<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section240.14a-11(c) or Section240.14a-12
CIDCO INCORPORATED
(Name of Registrant as Specified In Its Charter)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
April 30, 1998
Dear Stockholder:
This year's annual meeting of stockholders will be held on Wednesday,
May 27, 1998, at 10 a.m. local time, at the Company's principal offices, 220
Cochrane Circle, Morgan Hill, California. You are cordially invited to attend.
The Notice of Annual Meeting of Stockholders and a Proxy Statement,
which describe the formal business to be conducted at the meeting, follow this
letter.
After reading the Proxy Statement, please promptly mark, sign and
return the enclosed proxy card in the prepaid envelope to assure that your
shares will be represented. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY IN THE
ENCLOSED POSTAGE PAID ENVELOPE. Regardless of the number of shares you own, your
careful consideration of, and vote on, the matters before our stockholders is
important.
A copy of the Company's Annual Report to Stockholders is also enclosed
for your information. At the annual meeting we will review the activities of
CIDCO Incorporated over the past year and our plans for the future. We look
forward to seeing you at the annual meeting.
Very truly yours,
/S/ DANIEL L. EILERS
-------------------------------------
DANIEL L. EILERS
President and Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 1998
Dear Stockholders:
Please take notice that the annual meeting of the stockholders of
CIDCO Incorporated, a Delaware corporation (the "Company"), will be held on May
27, 1998, at 10 a.m. local time, at the Company's principal offices located at
220 Cochrane Circle, Morgan Hill, California, for the following purposes:
1. To elect two Class A directors to hold office for a three-year term
and until their respective successors are elected and qualified.
2. To consider, approve and ratify the appointment of Price Waterhouse
LLP as the Company's independent public auditors for the year ending December
31, 1998.
3. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on April 3, 1998 are
entitled to notice of, and to vote at, this meeting and any adjournment or
postponement. For ten days prior to the meeting, a complete list of stockholders
entitled to vote at the meeting will be available for examination by any
stockholder, for any purpose relating to the meeting, during ordinary business
hours at the Company's principal offices located at 220 Cochrane Circle, Morgan
Hill, California.
By order of the Board of Directors,
/S/ DANIEL A. DOROSIN
-----------------------
DANIEL A. DOROSIN, ESQ.
Secretary
Morgan Hill, California
April 30, 1998
IMPORTANT: Please fill in, date, sign and promptly mail the enclosed proxy card
in the accompanying postage-paid envelope to assure that your shares are
represented at the meeting. If you attend the meeting, you may choose to vote in
person even if you have previously sent in your proxy card.
<PAGE> 4
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited by the Board of Directors of
CIDCO Incorporated, a Delaware corporation (the "Company"), for use at its 1998
Annual Meeting of Stockholders to be held on May 27, 1998 (the "Annual Meeting")
or any adjournment or postponement, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. The date of this Proxy
Statement is April 30, 1998, the approximate date on which this Proxy Statement
and the accompanying form of proxy were first sent or given to stockholders.
SOLICITATION AND VOTING OF PROXIES
The cost of soliciting proxies will be borne by the Company. In
addition to soliciting stockholders by mail through its employees, the Company
will request banks and brokers, and other custodians, nominees and fiduciaries,
to solicit their customers who have stock of the Company registered in the names
of such persons and will reimburse them for their reasonable, out-of-pocket
costs. The Company may use the services of its officers, directors and others to
solicit proxies, personally or by telephone, without additional compensation.
On April 3, 1998, the Company had outstanding 14,030,209 shares of
its Common Stock, par value $0.01 per share ("Common Stock"), all of which are
entitled to vote with respect to all matters to be acted upon at the Annual
Meeting. Each stockholder of record as of that date is entitled to one vote for
each share of Common Stock held by him or her. The Company's Bylaws provide that
a majority of all of the shares of the stock entitled to vote, whether present
in person or represented by proxy, shall constitute a quorum for the transaction
of business at the meeting. Votes for and against, abstentions and "broker
non-votes" will each be counted as present for purposes of determining the
presence of a quorum.
All valid proxies received before the meeting will be exercised. All
shares represented by a proxy will be voted, and where a stockholder specifies
by means of his or her proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with the specification so made. If
no choice is indicated on the proxy, the shares will be voted in favor of the
proposal. A stockholder giving a proxy has the power to revoke his or her proxy
at any time before the time it is exercised by delivering to the Secretary of
the Company a written instrument revoking the proxy or a duly executed proxy
with a later date, or by attending the meeting and voting in person.
1
<PAGE> 5
INFORMATION ABOUT CIDCO INCORPORATED
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 31, 1998, certain
information with respect to the beneficial ownership of the Company's Common
Stock by (i) each stockholder known by the Company to be the beneficial owner of
more than 5% of the Company's Common Stock, (ii) each director and
director-nominee of the Company, (iii) each executive officer of the Company
named in the Summary Compensation Table below and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL COMMON STOCK
NAME OF BENEFICIAL OWNER(1) OWNERSHIP OUTSTANDING(2)
- ------------------------------------------------------------------------ --------- --------------
<S> <C> <C>
J&W Seligman & Co. Incorporated(3) ..................................... 2,835,157 20.3
100 Park Avenue
New York, New York 10017
SMALLCAP World Fund, Inc.(4) ........................................... 913,000 6.5
333 South Hope Street
Los Angeles, California 90071
Thomson, Horstmann & Bryant, Inc.(5) ................................... 865,000 6.2
Park 80, West Plaza Two
Saddlebrook, New Jersey 07663
Bankers Trust New York Corporation(6) .................................. 771,269 5.5
130 Liberty Street
New York, New York 10006
Joseph A. Graziano(7) .................................................. 6,665 *
Ernest K. Jacquet(8) ................................................... 48,242 *
Scott C. McDonald(9) ................................................... 13,330 *
Richard M. Moley(10) ................................................... 33,350 *
Daniel L. Eilers(11) ................................................... 120,000 *
Timothy J. Dooley(12) .................................................. 40,279 *
Richard D. Kent(13) .................................................... 13,332 *
Ian G.A. Laing(14) ..................................................... 24,999 *
Marv Tseu(15) .......................................................... 30,000 *
Paul G. Locklin(16) .................................................... 1,098,800 7.8
All current directors and executive officers as a group (12 persons)(17) 1,534,307 10.7
</TABLE>
- --------------------------------
* Less than 1%.
(1) Except as indicated in the footnotes to this table, to the Company's
knowledge the persons named in the table have sole voting and
dispositive power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws, where
applicable.
2
<PAGE> 6
(2) Calculated on the basis of 13,984,793 shares of Common Stock outstanding
as of January 31, 1998, except that shares of Common Stock underlying
options exercisable within 60 days of January 31, 1998 are deemed to be
outstanding for purposes of calculating the beneficial ownership of
Common Stock of the holders of such options.
(3) Based on a Schedule 13G filed with the Securities and Exchange
Commission ("SEC") on February 12, 1998. J&W Seligman & Co. Incorporated
("J&W") serves as an advisor to Seligman Communications and Information
Fund, Inc. ("SC"). Includes 1,500,000 shares held by SC. William C.
Morris, is the owner of a majority of the outstanding voting securities
of J&W and may be deemed a beneficial owner of the shares. J&W has
shared voting power over 2,702,930 shares and shared dispositive power
over 2,835,157 shares. SC has sole voting and dispositive power over
1,500,000 shares. Mr. Morris has shared voting power over 2,702,930
shares and sole dispositive power over 2,835,157 shares.
(4) Based on a Schedule 13G filed with the SEC on February 11, 1998. The
Capital Group Companies, Inc. ("CGC") is the parent holding company of
Capital Research and Management ("CRM"). CRM serves as an advisor to
SMALLCAP World Fund, Inc. ("SMALLCAP"). CGC has sole dispositive power
and no voting power over the shares, and may be deemed a beneficial
owner of the shares. CRM has sole dispositive power and no voting power
over the shares, and may be deemed a beneficial owner of the shares.
SMALLCAP has sole voting power and no dispositive power over the shares.
(5) Based on a Schedule 13G filed with the SEC on March 13, 1998. Thomson,
Horstmann & Bryant, Inc. has sole voting power over 532,900 shares,
shared voting power over 17,600 shares and sole dispositive power over
865,000 shares.
(6) Based on a Schedule 13G filed with the SEC on February 17, 1998. Bankers
Trust Company ("BTC") is a wholly owned subsidiary of Bankers Trust New
York Corporation ("BTNY"). BT Alex.Brown Incorporated ("BTAB") and
Alex.Brown Capital Advisory ("AB") are indirect wholly owned
subsidiaries of BTNY. BTC has sole voting power over 53,400 shares, sole
dispositive power over 128,800 shares, and is the beneficial owner of
128,800 shares. BTAB has sole voting power over 5,000 shares, sole
dispositive power over 8,500 shares and is the beneficial owner of 8,500
shares. AB has sole voting and dispositive power over 633,619 shares and
is the beneficial owner of 633,619 shares.
(7) Represents 6,665 shares subject to options exercisable within 60 days of
January 31, 1998.
(8) Includes 13,330 shares subject to options exercisable within 60 days of
January 31, 1998.
(9) Represents 13,330 shares subject to options exercisable within 60 days
of January 31, 1998.
(10) Represents 33,350 shares subject to options exercisable within 60 days
of January 31, 1998.
(11) Represents 120,000 shares subject to options exercisable within 60 days
of January 31, 1998.
(12) Includes 20,303 shares subject to options exercisable within 60 days of
January 31, 1998.
(13) Represents 13,332 shares subject to options exercisable within 60 days
of January 31, 1998.
(14) Represents 24,999 shares subject to options exercisable within 60 days
of January 31, 1998.
(15) Represents 30,000 shares subject to options exercisable within 60 days
of January 31, 1998.
(16) Includes 100,000 shares subject to options exercisable within 60 days of
January 31, 1998, 10,000 shares owned by the Matthew Locklin Trust, for
which Mr. Locklin serves as Trustee and has sole voting and dispositive
power and 10,000 shares owned by his father, Harry Locklin, as to which
Mr. Locklin disclaims beneficial ownership.
(17) See notes (7) through (16). Includes 375,309 shares subject to options
exercisable within 60 days of January 31, 1998.
3
<PAGE> 7
MANAGEMENT
The table below sets forth, for the Company's directors, including
the Class A nominees to be elected at the Annual Meeting, certain information
regarding the background and the age of each director.
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE DIRECTOR SINCE
- --------------------------------------------- ----------------------------------------------------- ----- ----------------
<S> <C> <C> <C>
Class A directors nominated for election at the 1998 Annual Meeting of Stockholders:(1)
Daniel L. Eilers Director 43 1997
Richard M. Moley(2) Director 59 1994
Class B director whose term expires at the 1999 Annual Meeting of Stockholders:(2)
Ernest K. Jacquet Director 51 1993
Class C directors whose terms expire at the 2000 Annual Meeting of Stockholders:
Paul G. Locklin Director 52 1998
Joseph A. Graziano Director 54 1997
</TABLE>
- ----------------------------
(1) During 1997, Scott C. McDonald served as a Class A director. Mr.
McDonald will not stand for re-election at the Annual Meeting.
(2) During 1997, Mr. Moley served as a Class B director. The Nominating
Committee nominated Mr. Moley for election as a Class A director,
creating a vacancy in Class B as of the date of the Annual Meeting. The
Nominating Committee is currently seeking a non-employee director for
the vacancy in Class B.
Daniel L. Eilers has served as the President, Chief Executive Officer
and a director of the Company since March 1997. From November 1996 to February
1997, he served as President, Chief Executive Officer and a director of NAT
Systems International, a privately held enterprise software company. From
January 1996 to November 1996, he served as CEO in Residence at Kleiner Perkins
Caufield & Byers, a venture capital firm. From June 1982 to December 1995, he
held various executive positions at Apple Computer, Inc., a personal computer
company ("Apple"), most recently as a Senior Vice President. In addition, from
March 1991 to June 1995, he served as President, Chief Executive Officer and a
director of Claris Corporation, an application software company and a subsidiary
of Apple. He also serves as a director of a privately held company. Mr. Eilers
received a B.A. degree from the University of Washington and an M.B.A. degree
from Stanford University.
Richard M. Moley has served as a director of the Company since January
1994. Since August 1997, Mr. Moley has been a private investor. From July 1996
to August 1997, he served as Senior Vice President of Cisco Systems Inc.
("Cisco"), an internetworking company. From June 1986 to July 1996, the date of
the acquisition of Stratacom, Inc. by Cisco, he was Chairman of the Board, Chief
Executive Officer and President of Stratacom, Inc., a wide-area networking
company. He also serves as a director of Linear Technologies Corporation, CMC
Industries, Inc. and a number of privately held companies. Mr. Moley received a
B.S. degree from Manchester University, England, an M.S.E.E. degree from
Stanford University and an M.B.A. degree from the University of Santa Clara.
Ernest K. Jacquet has served as a director of the Company since May
1993. Since April 1990 he has served as a general partner of Summit Partners, a
venture capital partnership that is the general partner of Summit Ventures III,
L.P. and Summit Investors II, L.P. which were principal stockholders of the
Company prior to its initial public offering. He also serves as a director of a
privately held company. Mr. Jacquet received a B.S.E.
4
<PAGE> 8
degree and an M.S.E. degree from the University of Michigan and an M.B.A. degree
from Stanford Business School.
Paul G. Locklin, a co-founder of the Company, served as President,
Chief Executive Officer and a director of the Company since its incorporation in
1988 until March 1997. From March 1997 to April 1997, he served as Co-Chairman
of the Board and has served as Chairman of the Board since April 1997. He also
served as a consultant to the Company from April 1997 through July 1997. Mr.
Locklin also serves as a director of a privately held company. Mr. Locklin
received a B.S. degree in marketing from California State University at Hayward.
Joseph A. Graziano has served as a director of the Company since April
1997. Since December 1995, Mr. Graziano has been a private investor. From June
1989 to December 1995, he served as Executive Vice President and Chief Financial
Officer of Apple. He also served as a director of Apple from June 1993 to
October 1995. From May 1987 to June 1989, he served as the Chief Financial
Officer of Sun Microsystems, Inc., a network computing company. He also serves
as a director of Pixar Animation Studios, Inc., IntelliCorp, Inc. and a number
of privately held companies. Mr. Graziano received a B.S. degree in accounting
from Merrimack College and is a certified public accountant.
Scott C. McDonald has served as a director of the Company since
November 1996. Mr. McDonald will not stand for re-election at the Annual
Meeting. From January 1997, to December 1997, he served as a consultant to the
Company. From October 1993 to January 1997, he served as the Chief Operating
Officer, Chief Financial Officer and Secretary of the Company. From March 1993
to September 1993, he was employed by PSI Integration, Inc., a producer of
Macintosh desktop and powerbook modems, most recently as President. From
February 1989 to February 1993, he served as the Chief Financial Officer and
Vice President of Finance and Administration of Integrated Systems, Inc., a
company that develops and markets engineering software products. Mr. McDonald
received a B.S. degree in accounting from Akron University and an M.B.A. degree
from Golden Gate University.
Meetings of the Board of Directors. During 1997, the Board of
Directors of the Company held eight (8) meetings. During that period the Audit
Committee of the Board held one (1) meeting, the Compensation Committee of the
Board held one (1) meeting, the Stock Option Committee held no meetings, but
acted numerous times by unanimous written consent, and the Nominating Committee
held no meetings. No director attended fewer than 75% of the total number of
meetings of the Board and the committees of the Board on which such director
served, held during that period.
The members of the Audit Committee during 1997 were Messrs. Moley and
McDonald until July 15, 1997. Since such date, the members of the Audit
Committee have been Messrs. Graziano, Jacquet and McDonald. The functions of the
Audit Committee include recommending to the Board the retention of independent
public auditors, subject to stockholder approval; reviewing and approving the
planned scope, proposed fee arrangements and results of the Company's annual
audit; reviewing the adequacy of accounting and financial controls; and
reviewing the independence of the Company's auditors.
The members of the Compensation Committee during 1997 were Messrs.
Moley, Jacquet and McDonald until July 15, 1997, when Mr. Graziano replaced Mr.
Jacquet. The Compensation Committee reviews and determines the salary and bonus
criteria for all executive officers. For additional information about the
Compensation Committee, see "EXECUTIVE COMPENSATION AND OTHER MATTERS" and
"REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION" below.
The members of the Stock Option Committee during 1997 were Messrs.
Moley and Jacquet until July 15, 1997, when Mr. Graziano replaced Mr. Jacquet.
The Stock Option Committee is responsible for administering the Company's 1993
Amended and Restated Stock Option Plan (the "1993 Plan"), including approving
stock option grants to officers and employees of Company. For additional
information about the Stock Option Committee, see "EXECUTIVE COMPENSATION AND
OTHER MATTERS," "REPORT OF THE STOCK OPTION COMMITTEE ON REPRICING OF OPTIONS,"
and "REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION," below.
5
<PAGE> 9
The Board of Directors established a Nominating Committee on July 15,
1997 consisting of outside directors, Messrs. Locklin, Moley and Graziano. The
Nominating Committee considers qualified candidates for appointment and
nomination for election to the Board of Directors and makes recommendations
concerning such candidates.
6
<PAGE> 10
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth information for the years ended
December 31, 1997, 1996, and 1995 concerning the compensation of the Chief
Executive Officer and the four most highly compensated executive officers of the
Company, whose total salary and bonus for the year ended December 31, 1997
exceeded $100,000 and the former Chief Executive Officer, for services in all
capacities to the Company and its subsidiaries:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------- -----------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS COMPENSATION
- -------------------------------- ---- -------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Daniel L. Eilers(2) ............ 1997 $281,250 $ 98,960 0 600,000(3) $ 2,939(4)
President and Chief Executive 1996 -- -- -- -- --
Officer 1995 -- -- -- -- --
Timothy J. Dooley(5) ........... 1997 191,923 55,469(6) 0 60,000(7) 1,857(4)
Vice President and General 1996 184,616 0 0 0 1,500(4)
Manager, Accessory Products 1995 175,000 122,500(6) 0 0 630(4)
Division
Ian G.A. Laing ................. 1997 199,310 50,000 15,355(8) 75,000(9) 2,547(4)
Executive Vice President and 1996 86,095 12,500 28,073(8) 0 0
General Manager, SmartPhones 1995 -- -- -- -- --
Division
Marv Tseu ...................... 1997 199,537 40,625 0 90,000(10) 2,875(4)
Executive Vice President, 1996 73,077 52,084 0 0 0
Sales and Marketing 1995 -- -- -- -- --
Richard D. Kent ................ 1997 166,923 24,375 0 60,000(11) 2,669(4)
Vice President, Finance and 1996 118,100 0 0 0 1,500(4)
Chief Financial Officer 1995 105,723 33,600 0 0 505(4)
Former Officers:
Paul G. Locklin(12) ............ 1997 216,599(13) 0 0 30,000 323,544(4)
Former President and Chief 1996 247,627 0 9,615(14) 0 1,500(4)
Executive Officer 1995 188,295 188,295 8,540(14) 0 630(4)
</TABLE>
- -----------------------------
(1) Bonuses are based on performance. See "REPORT OF THE COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION" and "REPORT OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION."
7
<PAGE> 11
(2) Mr. Eilers joined the Company in March 1997 as President and Chief
Executive Officer. See "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements."
(3) Represents options approved outside the 1993 Plan pursuant to a
Non-Qualified Stock Option Agreement in connection with Mr. Eilers'
employment agreement. See "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements."
(4) Represents: (i) matching contributions by the Company to the Company's
401(k) plan in the following amounts for 1997, 1996 and 1995,
respectively: Eilers ($2,500, N/A, N/A), Dooley ($1,637, $1,500,
$630), Laing ($2,405, $0, N/A), Tseu ($2,500, $0, N/A), Kent ($2,500,
$1,500, $505), Locklin ($2,500, $1,500, $630), (ii) insurance premiums
paid by the Company with respect to life insurance in the following
amounts during 1997 (no premiums were paid during 1995 or 1996):
Eilers ($439), Dooley ($220), Laing ($142), Tseu ($375), Kent ($169),
Locklin ($0), and (iii) severance payments in the amount of $321,044,
made to Mr. Locklin in 1997. See "Employment Contracts and Termination
of Employment and Change-in-Control Arrangements."
(5) Mr. Dooley served in various positions at the Company, most recently
as Vice President and General Manager, Accessory Products Division,
from September 30, 1994 to April 1998. See "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements."
(6) Includes commissions in the amount of $25,000 in 1997 and $122,500 in
1995.
(7) Includes 35,000 options that were repriced in January 1997 replacing
options granted in 1996.
(8) Represents payment of relocation expenses for Mr. Laing.
(9) Includes 50,000 options that were repriced in January 1997 replacing
options granted in 1996.
(10) Includes 60,000 options that were repriced in January 1997 replacing
options granted in 1996.
(11) Includes 20,000 options that were repriced in January 1997 replacing
10,000 options granted in 1996 and 10,000 options granted in 1995.
(12) Mr. Locklin served as President and Chief Executive Officer of the
Company from 1988 to March 1997. See "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements."
(13) Represents (i) annual salary in the amount of $130,766, (ii)
consulting fees in the amount of $83,333 and (iii) director's fees in
the amount of $2,500.
(14) Represents depreciation on automobile in the amount of $9,615 for 1996
and $8,540 for 1996.
8
<PAGE> 12
STOCK OPTIONS GRANTED IN FISCAL 1997
The following table provides the specified information concerning
grants of options to purchase the Company's Common Stock made during the year
ended December 31, 1997, to the persons named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS IN FISCAL 1997 FOR OPTION TERM(1)
------------------------------------------------- ---------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES IN OR BASE
OPTIONS FISCAL PRICE EXPIRATION
NAME GRANTED (#)(2) YEAR ($/SH)(3) DATE 5%($) 10%($)
- ------------------------------ -------------- ----- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Daniel L. Eilers ............. 600,000(4) 25.68 $ 14.25 03/17/07 $ 5,132,714 $13,237,437
Timothy J. Dooley ............ 35,000(5) 1.50 12.43 01/21/07 277,591 699,712
25,000 1.07 14.63 04/01/07 230,018 582,911
Ian G.A. Laing ............... 50,000(5) 2.4 12.43 01/21/07 396,559 999,589
25,000 1.7 14.63 04/01/07 230,018 582,911
Marv Tseu .................... 60,000(5) 2.57 12.43 01/21/07 475,871 1,199,507
30,000 1.28 14.63 04/01/07 276,022 699,493
Richard D. Kent .............. 20,000 0.86 12.94 02/01/07 160,803 409,348
10,000(5) 0.43 12.43 01/21/07 79,311 199,918
10,000(6) 0.43 12.43 01/21/07 79,311 199,918
20,000(7) 0.86 18.75 09/29/07 235,835 597,653
Former Officers:
Paul G. Locklin .............. 30,000(8) 1.28 19.82 09/05/02 164,277 363,009
</TABLE>
- -----------------------------
(1) Potential gains are net of exercise price, but before taxes associated
with exercise. These amounts represent certain assumed rates of
appreciation only, based on the SEC rules. Actual gains, if any, on
stock option exercises are dependent on the future performance of the
Common Stock, overall market conditions and the option holders'
continued employment through the vesting period. The amounts reflected
in this table may not necessarily be achieved.
(2) Except as described in the footnotes below, the options listed were
granted under the 1993 Plan and vest in annual increments of 33 1/3%
per year commencing one year from the date of grant. Under the 1993
Plan, the Stock Option Committee retains discretion to modify the
terms, including the exercise prices, of outstanding options. See
"Employment Contracts and Termination of Employment and
Change-in-Control Arrangements."
(3) All options were granted at market value on the date of grant.
(4) Represents options that were granted outside the 1993 Plan pursuant to
a Non-Qualified Stock Option Agreement. Such options vest in equal
monthly installments over a five-year period. See "Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements."
(5) Represents options that were repriced on January 21, 1997, replacing
options that were granted in 1996.
(6) Represents options that were repriced on January 21, 1997, replacing
options that were granted in 1995.
9
<PAGE> 13
(7) Represents options that vest 25% one year from the date of grant, and
an additional 1/48 each month thereafter until fully vested.
(8) Represents options granted pursuant to the 1994 Directors' Stock
Option Plan (the "Directors' Plan"). Such options vest in four equal
annual installments, commencing January 13, 1999.
10
<PAGE> 14
OPTION EXERCISES AND FISCAL 1997 YEAR-END VALUES
The following table provides the specified information concerning
exercises of options to purchase the Company's Common Stock in the year ended
December 31, 1997, and unexercised options held as of December 31, 1997, by the
persons named in the Summary Compensation Table.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997(1)
ACQUIRED $ VALUE ----------------------------- -------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE(2) UNEXERCISABLE $EXERCISABLE(2)$ UNEXERCISABLE
- ------------------------- ----------- ---------- ----------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Daniel L. Eilers ........ 0 $ 0 90,000 510,000 $ 472,500 $2,677,500
Timothy J. Dooley ....... 0 0 304 60,000 5,624 369,200
Ian G.A. Laing .......... 0 0 0 75,000 0 475,250
Marv Tseu ............... 0 0 0 90,000 0 570,300
Richard D. Kent ......... 0 0 0 60,000 0 287,600
Former Officers:
Paul G. Locklin ......... 0 0 100,000 30,000 1,850,000 0
</TABLE>
(1) Based on a fair market value of $19.50, the closing price of the
Common Stock on December 31, 1997, as reported by The Nasdaq Stock
Market. Does not include options that had an exercise price greater
than $19.50.
(2) Since August 2, 1997 options listed above, granted under the 1993
Plan, vest and become exercisable over a period of four years. Prior
to August 2, 1997, the options listed above granted under the 1993
Plan vest and become exercisable over a period of three years.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On March 17, 1997 the Company entered into an employment agreement
with Daniel L. Eilers, the President and Chief Executive Officer of the Company
(the "Eilers Agreement"). The Eilers Agreement provides for a minimum base
annual salary of $375,000 and a $98,960 bonus for 1997. For subsequent calendar
years, the Eilers Agreement provides that Mr. Eilers will receive bonuses as the
Compensation Committee of the Board may in its sole discretion determine and
award, provided, however, that the target bonus for any year under the Company's
Annual Executive Incentive Plan shall not be less than $125,000. In connection
with the Eilers Agreement, Mr. Eilers was granted an option to purchase 600,000
shares of the Company's Common Stock (the "Stock Option"), as described below.
In the event Mr. Eilers' employment is terminated as a result of a "Permanent
Disability," by the Company without "Cause" or by Mr. Eilers for "Good Reason"
(as such terms are defined below), Mr. Eilers shall receive the following
severance benefits: (i) a lump sum payment equal to twelve months of Mr. Eilers'
then effective base salary plus 100% of Mr. Eilers' target bonus for the year in
which termination occurs, to be paid within thirty (30) days of termination,
provided that such lump sum payment shall not be less than $500,000, (ii) one
year additional vesting and extension of exercisability, as of the date of
termination, for the Stock Option and (iii) continuation of Company-paid
benefits for one year after date of termination. "Cause" shall mean (i)
intentional failure, neglect or refusal of Mr. Eilers to substantially fulfill
his material duties, (ii) the material breach of any fiduciary duty or other
material dishonesty with respect to the Company or any affiliate of the Company
or (iii) conviction of Mr. Eilers for a felony or crime involving moral
turpitude. "Permanent Disability" shall mean the total incapacitation of Mr.
Eilers so as to preclude performance of the duties of his employment for an
aggregate of four months in any twelve month period. "Good Reason" shall exist
if the Company (or any successor resulting from a change in control of the
Company) (i) breaches a material provision of the Eilers
11
<PAGE> 15
Agreement and fails to cure such breach within 30 days notice by Mr. Eilers,
(ii) changes his principle work location, (iii) materially changes his duties,
(iv) reduces his compensation or (v) becomes insolvent or bankrupt. In addition,
if Mr. Eilers' employment is terminated in connection with a change of control
of the Company, and if any excise tax is due as a result of "parachute payments"
under the Internal Revenue Code of 1998, as amended, the Company will make a
cash payment to Mr. Eilers equal to the amount of such excise tax.
On March 12, 1997, in connection with the Eilers Agreement, the
Company entered into a Non-Qualified Stock Option Agreement with Mr. Eilers for
600,000 shares of the Company's Common Stock at an exercise price of $14.25 per
share. The Stock Option becomes exercisable in monthly increments over a
five-year period and expires ten years from the date of grant. If Mr. Eilers'
employment is terminated, the Stock Option may be exercised within twelve months
of the date of termination. In the event of a change in control, if Mr. Eilers'
employment is terminated without Cause or Mr. Eilers resigns with Good Reason,
the vesting of the Stock Option will accelerate in full.
On September 30, 1994, June 28, 1996, July 29, 1996 and December 16,
1996, respectively, the Company entered into employment agreements (the
"Employment Agreements") with Messrs. Dooley, Laing, Tseu and Kent (the
"Officers"). The Employment Agreements provide for a minimum base annual salary,
subject to annual review by the Company's Compensation Committee, with a minimum
annual increase for subsequent years to account for increases in the cost of
living as reflected in the Price Index for all Urban Consumers in the Bay Area.
The minimum base annual salary for Messrs. Dooley, Laing, Tseu and Kent are
$52,000, $185,000, $195,000 and $160,000, respectively. The Officers may 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. Mr.
Tseu's Employment Agreement also provides for a bonus of $120,000 for 1996,
pro-rated for such portion of the year during which he was employed by the
Company. Mr. Laing's Employment Agreement also provides for an annual bonus of
$50,000 for 1996 and 1997, pro-rated for such portions of those years during
which he was employed by the Company. The Employment Agreements also provide for
the Officers to participate in Company benefit plans. In the event that an
Officer's employment with the Company is terminated by the Company without Cause
or by an Officer for Good Reason, the Officer will receive the following
severance benefits: (i) continuation for six months (twelve months for Mr.
Laing) of his then current base salary, plus any cost of living increase granted
to him by the Company through the date of such termination and (ii) continuation
for six months (twelve months for Mr. Laing) of Company-paid benefits. However,
if during such period the Officer obtains comparable employment with another
employer, then the continuing base salary payment will cease upon commencement
of such comparable employment.
On April 15, 1997, the Company entered into a Confidential
Separation Agreement and General Release with Mr. Locklin, the Company's former
President and Chief Executive Officer. Pursuant to such agreement, Mr. Locklin
received: (i) a lump sum cash payment in the amount of $250,000, (ii) an
automobile owned by the Company and used by Mr. Locklin in connection with his
employment, valued at $67,320 and (iii) continuation of health benefits through
April 1998.
Pursuant to the 1993 Plan, in the event of a change in control, the
Stock Option Committee has the power but is not obligated to accelerate the
vesting of outstanding options. In the event of a hostile change in control as
defined in the 1993 Plan, the vesting of outstanding options will automatically
accelerate in full. Pursuant to the Directors' Plan in the event of a change in
control (as defined in the Directors' Plan), the vesting of options outstanding
under the Directors' Plan will accelerate in full.
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company are not paid any
fees or other remuneration for service on the Board or on any Board Committee.
Since January 1, 1997, the non-employee directors of the Company are paid
(unless the Board specifically determines otherwise with respect to any such
person) director's fees at the rate of $10,000 per year (payable quarterly in
arrears) for serving as directors of the Company. The Company also reimburses
all of its directors for their reasonable out-of-pocket expenses incurred in the
performance of their duties as directors of the Company. Directors may also
receive options to purchase the Company's Common Stock
12
<PAGE> 16
pursuant to the Directors' Plan. During 1997, Messrs. Moley, Locklin and
Graziano received options to purchase 30,000, 30,000 and 33,325 shares,
respectively, shares of the Company's Common Stock, under the Directors' Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, the Company leased office space from Diamond Corporate
Park. Diamond Corporate Park is owned by James and William Diamond, sons of
Robert C. Diamond, the former Chairman of the Board of the Company. The lease
agreement for such space was terminated on December 1, 1997 for consideration of
$72,400. In addition, during 1997, the Company paid an aggregate of $93,877 in
rent under such lease agreement.
During 1997, the Company entered into a consulting agreement with
Mr. Locklin for financial and operational management consulting services to the
Company whereby Mr. Locklin received a monthly fee equal to $20,833. Such
consulting agreement contains a non-compete covenant, for one year from the date
of termination of the Consulting Agreement. The Consulting Agreement was
terminated in July 1997.
During 1997, the Company entered into a consulting agreement
with Mr. McDonald for financial and operational consulting services to the
Company whereby Mr. McDonald received a monthly fee equal to $5,000. Such
consulting agreement contains a non-compete covenant, for one year from the
date of termination of the Consulting Agreement. The Consulting Agreement was
terminated in December 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors acted with regard to the employment agreement
between the Company and Mr. Eilers. The members of the Board of Directors at
the time of such action were Robert L. Diamond, then Chairman of the Board and
Paul G. Locklin, then President and Chief Executive Officer; and Scott C.
McDonald, Richard M. Moley and Ernest K. Jacquet, each non-employee directors.
Messrs. Diamond and Locklin participated in deliberations concerning Mr.
Eilers' employment agreement, but did not participate in any deliberations
regarding compensation of any incumbent executive officers during 1997.
See "Certain Relationships and Related Transactions" for information
concerning certain transactions between the Company and certain members of the
Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the SEC. Such persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms filed
by such person.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and more than 10% stockholders were complied with except
that an initial statement of beneficial ownership which was filed for Joseph A.
Graziano upon his joining the Company's Board of Directors was filed ten days
following the month of the event, rather than ten days following the event
itself.
13
<PAGE> 17
REPRICING OF OPTIONS
The following table provides specified information concerning all
repricings of options to purchase the Company's Common Stock held by any
executive officer of the Company since March 3, 1994, the date of the Company's
initial public offering.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL OPTION
UNDERLYING OF STOCK EXERCISE PRICE TERM REMAINING
OPTIONS AT TIME OF AT TIME OF AT DATE OF
NAME AND REPRICED OR REPRICING OR REPRICING OR NEW REPRICING OR
PRINCIPLE POSITION DATE AMENDED AMENDMENT(1) AMENDMENT EXERCISE PRICE AMENDMENT(2)
- --------------------------------- -------- ---------- ------------ --------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Timothy J. Dooley ............... 1/21/97 35,000 $ 12.43 $ 24.95 $ 12.43 8 years 11 days
Vice President and General
Manager, Accessory Products
Division
Richard D. Kent ................. 1/21/97 10,000 $ 12.43 $ 32.35 $ 12.43 7 years 162 days
Vice President, Finance and 1/21/97 10,000 $ 12.43 $ 16.75 $ 12.43 9 years 70 days
Chief Financial Officer
Ian G.A. Laing .................. 1/21/97 50,000 $ 12.43 $ 16.75 $ 12.43 9 years 192 days
Executive Vice President and
General Manager, Smart Phones
Division
Marv Tseu ....................... 1/21/97 60,000 $ 12.43 $ 16.75 $ 12.43 9 years 192 days
Executive Vice President,
Sales and Marketing
Former Executive Officers:
Thomas C. Bristovish(3) ......... 1/21/97 8,336 $ 12.43 $ 18.67 $ 12.43 7 years 102 days
Vice President, Sales 1/21/97 13,330 $ 12.43 $ 24.95 $ 12.43 8 years 11 days
Edward Forker(4) ................ 1/21/97 25,000 $ 12.43 $ 30.62 $ 12.43 8 years 163 days
Vice President, Sales 1/21/97 15,000 $ 12.43 $ 27.50 $ 12.43 9 years 11 days
Mark A. Sherman ................. 1/21/97 12,000 $ 12.43 $ 25.34 $ 12.43 7 years 256 days
Vice President, Operations 1/21/97 10,000 $ 12.43 $ 24.50 $ 12.43 8 years 314 days
</TABLE>
(1) Established by the Stock Option Committee to be $12.43, the average
closing price of the Company's Common Stock during the five-day period
preceding January 21, 1997.
(2) Repriced options vest over a three-year period beginning on the date
of the repricing. Optionees forfeited any accrued vesting on canceled
options. See "REPORT OF THE STOCK OPTION COMMITTEE ON REPRICING OF
OPTIONS."
(3) Mr. Bristovish is no longer an executive officer and presently serves
as a field sales vice president of the Company.
(4) Mr. Forker is no longer an executive officer and presently serves as a
field sales vice president of the Company.
14
<PAGE> 18
REPORT OF THE STOCK OPTION COMMITTEE
ON REPRICING OF OPTIONS
On January 21, 1997, the Stock Option Committee, comprised at that
time of Richard M. Moley and Ernest K. Jacquet, considered the options held by
the Company's employees, including executive officers, and the fact that a broad
decline in the price of the Common Stock of the Company had resulted in a
substantial number of stock options granted pursuant to the 1993 Plan having
exercise prices above the recent trading prices of the Company's Common Stock
(the "Underwater Options"). On January 21, 1997 the Stock Option Committee
approved the repricing.
The Stock Option Committee reviewed the impact of the decline in the
market price of the Company's Common Stock on the incentive afforded by the
Underwater Options and determined that such options were significantly less
likely to serve their purposes of retaining and motivating employees whose
contributions are important to the Company's future success. The Stock Option
Committee also determined that unless adjustment was made, longer term employees
holding Underwater Options would perceive a substantial inequity in comparison
to more recently hired employees granted options with exercise prices set at the
then lower market price of the Company's Common Stock, and the morale of such
longer term employees would suffer as a consequence. The Stock Option Committee
believed that the future success of the Company would depend in large part on
its ability to retain and motivate its highly skilled employees for whom
competition in the marketplace is intense, and the loss of such employees could
have a significant adverse impact on the Company's business. The Stock Option
Committee believed that providing equity incentives to employees of the Company
to further increase the Company's performance and the value of the Company for
its stockholders was both important and cost effective. The Stock Option
Committee considered other alternatives, such as granting new options
selectively to then employed key employees, but determined that the size of the
additional options that would be required to offset the decline in the market
price of the Company's Common Stock would result in significant dilution to the
stockholders.
Considering these factors, the Stock Option Committee determined
that it was in the best interests of the Company and its stockholders to restore
the incentives for employees and executive officers holding Underwater Options
to remain with the Company by adopting a stock option exchange program whereby
employees holding Underwater Options could elect to cancel such options and
receive in exchange new options pursuant to the 1993 Plan having an exercise
price equal to the average closing price of the Company's Common Stock during
the five-day period preceding January 21, 1997, the effective date of the
repricing. Each new option (a "New Option") gives the optionee the right to
purchase the number of shares of the Company's Common Stock that were subject to
and unexercised under the optionee's Underwater Option immediately prior to its
cancellation. Each New Option vests in three annual installments commencing on
January 21, 1998 with a term of ten years, commencing on January 21, 1997,
unless earlier terminated in accordance with the provisions of the option
agreement evidencing such New Option. Options for a total of 688,665 shares with
exercise prices ranging from $16.75 per share to $38.33 per share were exchanged
for options for an equal number of shares at an exercise price of $12.43 per
share. Options to purchase an aggregate of 100,000 shares held by Mr. Diamond
and Mr. Locklin were not repriced and were subsequently canceled in March 1997.
STOCK OPTION COMMITTEE
Richard M. Moley
Joseph A. Graziano
15
<PAGE> 19
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Committee") is comprised of Richard M. Moley, Scott C. McDonald and Joseph A.
Graziano. Ernest K. Jacquet served as a member of the Committee until Mr.
Graziano became a member on July 15, 1997. Each of these individuals is a
non-employee member of the Company's Board of Directors. The Committee is
responsible for setting and administering the policies governing annual
compensation of the executive officers of the Company. The Committee reviews the
performance and compensation levels for executive officers and sets salary
levels.
The Stock Option Committee of the Board of Directors is comprised of
Joseph A. Graziano and Richard M. Moley. Ernest K. Jacquet served as a member of
the Stock Option Committee until Mr. Graziano became a member on July 15, 1997.
Each of these individuals is a non-employee member of the Company's Board of
Directors. The Stock Option Committee is responsible for administering the
Company's 1993 Plan, including approving stock option grants to executive
officers.
The goals of the Company's executive officer compensation policies
are to attract, retain and reward executive officers who contribute to the
Company's success, to align executive officer compensation with the Company's
performance and to motivate executive officers to achieve the Company's business
objectives. The Company uses salary, bonus compensation and option grants to
attain these goals. The Committee reviews compensation surveys prepared by
management of the Company and by Radford Associates, an employment compensation
consulting firm ("Radford"), to compare the Company's compensation package with
that of similarly-sized high technology companies in the Company's geographic
area. In preparing the performance graph set forth in the section entitled
"COMPARISON OF STOCKHOLDER RETURN," the Company has selected the Hambrecht &
Quist Technology Index as its published industry index; however, the companies
included in the Company's salary surveys are not necessarily those included in
this index, because companies in the index may not compete with the Company for
executive talent, and companies which do compete for executive officers may not
be publicly traded.
Base salaries of executive officers are reviewed annually by the
Committee and adjustments are made based on (i) salary recommendations from the
President and Chief Executive Officer, (ii) individual performance of executive
officers for the previous fiscal year, (iii) financial results of the Company
for the previous year and (iv) reports to the Committee from Radford concerning
competitive salaries, scope of responsibilities of the officer position and
levels paid by similarly-sized high technology companies in the Company's
geographic area. The Company seeks to compensate the executive officers at the
median range of compensation levels paid by similarly sized high technology
companies in the Company's geographical area.
During 1997, the Board approved an Annual Executive Incentive Plan
(the "Incentive Plan") to formally link cash bonuses for executive officers to
the Company's operating performance. Pursuant to the Incentive Plan, the amount
of bonuses paid is dependent upon the Company meeting appropriate business
targets. The Committee believes that this type of bonus program based on
attaining established financial targets properly align the interests of the
Company's executive officers with the interests of stockholders. Under the
Incentive Plan, the Committee establishes the "Corporate Performance Goal,"
which is the Company's achievement of such level of net income as the Committee
shall determine. The Committee establishes for each executive officer an amount
that may be awarded to such executive officer if the Corporate Performance Goal
is met (a "Target Award"). Each executive officer's Target Award is an amount
equal to such percentage of the base salary paid to such executive officer as
the Committee determines. The Chief Executive Officer may in his discretion
reduce a bonus payable to an executive officer, based upon the Chief Executive
Officer's evaluation of such executive officers job performance or other factors
the Chief Executive Officer deems appropriate. In addition to bonuses paid in
connection with corporate performance, the Committee, in its discretion, may
provide a bonus based on individual achievement of individual performance goals,
established at the beginning of the year. For 1997, the bonuses were not
required to be paid because revenue and profitability levels of the Company
during 1997 did not meet the performance goals established by the Committee.
However, since a majority of the executive officers had contractual rights that
necessitated payment of bonuses, bonuses were paid at 32.5% of the target for
each executive officer, which was
16
<PAGE> 20
determined the previous year by the Committee, or for the amount to which the
executive officer was contractually entitled, whichever was greater.
The Company strongly believes that equity ownership by executive
officers provides incentives to build stockholder value and aligns the interests
of executive officers with those of the stockholders. The size of an initial
option grant to an executive officer has generally been determined with
reference to similarly sized high technology companies in the Company's
geographical area, the responsibilities and future contributions of the
executive officer, as well as recruitment and retention considerations. In 1997,
the Stock Option Committee approved stock option grants to certain of the
executive officers. See "OPTION GRANTS LAST FISCAL YEAR."
The Company has considered the provisions of Section 162(m) of the
Internal Revenue Code and related Treasury Department regulations which restrict
deductibility of executive compensation paid to the Company's chief executive
officer and each of the four other most highly compensated executive officers
holding office at the end of any year to the extent such compensation exceeds
$1,000,000 for any of such officers in any year and does not qualify for an
exception under the statute or regulations. Income from options granted under
the 1993 Plan should qualify for an exemption from these restrictions. The
Committee does not believe that in general other components of the Company's
compensation will be likely to exceed $1,000,000 for any executive officer in
the foreseeable future and therefore concluded that no further action with
respect to qualifying such compensation for deductibility was necessary at this
time. Since the options granted to Mr. Eilers upon his commencement of
employment were not granted pursuant to the 1993 Plan, any compensation realized
by Mr. Eilers in the future upon his exercise of such options will not qualify
as "performance-based compensation" and will therefore not be exempt from the
limitation on the tax deductibility imposed by Section 162(m). In the future,
the Committee will continue to evaluate the advisability of qualifying its
executive compensation for deductibility of such compensation. The Committee's
policy is to qualify its executive compensation for deductibility under
applicable tax laws as practicable.
COMPENSATION COMMITTEE
Joseph A. Graziano
Scott C. McDonald
Richard M. Moley
STOCK OPTION COMMITTEE
Joseph A. Graziano
Richard M. Moley
17
<PAGE> 21
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
During 1997, the Board of Directors acted with regard to the
employment agreement between the Company and Mr. Eilers. The members of the
Board of Directors at the time of such action were Robert L. Diamond, then
Chairman of the Board and Paul G. Locklin, then President and Chief Executive
Officer; and Scott C. McDonald, Richard M. Moley and Ernest K. Jacquet, each
non-employee directors.
Daniel L. Eilers has served as the President and Chief Executive
Officer of the Company since March 17, 1997. Mr. Eilers' 1997 compensation,
including a base salary of $375,000 and a bonus of $98,960, was determined by
his employment agreement with the Company. Such agreement also provides that his
Target Award for any year be a minimum of $125,000 and for the initial grant to
him of an option to purchase 600,000 shares of Common Stock. Mr. Eilers'
employment agreement was entered into following arms-length negotiations and
approval by the Board. His compensation, including the number of shares subject
to options granted, was determined to be competitive compared with compensation
for chief executive officers of similarly-sized high technology companies in the
Company's geographic area. In the judgment of the Board of Directors, such
arrangements were necessary to attract Mr. Eilers to join the Company. See
"Employment Contracts and Termination of Employment and Change-in-Control
Arrangements" for a description of the terms of employment.
BOARD OF DIRECTORS
Daniel L. Eilers
Scott C. McDonald
Richard M. Moley
Ernest K. Jacquet
Paul G. Locklin
Joseph A. Graziano
18
<PAGE> 22
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage
change in the cumulative total return on the Company's Common Stock with the
cumulative total returns of The Nasdaq Stock Market - U.S. Index and the
Hambrecht & Quist Technology Index for the period commencing on March 3, 1994,
the date of the Company's Initial Public Offering, and ending on December 31,
1997.(1)
COMPARISON OF CUMULATIVE TOTAL RETURN FROM
MARCH 3, 1994 THROUGH DECEMBER 31, 1997:(1)
CIDCO INCORPORATED, THE NASDAQ STOCK MARKET-U.S. INDEX
AND HAMBRECHT & QUIST TECHNOLOGY INDEX
[COMPARISON GRAPH]
<TABLE>
<CAPTION>
3/3/94 12/31/94 12/31/95 12/31/96 12/31/97
------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CIDCO Incorporated 100 193 170 117 130
Nasdaq Stock Market -U.S 100 97 137 168 207
Hambrecht & Quist Technology 100 109 163 202 237
</TABLE>
- ---------------------------------
(1) Assumes that $100.00 was invested on March 3, 1994, at the Company's
initial public offering price, in the Company's Common Stock and each
index. No cash dividends have been declared on the Company's Common
Stock. Stockholder returns over the indicated period should not be
considered indicative of future stockholder returns.
19
<PAGE> 23
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
The Company has a classified Board of Directors which currently
consists of six (6) directors, two (2) of whom are Class A directors, two (2) of
whom are Class B directors, and two (2) of whom are Class C directors. Class A,
Class B and Class C directors serve until the Annual Meetings of Stockholders to
be held in 1998, 1999 and 2000, respectively, and until their respective
successors are duly elected and qualified. Directors in a class are elected for
a term of three years to succeed the directors in such class whose terms expire
at such annual meeting. Scott C. McDonald, previously a Class A director will
not stand for re-election. Richard M. Moley, previously a Class B director, is a
nominee for election at the 1998 Annual Meeting of Stockholders as a Class A
director. Following the 1998 Annual Meeting of Stockholders, there will be a
vacancy in Class B of the Board of Directors. The Nominating Committee is
currently seeking a non-employee director for such vacancy.
Management's nominees for election at the 1998 Annual Meeting of
Stockholders to Class A of the Board of Directors are Daniel L. Eilers and
Richard M. Moley. If elected, the nominees will serve as directors until the
Company's Annual Meeting of Stockholders in 2001, and until their successors are
elected and qualified. If a quorum is present and voting, the two (2) nominees
for the position as Class A directors receiving the highest number of votes will
be elected. Abstentions will have no effect on the vote. If the nominees decline
to serve or become unavailable for any reason, or if a vacancy occurs before the
election (although management knows of no reason to anticipate that this will
occur), the proxies may be voted for substitute nominees as the Board of
Directors may designate. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE NOMINEES NAMED ABOVE.
PROPOSAL NUMBER TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
The Board of Directors of the Company has selected Price Waterhouse
LLP as independent public auditors to audit the consolidated financial
statements of the Company for the year ending December 31, 1998. Price
Waterhouse LLP has acted in such capacity since its appointment in 1993. A
representative of Price Waterhouse LLP is expected to be present at the annual
meeting, with the opportunity to make a statement if the representative desires
to do so, and is expected to be available to respond to appropriate questions.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast affirmatively
or negatively at the annual meeting of stockholders at which a quorum
representing a majority of all outstanding shares of Common Stock of the Company
is present and voting, either in person or by proxy, is required for approval of
this proposal. Votes for and against, abstentions and broker non-votes will each
be counted as present for purposes of determining the presence of a quorum.
Neither abstentions nor broker non-votes will have any effect on the outcome of
the proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT PUBLIC AUDITORS
FOR THE YEAR ENDING DECEMBER 31, 1998.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next
annual meeting of the stockholders of the Company must be received by the
Company at its offices at 220 Cochrane Circle, Morgan Hill, California no later
than January 2, 1999, and satisfy the conditions established by the Securities
and Exchange Commission for stockholder proposals to be included in the
Company's proxy statement for that meeting.
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<PAGE> 24
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the Board of Directors knows of
no other business that will be conducted at the 1998 Annual Meeting of
Stockholders of the Company other than as described in this Proxy Statement. If
any other matter or matters are properly brought before the meeting, or any
adjournment or postponement of the meeting, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on such matters in
accordance with their best judgment.
By Order of the Board of Directors
DANIEL A. DOROSIN, ESQ.
Secretary
April 30, 1998
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<PAGE> 25
CIDCO INCORPORATED
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 27, 1998
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Daniel L. Eilers and Daniel A. Dorosin,
and each of them, with full power of substitution, to represent the undersigned
and to vote all of the shares of stock in CIDCO Incorporated, a Delaware
corporation (the "Company"), which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held on Wednesday, May 27,
1998 at 10:00 a.m. local time, at the Company's principal offices at 220
Cochrane Circle, Morgan Hill, California, and at any adjournment or postponement
thereof (i) as hereinafter specified upon the proposals listed on the reverse
side and as more particularly described in the Proxy Statement of the Company
dated April 30, 1998 (the "Proxy"), receipt of which is hereby acknowledged,
and (ii) in their discretion upon such other matters as may properly come
before the meeting. The undersigned hereby acknowledge(s) receipt of the
Company's 1997 Annual Report to Stockholders.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1 AND 2.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
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<PAGE> 26
[x] Please mark
votes as in
this example
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED
TO SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR
STOCK MAY BE REPRESENTED AT THE MEETING.
A vote FOR the following proposals is recommended by the Board of
Directors:
1. To elect the following two persons as Class A directors to hold
office for a three-year term and until their respective successors are elected
and qualified:
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed below (except to vote for all
as marked to the nominees listed
contrary below.) below.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below.)
Daniel L. Eilers
Richard M. Moley
To consider, approve and ratify the appointment of Price Waterhouse LLP
as independent public auditors for the Company for the fiscal year ending
December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MARK HERE [ ] MARK HERE [ ]
FOR ADDRESS IF YOU
CHANGE AND PLAN TO
NOTE AT LEFT ATTEND THE
MEETING
PLEASE SIGN HERE. Sign exactly as your Signature:____________ Date:______
name(s) appears on your stock
certificate. If shares of stock are held Signature:____________ Date:______
of record in the names of two or more
persons or in the name of husband and
wife, whether as joint tenants or
otherwise, both or all of such persons
should sign the Proxy. If shares of
stock are held of record by a
corporation, the Proxy should be
executed by the President or Vice
President and the Secretary or Assistant
Secretary. Executors or administrators
or other fiduciaries who execute the
Proxy for a deceased stockholder should
give their full title. Please date the
Proxy.
2
