employee's employment with the Company for any reason
(including termination of employment by the Company without Cause) the Employee
shall not, directly or indirectly, alone or as a member of any partnership or
other business organization, or as a partner, officer, director, employee,
stockholder, consultant or agent of any corporation, partnership or business
organization (i) request or cause any customer of the Company to cancel or
terminate any business relationship with the Company, or (ii) solicit or
otherwise cause any employee of the Company to terminate such employee's
relationship with the Company. For the purposes of this Section 4(b), a business
shall be deemed to be in competition with the Company only if the products or
services of such business are substantially similar in function or capability to
the products or services then being developed, manufactured, marketed, provided
or sold by the Company, and are marketed to substantially the same type of user
as that to which the products and services of the Company are marketed or
proposed to be marketed.
5. Confidential Information.
(a) The Employee will not at any time, whether during or after the
termination or cessation of his employment, reveal to any person, association or
company any of the trade secrets or confidential information concerning the
organization, business or finances of the Company so far as they have come or
may come to his knowledge, except as may be required in the ordinary course of
performing his duties as an employee of the Company or except as may be in the
public domain through no fault of the Employee, and the Employee shall keep
secret all matters entrusted to him and shall not use or attempt to use any such
information in any manner which may injure or cause loss or may be calculated to
injure or cause loss whether directly or indirectly to the Company.
(b) The Employee agrees that during his employment he shall not make,
use or permit to be used any notes, memoranda, drawings, specifications,
programs, data or other materials of any nature relating to any matter within
the scope of the business of the Company or concerning any of its dealings or
affairs otherwise than for the benefit of the Company. The Employee shall not,
after the termination or cessation of his employment, use or permit to be used
any such notes, memoranda, drawings, specifications, programs, data or other
materials, it being agreed that any of the foregoing shall be and remain the
sole and exclusive property of the Company and that immediately upon the
termination or cessation of his employment the Employee shall deliver all of the
foregoing, and all copies thereof, to the Company, at its main office.
6. Patent and Copyright Assignment.
The Employee agrees to assign and transfer to the Company or its designee,
without any separate remuneration or compensation, his entire right, title and
interest in and to all Inventions and Works in the Field (as hereinafter
defined), together with all United States and foreign rights with respect
thereto, and at the Company's expenses to execute and deliver all appropriate
<PAGE>
patent and copyright applications for securing United States and foreign patents
and copyrights on such Inventions and Works, and to perform all lawful acts,
including giving testimony, and to execute and deliver all such instruments,
that may be necessary or proper to vest all such Inventions and Works in the
Field and patents and copyrights with respect thereto in the Company, and to
assist the Company in the prosecution or defense of any interference which may
be declared involving any said patent applications or patents or copyright
applications or copyrights. For the purposes of this Agreement, the words
"Inventions and Works" shall include any discovery, process, design,
development, improvement, application, technique, program or invention, whether
practice or not, conceived or made by the Employee, individually or jointly with
others (whether on or off the Company's premises or during or after normal
working hours), on or after July 15, 1996 while in the employ of the Company,
provided, however, that no discovery, process, design, development, improvement,
application, technique, program or invention reduced to practice or conceived by
the Employee off the Company's premises and after normal working hours shall be
deemed to be included in the term "Inventions and Works" unless directly or
indirectly related to the business then being conducted by the Company or any
business which the Company is then actively exploring (collectively, the
"Field").
7. Binding Effect.
This Agreement shall inure to the benefit of and shall be binding upon the
parties hereto and the Company's successors or assigns (whether resulting from
any reorganization, consolidation or merger of the Company or any business to
which all or substantially all of the assets of the Company are sold) and the
Employee's heirs, executors and legal representatives.
8. Entire Agreement.
This Agreement contains the entire agreement and understanding of the parties
with respect to the subject matter hereof, supersedes all prior agreements and
understandings with respect thereto and cannot be modified, amended, waived or
terminated, in whole or in part, except in writing signed by the party to be
charged.
9. Right to Injunction.
The Employee acknowledges and agrees that the services rendered and to be
rendered to the Company by him are of a specialized and unique character and
that irreparable and immediate damage will result to the Company if Employee
fails to, refuses to or neglects to perform his agreements and obligations
hereunder. In the event of such a failure, refusal or neglect by the Employee,
the Company shall be entitled to injunctive relief or any other legal or
equitable remedies including the recovery, by appropriate action, of the amount
of the actual damage caused by the Company by any such failure, refusal or
neglect by the Employee. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of any other
remedy at law or in equity for the same event or any other event.
10. Miscellaneous.
(a)Amendments. No amendment, modification or waiver of any of the terms
of this Agreement shall be valid unless made in writing and signed by the
Employee and the Company.
(b)Successors in Interest. All provisions of this Agreement shall
survive the termination or cessation of the Employee's employment with the
Company and shall be binding upon and inure to the benefit of and be enforceable
by and against the respective heirs, executors, administrators, personal
representatives, successors and assigns of either of the parties to this
agreement.
<PAGE>
(c)Waiver. The waiver by the Company of a breach of this Agreement by
the Employee shall not operate or be construed as a waiver of any subsequent
breach by the Employee.
(d)Severability. If any provision of this Agreement shall contravene any
law or any particular state where the Employee shall perform services for the
Company, then this Agreement shall be first construed to be limited in scope and
duration so as to be enforceable in that state, and if still unenforceable,
shall then be construed as if such provision is not contained herein.
(e)Governing Law. This Agreement shall be governed by the laws of the
State of New York without regard to the conflict of laws principles thereof.
(f)Counterparts. This Agreement may be executed in two or more
counterparts, and by each party on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first above written.
CIDCO INCORPORATED
By: /s/Paul G. Locklin
------------------
Paul G. Locklin
President and CEO
/s/Richard D. Kent
------------------
Richard D. Kent
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT dated as of March 17, 1997 between CIDCO Incorporated, a
Delaware corporation (the "Company"), and Daniel L. Eilers (the "Employee").
WHEREAS, the Employee has been hired as a key employee of the Company;
and
WHEREAS, the Company is engaged in a highly technical and competitive
business.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. Employment and Term.
The Company hereby agrees to employ the Employee during the period
commencing as of the date hereof and continuing until his employment is
terminated pursuant to the terms hereof, to serve as the Company's President and
Chief Executive Officer, officed at the Company's headquarters in Morgan Hill,
California, to perform such duties as are consistent with the usual duties of an
officer of this status and to report to the Company's Board of Directors. The
Employee hereby accepts such employment and agrees to devote his full business
time exclusively to the faithful and diligent performance of the duties provided
herein (it being understood and agreed by the parties that the Employee may,
however, devote such time as is reasonably necessary, in a manner that does not
interfere with the performance of his duties hereunder, to transitional matters
for his previous employer NAT Systems and to acting as a member of the Board of
Directors of SPL World Group) and agrees in connection with the performance of
such duties to act in a manner consistent with the primary objective of building
long-term shareholder value of the Company.
2. Compensation.
(a) Salary. The Company shall compensate the Employee with a base
salary of at least $375,000 per annum (representing the annualized rate of the
Employee's base salary during the remainder of 1997), subject to annual review
by the Compensation Committee of the Board.
(b) Benefits. The Employee shall be entitled to participate in such
pension plans, 401(k) plans, group health, accident or life insurance plans,
group medical and hospitalization plans, stock option plans, stock purchase
plans and other similar benefits, as may hereafter be available to the
executives of the Company. It is understood that, except as set forth herein,
the Company does not by reason of this Agreement obligate itself to make such
benefits available to its employees.
(c) Expenses. The Company shall pay or reimburse the Employee for all
expenses normally reimbursed by the Company and reasonably incurred by him in
furtherance of his duties hereunder including, without limitation, expenses for
traveling, meals, hotel accommodations and the like upon submission by him of
vouchers or an itemized list thereof prepared in compliance with such rules
relating thereto as the Board may, from time to time, adopt and as may be
required in order to permit such payments as proper deductions to the Company
under the Internal Revenue Code of 1986, as amended, and the rules and
regulations adopted pursuant thereto now or hereafter in effect.
(d) Vacations. During each year of employment (including the current
year ending December 31, 1997), the Employee shall be entitled to paid vacations
for an aggregate of the greater of (A) two weeks, or (B) such period as may be
provided from time to time in the Company's vacation policy. The Company shall
not pay the Employee any additional compensation for any vacation time not used
by the Employee.
<PAGE>
(e)Bonuses. In addition to the Employee's base salary, for the calendar
year ending December 31, 1997 the Employee shall (if he remains employed by the
Company on December 31, 1997) be entitled to receive a minimum bonus of $98,960
payable at such time in 1998 as other employee bonuses for calendar year 1997
are paid by the Company (but in no event later than February 15, 1998). For
subsequent calendar years, the Employee will receive bonuses in such amounts, at
such times and upon such terms as the Compensation Committee of the Board may in
its sole discretion determine and award, provided, however, that the Executive's
"Target Award" under the Company's Annual Executive Incentive Plan shall not be
less than $125,000.
(f)Stock Option. Pursuant to a Stock Option Agreement in the form
attached hereto as Exhibit A, the Company shall grant the Employee an option
(the "Stock Option") to purchase 600,000 shares of the Company's common stock,
par value $.01 per share, at an exercise price of $14.25 per share. Such Stock
Option is to be a non-statutory stock option which is not intended to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended.
The Stock Option shall vest in 60 equal monthly installments beginning with the
installment vesting on April 1, 1997. 3. Termination.
(a)Employee's employment shall be terminated upon the occurrence of any
of the following events: (i) upon the death of the Employee; (ii) upon the
Permanent Disability (as such term is defined in Section 3(d) hereof) of the
Employee; (iii) upon written notice of termination of employment by the Company
for Cause or without Cause (as defined in Section 3(c) hereof); or (iv) upon
written notice of termination of employment by the Employee for Good Reason or
without Good Reason (as defined in Section 3(e) hereof).
(b)In the event that the Employee's employment with the Company is
terminated by the Company without Cause or as a result of Permanent Disability
or is terminated by the Employee for Good Reason, then the Employee shall,
within 30 days following the employment termination date, receive a lump sum
cash severance payment equal to one year of his then current base salary, Target
Award bonus amount and benefits value (which shall be a minimum cash payment of
$500,000 plus 12 months of benefits value) and the period for vesting and
exercisability of the Stock Option referenced herein shall be extended for one
additional year from the employment termination date
(c)For purposes hereof, "Cause" shall mean any of the following: (i)
the intentional failure, neglect or refusal of the Employee to substantially
fulfill his material duties as an employee; (ii) a material breach of any
fiduciary duty or other material dishonesty by the Employee with respect to the
Company or any affiliate thereof; or (iii) the conviction of the Employee for a
felony or crime involving moral turpitude.
(d)For purposes hereof, "Permanent Disability" shall mean the total
incapacitation of the Employee so as to preclude performance of the duties of
his employment hereunder for an aggregate period of four months in any twelve
month period.
(e)For purposes hereof, "Good Reason" shall exist if the Company (or
any successor resulting from a change of control of the Company) shall: (i) be
in breach of or default under any material provision of this Agreement and not
substantially cure such breach within 30 days of receiving notice of such breach
from the Employee; (ii) change the principal work location of the Employee to a
location which increases the Employee's one-way commute from his house in Los
Altos Hills, California without the consent of the Employee, which consent may
be withheld by the Employee for any reason; (iii) materially change the duties
of the Employee without the Employee's consent, which consent may be withheld by
the Employee for any reason; (iv) reduce the Employee's compensation in any way
without the Employee's consent, which consent may be withheld by the Employee
for any reason; or (v) become insolvent or bankrupt or file a voluntary or
involuntary petition in bankruptcy or make an assignment for the benefit of
creditors or consent to the appointment of a trustee or receiver.
<PAGE>
(f)If any Change in Control Benefit (as hereinafter defined) payable to
the Employee (a "Benefit Payment") is or will be subject to the excise tax
imposed with respect to "excess parachute payments" under section 4999 of the
Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are collectively referred to
as the "Excise Tax"), the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Employee will retain an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Benefit Payment. The Gross-Up Payment shall be payable to the
Employee in accordance with the following provisions:
(i)Whenever the Employee becomes entitled to receive any
Benefit Payment, the Company's independent auditors as designated by
the Company's Board of Directors prior to the occurrence of the change
in control giving rise to such Benefit Payment (the "Accounting Firm")
shall determine (i) whether such Benefit Payment is or will be subject
to Excise Tax; (ii) whether any Benefit Payments previously made to the
Employee ("Prior Benefit Payments") are or will be subject to Excise
Tax in an amount exceeding the amount taken into account in calculating
the Gross-Up Payment, if any, that was made to the Employee in respect
of such prior Benefit Payments; (iii) the amount of the Excise Tax
payable by the Employee with respect to such Benefit Payment and all
Prior Benefit Payments; and (iv) the amount of the Gross-Up Payment
payable to the Employee hereunder with respect to such Benefit Payment
and all Prior Benefit Payments, less the amount of any Gross-Up Payment
previously made to the Employee.
(ii) If the Accounting Firm determines that no Excise Tax is
payable by the Employee with respect to such Benefit Payment and all
Prior Benefit Payments, the Accounting Firm shall furnish the Employee
and the Company with a written statement certifying that the Accounting
Firm has determined that no Excise Tax is payable, setting forth the
reasons for its determination, and stating that the Employee has
substantial authority not to report any Excise Tax on his federal
income tax return.
(iii) If the Accounting Firm determines that a Gross-Up
Payment is payable to the Employee, it shall furnish the Employee and
the Company with a written statement of its determination, and all
accompanying calculations and other material supporting its
determination. The amount of the Gross-Up Payment so determined by the
Accounting Firm to be payable to the Employee shall be paid to the
Employee as soon as practicable after the Accounting Firm's
determination has been furnished to the Employee and the Company.
(iv) If in connection with any audit of the Employee's federal
income tax returns it is determined that the Employee is liable for
Excise Tax with respect to any Benefit Payments in an amount in excess
of the amount taken into account in any determination previously made
by the Accounting Firm under subparagraph (f)(i), the Employee may, by
written notice to the Company, request that a Gross-Up Payment be made
to the Employee with respect to such additional Excise Tax amount.
Promptly after receipt of such notice, the Company shall cause the
Accounting Firm to review the Employee's request and to determine the
amount, if any, of the Gross-Up Payment to which the Employee is
entitled with respect to such additional Excise Tax amount. The
Employee shall furnish the Accounting Firm with such information and
documents as the Accounting Firm may reasonably request to enable it to
make a determination as to the Employee's request. The Accounting Firm
shall furnish the Employee and the Company with a written statement of
its determination as to the Employee's request, and all accompanying
calculations and other material supporting its determination. The
Gross-Up Payment, if any, determined by the Accounting Firm to be
payable to the Employee shall be paid to the Employee as soon as
practicable after the Accounting Firm has made its determination.
<PAGE>
(g) For purposes hereof the following terms shall have the
following meanings:
(i) "Change in Control Benefit" means any payment or other
benefit that the Employee may be entitled to receive under any Change
in Control Plan upon a change in control (as defined in such Plan) or
upon the Employee's involuntary termination (as defined in such Plan)
following such change in control; and
(ii) "Change in Control Plan" means any plan, program, policy,
or agreement (including, without limitation, this Agreement and the
Non-Qualified Stock Option Agreement issued to the Employee on March
12, 1997) or resolution of the Board of Directors of the Company under
which a Change in Control Benefit may be provided to the Employee
4. Noncompetition and Nonintervention.
(a) While in the employ of the Company, the Employee agrees to devote
substantially all of his work time, attention and energies to the performance of
the business of the Company and the Employee shall not, directly or indirectly,
alone or as a member of any partnership or other business organization, or as a
partner, officer, director, employee, stockholder, consultant or agent of any
other corporation, partnership or other business organization, be actively
engaged in or concerned with any other duties or pursuits which interfere with
the performance of his duties as an employee of the Company, or which, even if
noninterfering, may be contrary to the best interests of the Company.
(b) For a period of one year after the termination or cessation of the
Employee's employment with the Company for any reason (including termination of
employment by the Company without Cause), the Employee shall not, directly or
indirectly, alone or as a member of any partnership or other business
organization, or as a partner, officer, director, employee, stockholder,
consultant or agent of any corporation, partnership or business organization,
engage in any business activity which is directly or indirectly in competition
with the products or services being developed, manufactured, marketed, provided
or sold by the Company or which is directly or indirectly detrimental to the
business of the Company. For a period of one year after the termination or
cessation of the Employee's employment with the Company for any reason
(including termination of employment by the Company without Cause) the Employee
shall not, directly or indirectly, alone or as a member of any partnership or
other business organization, or as a partner, officer, director, employee,
stockholder, consultant or agent of any corporation, partnership or business
organization (i) request or cause any customer of the Company to cancel or
terminate any business relationship with the Company, or (ii) solicit or
otherwise cause any employee of the Company to terminate such employee's
relationship with the Company. For the purposes of this Section 4(b), a business
shall be deemed to be in competition with the Company only if the products or
services of such business are substantially similar in function or capability to
the products or services then being developed, manufactured, marketed, provided
or sold by the Company, and are marketed to substantially the same type of user
as that to which the products and services of the Company are marketed or
proposed to be marketed.
5. Confidential Information.
(a) The Employee will not at any time, whether during or after the
termination or cessation of his employment, reveal to any person, association or
company any of the trade secrets or confidential information concerning the
organization, business or finances of the Company so far as they have come or
may come to his knowledge, except as may be required in the ordinary course of
performing his duties as an employee of the Company or except as may be in the
public domain through no fault of the Employee, and the Employee shall keep
secret all matters entrusted to him and shall not use or attempt to use any such
information in any manner which may injure or cause loss or may be calculated to
injure or cause loss whether directly or indirectly to the Company.
<PAGE>
(b) The Employee agrees that during his employment he shall not make,
use or permit to be used any notes, memoranda, drawings, specifications,
programs, data or other materials of any nature relating to any matter within
the scope of the business of the Company or concerning any of its dealings or
affairs otherwise than for the benefit of the Company. The Employee shall not,
after the termination or cessation of his employment, use or permit to be used
any such notes, memoranda, drawings, specifications, programs, data or other
materials, it being agreed that any of the foregoing shall be and remain the
sole and exclusive property of the Company and that immediately upon the
termination or cessation of his employment the Employee shall deliver all of the
foregoing, and all copies thereof, to the Company, at its main office.
6. Patent and Copyright Assignment.
The Employee agrees to assign and transfer to the Company or its
designee, without any separate remuneration or compensation, his entire right,
title and interest in and to all Inventions and Works in the Field (as
hereinafter defined), together with all United States and foreign rights with
respect thereto, and at the Company's expenses to execute and deliver all
appropriate patent and copyright applications for securing United States and
foreign patents and copyrights on such Inventions and Works, and to perform all
lawful acts, including giving testimony, and to execute and deliver all such
instruments, that may be necessary or proper to vest all such Inventions and
Works in the Field and patents and copyrights with respect thereto in the
Company, and to assist the Company in the prosecution or defense of any
interference which may be declared involving any said patent applications or
patents or copyright applications or copyrights. For the purposes of this
Agreement, the words "Inventions and Works" shall include any discovery,
process, design, development, improvement, application, technique, program or
invention, whether practice or not, conceived or made by the Employee,
individually or jointly with others (whether on or off the Company's premises or
during or after normal working hours), on or after July 15, 1996 while in the
employ of the Company, provided, however, that no discovery, process, design,
development, improvement, application, technique, program or invention reduced
to practice or conceived by the Employee off the Company's premises and after
normal working hours shall be deemed to be included in the term "Inventions and
Works" unless directly or indirectly related to the business then being
conducted by the Company or any business which the Company is then actively
exploring (collectively, the "Field").
7. Binding Effect.
This Agreement shall inure to the benefit of and shall be binding upon
the parties hereto and the Company's successors or assigns (whether resulting
from any reorganization, consolidation or merger of the Company or any business
to which all or substantially all of the assets of the Company are sold) and the
Employee's heirs, executors and legal representatives.
8. Entire Agreement.
This Agreement contains the entire agreement and understanding of the
parties with respect to the subject matter hereof, supersedes all prior
agreements and understandings with respect thereto and cannot be modified,
amended, waived or terminated, in whole or in part, except in writing signed by
both parties.
9. Right to Injunction.
The Employee acknowledges and agrees that the services rendered and to
be rendered to the Company by him are of a specialized and unique character and
<PAGE>
that irreparable and immediate damage will result to the Company if Employee
fails to, refuses to or neglects to perform his agreements and obligations
hereunder. In the event of such a failure, refusal or neglect by the Employee,
the Company shall be entitled to injunctive relief or any other legal or
equitable remedies including the recovery, by appropriate action, of the amount
of the actual damage caused by the Company by any such failure, refusal or
neglect by the Employee. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of any other
remedy at law or in equity for the same event or any other event.
10. Miscellaneous.
(a) Amendments. No amendment, modification or waiver of any of
the terms of this Agreement shall be valid unless made in writing and signed by
the Employee and the Company.
(b) Successors in Interest. All provisions of this Agreement
shall survive the termination or cessation of the Employee's employment with the
Company and shall be binding upon and inure to the benefit of and be enforceable
by and against the respective heirs, executors, administrators, personal
representatives, successors and assigns of either of the parties to this
Agreement.
(c) Waiver. The waiver by the Company of a breach of this
Agreement by one party shall not operate or be construed as a waiver of any
subsequent breach by either party.
(d) Severability. If any provision of this Agreement shall
contravene any law or any particular state where the Employee shall perform
services for the Company, then this Agreement shall be first construed to be
limited in scope and duration so as to be enforceable in that state, and if
still unenforceable, shall then be construed as if such provision is not
contained herein.
(e) Governing Law. This Agreement shall be governed by the
laws of the State of California without regard to the conflict of laws
principles thereof.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, and by each party on separate counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
CIDCO INCORPORATED
By: /s/Paul G.Locklin
-----------------
Paul G. Locklin
---------------------
Co-Chairman of the Board
/s/Daniel L. Eilers
---------------------
Daniel L. Eilers
<PAGE>
CIDCO INCORPORATED
STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION
AGREEMENT entered into this 12th day of March, 1997 by and
between CIDCO Incorporated, a Delaware corporation, with principal executive
offices at 220 Cochrane Circle, Morgan Hill, CA 95037 (the "Company"), and the
undersigned director and executive (the "Employee") of the Company (the Company
and its subsidiaries herein together referred to as the "Company").
Whereas, the Employee will execute an Employment Agreement
(the "Employment Agreement") dated March 17, 1997 to serve as President and
Chief Executive Officer of the Company; and
Whereas, the Company desires to grant the Employee a
non-qualified stock option to acquire shares of the Company's common stock, $.01
par value per share (the "Shares"), at an exercise price equal to the closing
price of the Company's common stock on the last trading day prior to the grant
date of such option.
ACCORDINGLY, in consideration of the premises and of the
mutual covenants and agreements contained herein, the Company and the Employee
hereby agree as follows:
A. Grant of Option. The Company hereby irrevocably grants to the Employee a
non-qualified stock option (the "Option") to purchase all or any part of an
aggregate of six hundred thousand (600,000) Shares on the terms and conditions
hereinafter set forth.
1. Purchase Price. The purchase price ("Purchase Price") for
the Shares covered by the Option shall be $14.25 per Share, which represents the
closing price of the Company's common stock on the last trading day prior to the
Option's grant date.
2. Time of Exercise of Option.
(a) The Option shall become exercisable for one and
two thirds per cent (1.67%) of the Shares covered thereby monthly on the twelfth
day of each month after the date of grant, so that the Option shall be
exercisable as follows:
Percentage of
Shares Becoming Cumulative
Available for Percentage
On or After Exercise Available
--------------------- -----------
April 12, 1997 1.67% 1.67%
May 12, 1997 1.67% 3.34%
June 12, 1997 1.67% 5.00%
July 12, 1997 1.67% 6.67%
August 12, 1997 1.67% 8.34%
September 12, 1997 1.67% 10.00%
October 12, 1997 1.67% 11.67%
November 12, 1997 1.67% 13.34%
December 12, 1997 1.67% 15.00%
January 12, 1998 1.67% 16.67%
February 12, 1998 1.67% 18.34%
March 12, 1998 1.67% 20.00%
April 12, 1998 1.67% 21.67%
May 12, 1998 1.67% 23.34%
June 12, 1998 1.67% 25.00%
July 12, 1998 1.67% 26.67%
August 12, 1998 1.67% 28.34%
September 12, 1998 1.67% 30.00%
October 12, 1998 1.67% 31.67%
November 12, 1998 1.67% 33.34%
December 12, 1998 1.67% 35.00%
<PAGE>
January 12, 1999 1.67% 36.67%
February 12, 1999 1.67% 38.34%
March 12, 1999 1.67% 40.00%
April 12, 1999 1.67% 41.67%
May 12, 1999 1.67% 43.34%
June 12, 1999 1.67% 45.00%
July 12, 1999 1.67% 46.67%
August 12, 1999 1.67% 48.34%
September 12, 1999 1.67% 50.00%
October 12, 1999 1.67% 51.67%
November 12, 1999 1.67% 53.34%
December 12, 1999 1.67% 55.00%
January 12, 2000 1.67% 56.67%
February 12, 2000 1.67% 58.34%
March 12, 2000 1.67% 60.00%
April 12, 2000 1.67% 61.67%
May 12, 2000 1.67% 63.34%
June 12, 2000 1.67% 65.00%
July 12, 2000 1.67% 66.67%
August 12, 2000 1.67% 68.34%
September 12, 2000 1.67% 70.00%
October 12, 2000 1.67% 71.67%
November 12, 2000 1.67% 73.34%
December 12, 2000 1.67% 75.00%
January 12, 2001 1.67% 76.67%
February 12, 2001 1.67% 78.34%
March 12, 2001 1.67% 80.00%
April 12, 2001 1.67% 81.67%
May 12, 2001 1.67% 83.34%
June 12, 2001 1.67% 85.00%
July 12, 2001 1.67% 86.67%
August 12, 2001 1.67% 88.34%
September 12, 2001 1.67% 90.00%
October 12, 2001 1.67% 91.67%
November 12, 2001 1.67% 93.34%
December 12, 2001 1.67% 95.00%
January 12, 2002 1.67% 96.67%
February 12, 2002 1.67% 98.34%
March 12, 2002 1.67% 100.00%
3. Term of Options; Exercisability.
(a) Term.
(1) Each Option shall expire not more than ten (10) years
from the date of the granting thereof, but shall be subject to earlier
termination as herein provided.
(2) If the Employee ceases to serve as an employee or director
of the Company, he may exercise his Option, but only within 12 months after the
date he ceases to be an employee or director of the Company. If such cessation
of employment resulted from a termination for Cause (as defined in the
Employment Agreement) by the Company or from a termination without Good Reason
(as defined in the Employment Agreement) by the Employee, then the Option shall
only be exercisable to the extent that the Employee was entitled to exercise it
at the date of such termination. If such cessation of employment resulted from a
termination without Cause by the Company or from a termination with Good Reason
by the Employee, then the Option shall be exercisable to the extent that the
Employee would have been entitled if his employment termination had occurred one
year after the actual date of termination. Notwithstanding the foregoing, in no
event may the Option be exercised after its term set forth in Section 3(a)(1)
has expired. To the extent that the Employee was not entitled to exercise an
Option at the date of such termination, or does not exercise such Option (which
he was entitled to exercise) within the time specified herein, the Option shall
terminate unless otherwise provided in this Section 3(a)(2).
Notwithstanding the foregoing, in the event that, within 90
days prior to or 12 months following the announcement of any change of control
of the Company (whether by merger or tender offer for more than 50% of the
outstanding voting stock or proxy contest for the election of a majority of the
members of the Company's Board of Directors or otherwise), the Employee optionee
is terminated as an employee without Cause (as defined in the Employment
Agreement) or resigns with Good Reason (as defined in the Employment Agreement),
all outstanding options held by the Employee shall be subject to immediate
acceleration, and any shares which are not vested at the time of such
termination of employment shall immediately vest in full and he may exercise his
option within 12 months after the date he ceases to be an employee of the
Company.
<PAGE>
(3) Notwithstanding the foregoing, if such termination as an
employee is because the Executive has become permanently disabled (without the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code")), such Option shall terminate on the last day of the twelfth month
from the date the Employee ceases to be an employee, or on the date on which the
Option expires by its terms, whichever occurs first.
(4) In the event of the death of the Employee:
(i) during the term of the Option, who, at the time
of his death shall have been in Continuous Status as an employee or director of
the Company since the date of grant of the Option, the Option may be exercised,
at any time within 12 months following the date of death, by the Employee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the right to exercise that would have
accrued had the Employee continued living and remained in Continuous Status as
an employee or director of the Company for 12 months after the date of death.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 3(a)(1) has expired.
(ii) within 30 days after the termination of
Continuous Status as an employee or director of the Company, the Option may be
exercised, at any time within 12 months following the date of death, by the
Employee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination. Notwithstanding the foregoing, in no
event may the option be exercised after its term set forth in Section 3(a)(i)
has expired.
For purposes of this Section 3(a)(4), "Continuous
Status" shall mean the absence of any interruption or termination of service as
an employee or director of the Company.
(b) Exercisability.
If the Employee ceases to be an employee or director of the
Company, except as otherwise herein provided in Section 3(a)(2) with respect to
termination of employment without Cause or with Good Reason, the Option granted
to the Employee hereunder shall be exercisable only to the extent that the right
to purchase Shares under such Option has accrued and is in effect on the date
such Employee ceases to be an employee or director of the Company. No partial
exercise of the Option may be made for less than twenty-five (25) full Shares of
common stock.
4. Manner of Exercise of Option.
(b) To the extent that the right to exercise the
Option has accrued and is in effect, the Option may be exercised in full or in
part by giving written notice to the Company stating the number of Shares
exercised and accompanied by payment in full for such Shares. Payment shall be
wholly in cash. Upon such exercise, delivery of a certificate for paid-up,
non-assessable Shares shall be made at the principal office of the Company to
the person exercising the Option, Not more than thirty (30) days from the date
of receipt of the notice by the Company.
(c) The Company shall at all times during the term
of the Option reserve and keep available such number of Shares of its common
stock as will be sufficient to satisfy the requirements of the Option. The
Employee shall not have any of the rights of a stockholder of the Company in
respect of the Shares until one or more certificates for such Shares shall be
delivered to him or her upon the due exercise of the Option.
<PAGE>
5. Non-Transferability. The right of the Employee to exercise
the Option shall not be assignable or transferable by the Employee otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised during the lifetime of the Employee only by him. The Option shall be
null and void and without effect upon the bankruptcy of the Employee or upon any
attempted assignment or transfer, except as hereinabove provided, including
without limitation any purported assignment, whether voluntary or by operation
of law, pledge, hypothecation or other disposition contrary to the provisions
hereof, or levy of execution, attachment, divorce, trustee process or similar
process, whether legal or equitable, upon the Option.
6. Representation Letter and Investment Legend. In the event
that for any reason the Shares to be issued upon exercise of the Option shall
not be effectively registered under the Securities Act of 1933 (the "1933 Act"),
upon any date on which the Option is exercised in whole or in part, the person
exercising the Option shall give a written representation to the Company in the
form attached hereto as Exhibit 1 and the company shall place an "investment
legend," so-called, as described in Exhibit 1, upon any certificate for the
Shares issued by reason of such exercise.
7. Adjustments on Changes in Capitalization. Adjustments on
Changes in Capitalization and the like shall be made in accordance with Section
11 of the Company's 1993 Employee Stock Option (the "Plan") Plan, as in effect
on the date of this Agreement.
8. Rights as a Shareholder. The Employee shall have no rights
as a shareholder with respect to any Shares which may be purchased by exercise
of this Option unless and until a certificate or certificates representing such
Shares are duly issued and delivered to the Employee. No adjustment shall be
made for dividends or other rights for which the record date is prior to the
date such stock certificate is issued.
9. Withholding Taxes. Whenever Shares are to be issued upon
exercise of this Option, the Company shall have the right to require the
Employee to remit to the Company an amount sufficient to satisfy all Federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares.
10. No Qualification under Section 422. It is understood and
intended that the Option granted hereunder shall not qualify as an "incentive
stock option" as defined in Section 422 of the Code. If the Employee intends to
dispose or does dispose (whether by sale, gift, transfer or otherwise) of any
Shares received upon exercise of this Option, he will notify the Company within
thirty (30) days after such disposition.
11. Change of Control. In the event of a sale or conveyance to
another entity of all or substantially all of the property or assets of the
Company, a Change in Control (as defined in the Plan), hostile or otherwise, the
effect of such events on this Option shall be as set forth in Sections 9 and 11
of the Plan.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its officer thereunto duly authorized, and the Employee has
hereunto set his hand, all as of the day and year first above written.
CIDCO INCORPORATED
By: /s/Paul G. Locklin
---------------------------
Title: Co-Chairman of the Board
DIRECTOR
Name: Daniel L. Eilers
<PAGE>
EXHIBIT 1
TO STOCK OPTION AGREEMENT
Gentlemen:
In connection with the exercise by me as to shares of common
stock, par value $.01 per share, of CIDCO Incorporated, a Delaware
corporation (the "Company") under the non-qualified stock option dated
March 12, 1997, granted to me under the 1994 Directors' Stock Option
Plan, I hereby acknowledge that I have been informed as follows:
1. The shares of common stock of the Company to be issued to me pursuant
to the exercise of said option have not been registered under the
Securities Act of 1933, as amended (the "Act"), and accordingly, must
be held indefinitely unless such shares are subsequently registered
under the Act, or an exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144
under the Act can be made only after the holding period and in limited
amounts in accordance with the terms and conditions provided by that
Rule, and in any sale to which that rule is not applicable,
registration or compliance with some other exemption under the Act will
be required.
3. The Company is under no obligation to me to register the
shares or to comply with any such exemptions under the Act.
4. The availability of Rule 144 is dependent upon adequate
current public information with respect to the Company being available
and, at the time that I may desire to make a sale pursuant to the Rule,
the Company may neither wish nor be able to comply with such
requirement.
In consideration of the issuance of certificates for the
shares to me, I hereby represent and warrant that I am acquiring such shares for
my own account for investment, and that I will not sell, pledge or transfer such
shares in the absence of an effective registration statement covering the same,
except as permitted by the provisions of Rule 144, if applicable, or some other
applicable exemption under the Act. In view of this representation and warranty,
I agree that there may be affixed to the certificates for the shares to be
issued to me, and to all certificates issued hereafter representing such shares
(until in the opinion of counsel, which opinion must be reasonably satisfactory
in form and substance to counsel for the Company, it is no longer necessary or
required) a legend as follows:
"The shares of common stock represented by this certificate have not been
registered under the Federal Securities Act of 1933, as amended. and were
acquired by the registered holder pursuant to a representation and warranty that
such holder was acquiring such shares for his own account and for investment,
with no intention to transfer or dispose of the same, in violation of the
registration requirements of that Act. These shares may not be sold, pledged or
transferred in the absence of an effective registration statement under the
Securities Act of 1933, as amended, or an opinion of counsel, which opinion is
reasonably satisfactory to counsel to the Company, to the effect that
registration is not required under said Act."
I further agree that the Company may place a stop order with
its Transfer Agent, prohibiting the transfer of such shares, so long as the
legend remains on the certificates representing the shares.
Very truly yours,
<PAGE>
EXHIBIT 11.1
CIDCO INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
Three months ended March 31,
----------------------------
1997 1996
---------- -----------
Net income................................. $ 4,397 $ 6,570
========== ===========
Weighted average shares outstanding........ 14,078 14,176
Shares issuable on exercise of options..... 600 840
-------- -----------
Weighted average shares outstanding........ 14,678 15,016
========== ===========
Earnings per share......................... $ 0.30 $ 0.44
========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(In thousands, except per share data; unaudited)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Mar-31-1997
<CASH> 24,417
<SECURITIES> 36,060
<RECEIVABLES> 60,379
<ALLOWANCES> 3,618
<INVENTORY> 9,178
<CURRENT-ASSETS> 137,537
<PP&E> 13,325
<DEPRECIATION> 0
<TOTAL-ASSETS> 154,900
<CURRENT-LIABILITIES> 30,093
<BONDS> 0
0
0
<COMMON> 145
<OTHER-SE> 88,065
<TOTAL-LIABILITY-AND-EQUITY> 154,900
<SALES> 77,030
<TOTAL-REVENUES> 0
<CGS> 42,783
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 27,378
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,328
<INCOME-TAX> 2,931
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,397
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
