<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
April 21, 1999
Dear Stockholder:
This year's annual meeting of stockholders will be held on Wednesday,
May 26, 1999, 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/ Paul G. Locklin
-------------------------------------
PAUL G. LOCKLIN
President and Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1999
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 26,
1999, 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 one (1) Class B director to hold office for a three-year
term and until his successor is elected and qualified.
2. To approve the Company's 1999 Employee Stock Purchase Plan.
3. To consider, approve and ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent public auditors for the
year ending December 31, 1999.
4. To transact such other business as may properly be brought before the
meeting.
Stockholders of record at the close of business on March 31, 1999 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/ Richard D. Kent
-----------------------------
RICHARD D. KENT
Secretary
Morgan Hill, California
April 21, 1999
- --------------------------------------------------------------------------------
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 1999 Annual
Meeting of Stockholders to be held on May 26, 1999 (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 21, 1999, 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 March 31, 1999, the Company had outstanding 13,383,010 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.
<PAGE> 5
INFORMATION ABOUT CIDCO INCORPORATED
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 31, 1999, 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 person 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>
Arthur A. Watson, Jr ............................... 1,438,700(3) 10.2
2787 Burning Daylight Farm
Free Union, Virginia 22940
Paul G. Locklin .................................... 966,300(4) 6.8
Trimark Financial Corporation ...................... 922,000(5) 6.6
One First Canadian Place,
Suite 5600, P.O. Box 487
Toronto Ontario M5X 1ES
Dimensional Fund Advisors Inc. ..................... 829,500(6) 5.9
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Daniel L. Eilers ................................... 240,000(7) 1.7
Richard M. Moley ................................... 122,500(8) *
Ernest K. Jacquet .................................. 84,211(9) *
Joseph A. Graziano ................................. 13,330(10) *
Richard D. Kent .................................... 1,979 *
Timothy J. Dooley .................................. 304(11) *
Ian G.A. Laing ..................................... 0 *
William A. Sole .................................... 0 *
All current directors and executive officers as a
group (9 persons) .................................. 1,428,624(12) 10.2
Former Officers:
Ho Leung Cheung .................................... 0(13) *
James R. Hindmarch ................................. 0(13) *
</TABLE>
- ------------
* Less than 1%.
2
<PAGE> 6
(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) Calculated on the basis of 14,081,010 shares of Common Stock outstanding
as of January 31, 1999, except that shares of Common Stock underlying
options exercisable within 60 days of January 31, 1999 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/A filed on October 29, 1998 with the Securities
and Exchange Commission.
(4) Includes 107,500 shares subject to options exercisable within 60 days of
January 31, 1999 and 10,000 shares owned by the Matthew Locklin Trust,
for which Mr. Locklin serves as trustee and has sole voting and
disposition power.
(5) Based on a Schedule 13G filed on February 1, 1999 with the Securities
and Exchange Commission.
(6) Based on a Schedule 13G filed on February 12, 1999 with the Securities
and Exchange Commission.
(7) Represents 240,000 shares subject to options exercisable within 60 days
of January 31, 1999.
(8) Includes 7,500 shares subject to options exercisable within 60 days of
January 31, 1999.
(9) Includes 69,000 shares held by J&R Investment Management Co. of which
Mr. Jacquet is an officer, director and 50% stockholder.
(10) Represents 13,330 shares subject to options exercisable within 60 days
of January 31, 1999.
(11) Represents 304 shares subject to options exercisable within 60 days of
January 31, 1999.
(12) See note (4) and notes (7) through (11). Includes 368,634 shares subject
to options exercisable within 60 days of January 31, 1999.
(13) Based upon the Company's records and a review of filings with the
Securities and Exchange Commission.
3
<PAGE> 7
MANAGEMENT
The table below sets forth, for the Company's directors, including the
Class B nominee to be elected at the Annual Meeting, certain information
regarding the background and the age of each director.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION WITH THE COMPANY AGE SINCE
- ------------------------ ------------------------- --- -----
<S> <C> <C> <C>
Class A directors whose terms expire at the 2001 Annual Meeting of Stockholders
Daniel L. Eilers Director 44 1997
Richard M. Moley Director 60 1994
Class B director nominated for election at the Annual Meeting:
Ernest K. Jacquet Director 52 1993
Class C director whose term expires at the 2000 Annual Meeting of Stockholders:
Paul G. Locklin Director 53 1986
</TABLE>
- -------------
Daniel L. Eilers has served as a director of the Company since March
1997. Since October 1998, Mr. Eilers has been a private investor and currently
serves as a director and/or advisor to several privately held companies. He
served as the President and Chief Executive Officer of the Company from March
1997 through September 1998. 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. 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 Internet working 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., Echelon Corporation 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 May 1998, Mr. Jacquet has served as Managing Partner of Parthenon
Capital, a private equity firm which invests in middle market companies. Prior
to founding Parthenon Capital, he was 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
Wilmar Industries and several privately held companies. Mr. Jacquet received a
B.S.E. degree and an M.S.E. degree from the University of Michigan and an M.B.A.
degree from Stanford Business School.
4
<PAGE> 8
Paul G. Locklin returned to the Company as President of the Telco
Products and Services Division of the Company in July 1998 and has served as
President and Chief Executive Officer of the Company since September 1998. Mr.
Locklin, co-founder of CIDCO, was President and Chief Executive Officer of the
Company from 1986 to 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. Prior to founding the company with Mr. Robert Diamond, Mr. Locklin
established PCI, an international electronics manufacturer that specialized in
liquid crystal displays, wire bondable printed circuit substrates, and
high-volume contract assembly. While at PCI, Mr. Locklin served as President and
CEO. Previous to his time at PCI, Mr. Locklin held a research position for the
color and Chemical Division of Hercules Inc. Mr. Locklin received a B.S. in
Marketing from California State University at Hayward.
Meetings of the Board of Directors. During 1998, the Board of Directors
of the Company held seventeen (17) meetings. During that period the Audit
Committee of the Board held two (2) meetings, the Compensation Committee of the
Board held two (2) meetings, the Stock Option Committee held no meetings, but
acted numerous times by unanimous written consent, and the Nominating Committee
held one (1) meeting. 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 are Messrs. Eilers and Jacquet.
During 1998, Joseph A. Graziano served as a member of this committee; Mr.
Graziano resigned in March 1999 and was replaced on this committee by Mr.
Eilers. Mr. McDonald also served on this committee in 1998 until his term
expired in May 1998. 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, reviewing the independence of the
Company's auditors; and such other matters as are referred from time to time by
the Board of Directors.
The members of the Compensation Committee are Messrs. Moley and Jacquet.
During 1998 Mr. Graziano served as a member of this committee; Mr. Graziano
resigned in March 1999 and was replaced on this committee by Mr. Jacquet. Mr.
McDonald also served on this committee in 1998 until his term expired in May
1998. 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," "REPORT
OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION" and "REPORT OF THE
COMPENSATION COMMITTEE ON REPRICING OF OPTIONS" below.
The members of the Stock Option Committee are Messrs. Moley and Eilers.
Mr. Graziano served as a member of this committee; Mr. Graziano resigned in
March 1999 and was replaced on this committee by Mr. Eilers. The Stock Option
Committee is responsible for administering the Company's 1993 Second Amended and
Restated Stock Option Plan (the "1993 Plan"), including approving stock option
grants to officers and employees of Company and the Amended and Restated 1998
Nonstatutory Stock Option Plan (the "1998 Plan"). For additional information
about the Stock Option Committee, see "EXECUTIVE COMPENSATION AND OTHER MATTERS"
and "REPORT OF THE STOCK OPTION COMMITTEE ON REPRICING OF OPTIONS" below.
The members of the Nominating Committee are Messrs. Locklin and Moley.
Mr. Graziano served as a member of this committee until his resignation in March
1999. The Nominating Committee considers qualified candidates for appointment
and nomination for election to the Board of Directors and makes recommendations
concerning such candidates. Stockholders may nominate one or more persons for
election as directors at a meeting only if timely notice of such nomination(s)
has been given in writing to the Secretary of the Company in accordance with the
Company's bylaws. Nominations of stockholders intended to be presented at the
next annual meeting of stockholders of the Company must be received by the
Company at its offices at 220 Cochrane Circle, Morgan Hill, California no later
than December 23, 1999.
5
<PAGE> 9
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth information for the years ended December
31, 1998, 1997, and 1996 concerning the compensation of (a) the two persons who
served as President and Chief Executive Officer during 1998, (b) the four most
highly compensated executive officers of the Company other than the Chief
Executive Officer whose total salary and bonus for the year ended December 31,
1998 exceeded $100,000 and (c) two former executive officers of the Company who
would have been among the four other most highly compensated executive officers
of the Company for the year ended December 31, 1998 but were no longer serving
as executive officers of the Company as of December 31, 1998, 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(2)
------------------ ---- ------ -------- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul G. Locklin(3) ....... 1998 $110,577 $ 0 0 250,000 $ 1,097
President and Chief 1997 216,599(4) 0 0 30,000 323,544
Executive Officer 1996 247,627 0 9,615(5) 0 1,500
Ian G.A. Laing ........... 1998 207,692 0 0 238,332(7) 2,610
Executive Vice 1997 199,310 50,000 15,355(6) 75,000(8) 2,547
President, Network 1996 86,095 12,500 28,073(6) 0 0
Phones & Accessory
Products
Richard D. Kent .......... 1998 192,308 0 0 246,664(7) 3,179
Chief Financial 1997 166,923 24,375 0 60,000(9) 2,669
Officer and Chief 1996 118,100 0 0 0 1,500
Operating Officer
William A. Sole(10) ...... 1998 142,308 71,000 0 225,000(7) 3,022
Executive Vice 1997 -- -- -- -- --
President, 1996 -- -- -- -- --
Worldwide Sales and
Marketing
Timothy J. Dooley(11) .... 1998 93,105 0 0 165,000(13) 139,068
Executive Vice 1997 191,923 55,469(12) 0 60,000(14) 1,857
President, 1996 184,616 0 0 0 1,500
Strategic Bus
Development
Former Officers:
Daniel L. Eilers(15) ..... 1998 303,633 0 0 120,000(16) 611,343
Former President 1997 281,250 98,960 0 600,000(17) 2,939
and Chief Executive 1996 -- -- -- -- --
Officer
Ho Leung Cheung .......... 1998 198,652 0 0 75,000(18) 210,315
Former Vice 1997 92,308 50,000 0 0 220
President and 1996 -- -- -- -- --
General Manager,
Internet Solutions
Division
</TABLE>
6
<PAGE> 10
<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(2)
------------------ ---- ------ -------- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James R. Hindmarch ....... 1998 159,565 0 127,041(6) 37,500 212,743
Former Vice 1997 264,243 0 99,992(6) 0 3,120
President, 1996 -- -- -- -- --
Worldwide Operations
</TABLE>
- --------
(1) Bonuses are based on performance. See "REPORT OF THE COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION."
(2) Represents: (i) matching contributions by the Company to the Company's
401(k) plan in the following amounts for 1998, 1997 and 1996,
respectively: Locklin ($0, $2,500, $1,500), Laing ($2,500, $2,405, $0),
Kent ($2,500, $2,500, $1,500), Sole ($2,500, N/A, N/A), Dooley ($2,500,
$1,637, $1,500), Eilers ($2,500, $2,500, N/A), Cheung ($2,500, $0, N/A),
Hindmarch ($2,500, $2,500, N/A), (ii) insurance premiums paid by the
Company with respect to life insurance in the following amounts during
1998 and 1997, respectively (no premiums were paid during 1996): Locklin
($1,097, $0), Laing ($110, $142), Kent ($679, $169), Sole ($522, N/A),
Dooley ($714, $220), Eilers ($902, $439), Cheung ($659, $220), Hindmarch
($2,302, $620), and (iii) severance payments made in 1998 and 1997,
respectively: Locklin ($0, $321,044), Dooley ($135,854, $0), Eilers
($607,941, $0), Cheung ($207,156, $0), Hindmarch ($207,941, $0). See
"EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS."
(3) Mr. Locklin served as President and Chief Executive Officer of the
Company from 1986 to March 1997. He returned to the Company as
President, Telco Products and Services Division in July 1998 and has
served as President and Chief Executive Officer since September 1998.
See "EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS."
(4) 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.
(5) Represents depreciation on automobile in the amount of $9,615 for 1996.
(6) Represents payment of relocation expenses.
(7) Includes: (i) for Mr. Laing, 156,666 shares for options outstanding as
of December 31, 1998, and 81,666 shares for options previously granted
in 1998 which were canceled and replaced pursuant to the August 17, 1998
repricing; (ii) for Mr. Kent, 153,332 options outstanding as of December
31, 1998, and 93,332 shares for options previously granted in 1998 which
were canceled and replaced pursuant to the August 17, 1998 repricing;
and (iii) for Mr. Sole, 150,000 shares for options outstanding as of
December 31, 1998, and 75,000 shares for options previously granted in
1998 which were canceled and replaced pursuant to the August 17, 1998
repricing. See "OPTION GRANTS IN LAST FISCAL YEAR" table and "REPORT OF
THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."
(8) Includes 25,000 shares for options granted in 1997 and 50,000 options
for shares that were previously granted in 1996 and canceled and
replaced pursuant to the January 1997 repricing. All shares listed in
1997 have been canceled and replaced pursuant to the August 17, 1998
repricing.
(9) Includes 40,000 shares for options granted in 1997, and 20,000 shares
for options previously granted in 1994 and 1996 that were canceled and
replaced pursuant to the January 1997 repricing. All shares listed in
1997 have been canceled and replaced pursuant to the August 17, 1998
repricing.
(10) Mr. Sole joined the Company in April 1998.
(11) Mr. Dooley served in various positions at the Company from June 1991 to
April 1998. He returned to the Company in October 1998 as Executive Vice
President, Strategic Business Development. See "EMPLOYMENT CONTRACTS AND
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS."
(12) Includes commissions in the amount of $25,000.
(13) Includes 150,304 shares for options outstanding as of 1998, and 75,000
shares for options previously granted in 1995, 1997 and 1998 which were
canceled and replaced pursuant to the October 30, 1998 repricing. See
"OPTION GRANTS IN LAST FISCAL YEAR" table and "REPORT OF THE STOCK
OPTION COMMITTEE ON REPRICING OF OPTIONS."
7
<PAGE> 11
(14) Includes 25,000 shares for options granted in 1997 and 35,000 shares for
options previously granted in 1995 which were canceled and replaced
pursuant to the January 1997 repricing. All shares listed in 1997 have
been canceled and replaced pursuant to the October 30, 1998 repricing.
(15) Mr. Eilers severed employment with the Company in September 1998. See
"EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS."
(16) Includes options repriced on September 30, 1998, replacing options
granted in 1997. See "OPTION GRANTS IN LAST FISCAL YEAR" table and
"REPORT OF THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS."
(17) Represents options approved outside the 1993 Plan pursuant to a
Non-Qualified Stock Option Agreement in connection with Mr. Eilers'
employment agreement.
(18) Includes options repriced on August 17, 1998, replacing options granted
in 1997. See "OPTION GRANTS IN LAST FISCAL YEAR" table and "REPORT OF
THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."
8
<PAGE> 12
STOCK OPTIONS GRANTED IN FISCAL 1998
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, 1998, to the persons name in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
INDIVIDUAL GRANTS IN FISCAL 1998 APPRECIATION FOR OPTION TERM(1)
------------------------------------------------------------- ------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#)(2) IN FISCAL YEAR ($/SH)(3) DATE 5%($) 10%($)
---- ------------- -------------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Paul G. Locklin ...... 250,000 8.75 $ 2.75 11/12/08 423,365 $1,095,698
Ian G.A. Laing ....... 81,666(4) 2.86 3.75 07/28/08 192,597 488,080
81,666(5) 2.86 3.00 08/17/08 154,078 390,464
25,000(5) .88 3.00 08/17/08 47,167 119,531
50,000(5) 1.75 3.00 08/17/08 94,334 239,061
Richard D. Kent ...... 15,000(4) .53 8.63 04/20/08 81,363 206,190
78,332(4) 2.74 3.75 07/28/08 184,735 468,154
78,332(5) 2.74 3.00 08/17/08 147,788 374,523
20,000(6) .70 3.00 08/17/08 37,734 95,625
10,000(6) .35 3.00 08/17/08 18,867 47,812
20,000(6) .70 3.00 08/17/08 37,734 95,625
10,000(6) .35 3.00 08/17/08 18,867 47,812
15,000(5) .53 3.00 08/17/08 28,300 71,718
William A. Sole ...... 75,000(4) 2.63 8.63 04/14/08 406,816 1,030,952
75,000(5) 2.63 3.00 08/17/08 141,501 358,592
75,000 2.63 1.88 10/21/08 88,438 224,120
Timothy J. Dooley .... 15,000(7) .53 12.78 03/19/08 120,569 305,544
75,000 2.63 1.88 10/21/08 88,438 224,120
35,000(8) 1.23 3.00 10/30/08 5,488 70,934
25,000(8) .88 3.00 10/30/08 3,920 50,667
15,000(9) .53 3.00 10/30/08 2,352 30,400
Former Officers:
Daniel L. Eilers ..... 120,000(10) 4.20 3.00 09/21/99(10) 20,250 143,279
Ho Leung Cheung ...... 75,000(6) 2.63 3.00 08/17/08 141,501 358,592
James R. Hindmarch ... 37,500 1.31 8.63 04/20/08 203,408 515,476
</TABLE>
9
<PAGE> 13
- ----------
(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 noted below, the options listed were granted under the 1993
Plan. Such options vest 25% after one year and an additional 1/48th each
month thereafter until fully vested. 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, except
that options repriced on October 30, 1998 for Mr. Dooley were repriced
at the greater of $3.00 or the market value on the date of grant and
options repriced on September 30, 1998 for Mr. Eilers were repriced
under the term of a Confidential Separation Agreement with Mr. Eilers.
See "EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS," "REPORT OF THE STOCK OPTION COMMITTEE
ON REPRICING OF OPTIONS" and "REPORT OF THE BOARD OF DIRECTORS ON
REPRICING OPTIONS."
(4) These options were canceled and replaced in connection with the August
17, 1998 repricing.
(5) Represents options that were repriced on August 17, 1998, replacing
options that were granted in 1998.
(6) Represents options that were repriced on August 17, 1998, replacing
options that were granted in 1997.
(7) These options were canceled and repriced in connection with the October
30, 1998 repricing.
(8) Represents options that were repriced on October 30, 1998, replacing
options that were granted in 1997.
(9) Represents options that were repriced on October 30, 1998, replacing
options that were granted in 1998.
(10) Represents an option that was repriced on September 30, 1998, replacing
an option that was granted in 1997. Such option was granted outside of
the 1993 Plan and vests at the rate of 1.67% per month through September
12, 1998. Such option is exercisable until the earlier of (a) the date
occurring 12 months after the later of September 21, 1998, the date Mr.
Eilers' employment terminated, or the date Mr. Eilers ceases to be a
director, or (b) the expiration on March 12, 2007 or earlier termination
of the option. See "EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS."
10
<PAGE> 14
OPTION EXERCISES AND FISCAL 1998 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, 1998, and unexercised options held as of December 31, 1998, by the
persons named in the Summary Compensation Table.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ON $ VALUE OPTIONS AT DECEMBER 31, 1998 DECEMBER 31, 1998(1)
NAME EXERCISE REALIZED EXERCISABLE(2) UNEXERCISABLE $ EXERCISABLE(2) $ UNEXERCISABLE
---- -------- -------- --------------- -------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Paul G. Locklin ....... 0 $ 0 100,000 280,000 $187,500 $ 31,250
Ian G.A. Laing ........ 0 0 27,999 131,667 0 0
Richard D. Kent ....... 0 0 19,582 133,750 0 0
William A. Sole ....... 0 0 0 150,000 0 75,000
Timothy J. Dooley ..... 0 0 20,303 130,001 570 75,000
Former Officers:
Daniel L. Eilers(3) ... 0 0 225,000 375,000 0 0
James R. Hindmarch(4) . 0 0 0 0 0 0
Ho Leung Cheung(4) .... 0 0 0 0 0 0
</TABLE>
- ---------
(1) Based on a fair market value of $2.88, the closing price of the Common
Stock on December 31, 1998, as reported by The NASDAQ National Market.
Does not include options that had an exercise price greater than $2.88.
(2) Except as noted below the options listed above were granted under the
1993 Plan and vest and become exercisable 25% after one year and an
additional 1/48 per month thereafter.
(3) Mr. Eilers' option vests at a rate of 1.67% per month through September
12, 1999. Such option is exercisable until the earlier of (a) the date
occurring 12 months after the later of September 21, 1998, the date Mr.
Eilers' employment terminated, or the date Mr. Eilers ceases to be a
director, or (b) the expiration on March 12, 2007 or earlier termination
of the option. See "EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS."
(4) Messrs. Hindmarch's and Cheung's options were canceled in connection
with the termination of their employment.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On November 12, 1998 the Company entered into an employment agreement with Paul
G. Locklin, the President and Chief Executive Officer of the Company (the
"Locklin Agreement"). In connection with the Locklin Agreement, he was granted a
non-qualified option to purchase 250,000 shares of the Company's Common Stock
under the 1993 Plan at an exercise price of $2.75 per share. The Locklin
Agreement provides that in the event Mr. Locklin's employment is terminated by
the Company without "Cause" or by Mr. Locklin for "Constructive Termination" (as
such terms are defined in the Locklin Agreement), Mr. Locklin shall receive the
following severance benefits: (i) a lump sum payment equal to twelve months of
Mr. Locklin's then effective base salary, and (ii) a lump sum payment for COBRA
medical insurance coverage for 12 months after the date of termination. If
within six months of a "Change of Control" (as defined in the Locklin Agreement)
Mr. Locklin employment is terminated by the Company without "Cause" or by Mr.
Locklin for "Constructive Termination," then Mr. Locklin is entitled to certain
stock option acceleration benefits in addition to the payments described above.
11
<PAGE> 15
On September 30, 1994 and June 28, 1996, respectively, the Company
entered into employment agreements (the "Employment Agreements") with Messrs.
Dooley and Laing (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 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. 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 such Officer's then current base salary and
(ii) continuation for six months (twelve months for Mr. Laing) of certain
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 June 1, 1998, the Company entered into a new employment agreement
with Mr. Kent (the "Kent Agreement") which provides that in the event Mr. Kent's
employment is terminated by the Company without "Cause" or by Mr. Kent for
"Constructive Termination" (as such terms are defined in the Kent Agreement),
Mr. Kent shall receive the following severance benefits: (i) a lump sum payment
equal to twelve months of Mr. Kent's then effective base salary, and (ii) a lump
sum payment for COBRA medical insurance coverage for 12 months after the date of
termination. If within six months of a "Change of Control" (as defined in the
Kent Agreement) Mr. Kent's employment is terminated by the Company without
"Cause" or by Mr. Kent for "Constructive Termination," then Mr. Kent is entitled
to certain stock option acceleration benefits in addition to the payments
described above.
On April 8, 1998, the Company offered William A. Sole a position with
the Company as the Vice President of Sales pursuant to a letter dated April 8,
1998 (the "Sole Offer Letter"). In the Sole Offer Letter, the Company guaranteed
Mr. Sole an annual base salary of $200,000. In addition, the Company granted Mr.
Sole a target bonus of $100,000 for fiscal year 1998, which was guaranteed on a
pro-rated basis, as well as an option to purchase 75,000 shares of the Company's
common stock. The Sole Offer Letter also provides for Mr. Sole to participate in
Company benefit plans.
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 provided for a minimum base annual
salary of $375,000 and a $98,960 bonus for 1997. For subsequent calendar years,
the Eilers Agreement provided that Mr. Eilers was to 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 was not to be less than $125,000. 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 in the Eilers Agreement), Mr. Eilers was to 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 his option and (iii) continuation of Company-paid benefits for
one year after date of termination. In addition, if Mr. Eilers' employment was
terminated in connection with a change of control of the Company, and if any
excise tax was due as a result of "parachute payments" under the Internal
Revenue Code of 1998, as amended, the Company was to make a cash payment to Mr.
Eilers equal to the amount of such excise tax. Mr. Eilers' employment was
terminated in September 1998 and he entered into a separation agreement with the
Company as described below.
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 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 option may be exercised within twelve
12
<PAGE> 16
months of the date of termination. In the event of a change of control, if Mr.
Eilers' employment is terminated without "Cause" or Mr. Eilers resigns with
"Good Reason", the vesting of the option will accelerate in full.
On September 30, 1998, the Company entered into a Confidential
Separation Agreement with Mr. Eilers in connection with his resignation as
President and Chief Executive Officer (the "Eilers Separation Agreement").
Pursuant to the Eilers Separation Agreement, Mr. Eilers received a lump sum cash
payment equal to the sum of (i) one year of Mr. Eilers' current base salary of
$375,000, (ii) his target bonus of $225,000 for the year ending December 31,
1998 and (iii) $7,941 for COBRA medical insurance coverage for the period of
twelve months following the termination date, less applicable income and
employment tax withholding. The Eilers Separation Agreement also provides that
the option for 600,000 shares granted to Mr. Eilers in 1997 will continue to
vest at the rate of 1.67% per month until September 12, 1999. The option will
remain exercisable to the extent vested until the earlier of (i) the date
occurring 12 months after the later of September 21, 1998, the date Mr. Eilers'
employment terminated, or the Mr. Eilers ceases to be a director or (ii) the
expiration on March 12, 2007 or earlier termination of the option. The Eilers
Separation Agreement also provided for the repricing to $3.00 of 120,000 vested
shares under the option. See "REPORT OF THE BOARD OF DIRECTORS ON REPRICING OF
OPTIONS."
On July 2, 1998 and October 17, 1998, the Company entered into
Confidential Separation Agreements with Messrs. Hindmarch and Cheung, the
Company's former Vice President Worldwide Operations and Vice President and
General Manager, Internet Solutions Division, respectively. Pursuant to such
agreements, Messrs. Hindmarch and Cheung each received: (i) a lump sum cash
payment in the amount of $200,000 and (ii) payment in the amount of $7,941 and
$7,156, respectively, for COBRA medical insurance coverage for the period of
twelve months following the termination date, less applicable income and
employment tax withholding.
Pursuant to the 1993 and 1998 Plans, 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 and 1998 Plans, the vesting of outstanding
options will automatically accelerate in full. Pursuant to the Directors' Plan
in the event of a change in control, the vesting of options outstanding under
the Directors' Plan will automatically 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, 1998, 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 pursuant to the
Directors' Plan. During 1998, Mr. Jacquet received options to purchase 30,000
shares of the Company's Common Stock, under the Directors Plan. An option for
33,325 shares previously granted to Mr. Jacquet during his association with
Summit Partners was canceled by the Board of Directors in 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors acted with regard to the separation agreement
between the Company and Mr. Eilers and the repricing of certain of Mr. Eilers'
stock options in connection with the termination of his employment as President
and Chief Executive Officer. The members of the Board of Directors at the time
of such action were Paul G. Locklin, Chairman of the Board, Daniel L. Eilers,
Richard M. Moley, Ernest K. Jacquet and Joseph A. Graziano. Mr. Eilers did not
participate in any deliberations with respect to his separation agreement or the
repricing.
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.
13
<PAGE> 17
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE OF LENGTH OF ORIGINAL
UNDERLYING STOCK EXERCISE PRICE OPTION TERM
OPTIONS AT TIME OF AT TIME OF NEW REMAINING AT DATE OF
NAME AND REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
PRINCIPAL POSITION DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT(1)
------------------ ---- ------- --------- --------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Ian G.A. Laing................ 8/17/98 50,000 $ 3.00 $12.43 $ 3.00 8 years 157 days
Executive Vice President 8/17/98 25,000 $ 3.00 $14.63 $ 3.00 8 years 227 days
and General Manager, Smart 8/17/98 81,666 $ 3.00 $ 3.75 $ 3.00 9 years 346 days
Phones Division 1/21/97 50,000 $12.43 $16.75 $12.43(2) 9 years 192 days
Richard D. Kent............... 8/17/98 20,000 $ 3.00 $12.94 $ 3.00 8 years 168 days
Vice President Finance, 8/17/98 10,000 $ 3.00 $12.43 $ 3.00 8 years 157 days
Chief Financial Officer 8/17/98 10,000 $ 3.00 $12.43 $ 3.00 8 years 157 days
and Chief Operations Officer 8/17/98 20,000 $ 3.00 $18.75 $ 3.00 9 years 43 days
8/17/98 15,000 $ 3.00 $ 8.63 $ 3.00 9 years 247 days
8/17/98 78,332 $ 3.00 $ 3.75 $ 3.00 9 years 346 days
1/21/97 10,000 $12.43 $32.35 $12.43(2) 7 years 162 days
1/21/97 10,000 $12.43 $16.75 $12.43(2) 9 years 70 days
William A. Sole............... 8/17/98 75,000 $ 3.00 $ 8.63 $ 3.00 9 years 241 days
Executive Vice President,
Worldwide Sales & Marketing
Timothy J. Dooley............. 10/30/98 35,000 $ 1.94 $12.43 $ 3.00(3) 8 years 83 days
Executive Vice President, 10/30/98 25,000 $ 1.94 $14.63 $ 3.00(3) 8 years 153 days
Strategic Business 10/30/98 15,000 $ 1.94 $12.78 $ 3.00(3) 9 years 141 days
Development 1/21/97 35,000 $12.43 $24.95 $12.43(2) 8 years 11 days
Marv Tseu..................... 1/21/97 60,000 $12.43 $16.75 $12.43(2) 9 years 192 days
Executive Vice President,
Sales & Marketing
Former Executive Officers(5):
Daniel L. Eilers.............. 9/30/98 120,000 $ 1.88 $14.25 $ 3.00(4) 8 years 168 days(4)
Former President and Chief
Executive Officer
Ho Leung Cheung............... 8/17/98 75,000 $ 3.00 $13.63 $ 3.00 8 years 318 days
Vice President & General
Manager, Internet Division
Thomas C. Bristovish.......... 1/21/97 8,336 $12.43 $18.67 $12.43(2) 7 years 102 days
Vice President, Sales 1/21/97 13,330 $12.43 $24.95 $12.43(2) 8 years 11 days
Edward Forker................. 1/21/97 25,000 $12.43 $30.62 $12.43(2) 8 years 163 days
Vice President, Sales 1/21/97 15,000 $12.43 $27.50 $12.43(2) 9 years 11 days
Mark A. Sherman............... 1/21/97 12,000 $12.43 $25.34 $12.43(2) 7 years 256 days
Vice President, Operations 1/21/97 10,000 $12.43 $24.50 $12.43(2) 8 years 314 days
</TABLE>
- ------------------
14
<PAGE> 18
(1) Options repriced on August 17, 1998 and October 30, 1998 continue to
vest at the same rate as the original options but, with limited
exceptions, are subject to a twelve-month restriction on exercise. See
"REPORT OF THE STOCK OPTION COMMITTEE ON REPRICING OF OPTIONS" and
"REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS." Options
repriced on January 21, 1997 vest over a three-year period beginning on
the date of the repricing and optionees forfeited any accrued vesting on
canceled options.
(2) 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.
(3) Established by the Stock Option Committee to be the greater of $3.00 per
share or the closing price of the Company's common stock as reported on
the NASDAQ National Market on Friday, October 30, 1998. See "REPORT OF
THE STOCK OPTION COMMITTEE ON REPRICING OF OPTIONS."
(4) Under the Eilers Separation Agreement such option was repriced at $3.00
per share. Such option is exercisable until the earlier of (a) the date
occurring 12 months after the later of September 21, 1998, the date Mr.
Eilers' employment terminated, or the date Mr. Eilers ceases to be a
director, or (b) the expiration on March 12, 2007 or earlier termination
of the option. See "EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS" and "REPORT OF THE BOARD OF
DIRECTORS ON REPRICING OF OPTIONS."
(5) Persons listed are no longer employees of CIDCO Incorporated.
15
<PAGE> 19
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is comprised of
non-employee members of the Company's Board of Directors. The members of the
Compensation Committee are Messrs. Moley and Jacquet. During 1998 Mr. Graziano
served as a member of this committee; Mr. Graziano resigned in March 1999 and
was replaced on this committee by Mr. Jacquet. Mr. McDonald also served on this
committee in 1998 until his term expired in May 1998. The Compensation Committee
is responsible for setting and administering the policies governing annual
compensation of the executive officers of the Company. The Compensation
Committee reviews the performance and compensation levels for executive officers
and sets salary levels.
The members of the Stock Option Committee are Messrs. Moley and Eilers.
During 1998 Mr. Graziano served as a member of this committee; Mr. Graziano
resigned in March 1999 and was replaced on this committee by Mr. Eilers. The
Stock Option Committee is responsible for administering the Company's 1993
Second Amended and Restated Stock Option Plan (the "1993 Plan"), including
approving stock option grants to officers and employees of Company and the
Amended and Restated 1998 Nonstatutory Stock Option Plan (the "1998 Plan").
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 Compensation 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 NASDAQ
Telecommunications 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
Compensation 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
Compensation 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 Compensation Committee believes that this type of bonus program in which
bonuses are based on the Company's attaining established financial targets,
properly align the interests of the Company's executive officers with the
interests of stockholders. Under the Incentive Plan, the Compensation Committee
establishes the "Corporate Performance Goal," which is the Company's achievement
of such level of net income as the Compensation Committee shall determine. The
Compensation 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
Compensation 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 Compensation
Committee, in its discretion, may provide a bonus based on individual
achievement of individual performance goals, established at the beginning of the
year. In 1998, the corporate performance goal of net income was not attained and
accordingly no bonus was awarded to any
16
<PAGE> 20
executive officer with the exception of Mr. Sole, who received a bonus of
$71,000 based upon a contractual commitment as part of Mr. Soles' offer of
employment in April 1998.
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 1998,
the Stock Option Committee approved stock option grants to certain of the
executive officers consistent with these criteria. See "OPTION GRANTS IN LAST
FISCAL YEAR."
Mr. Eilers' compensation as President and Chief Executive Officer prior
to the termination of his employment in September 1998 was established pursuant
to his employment agreement, the terms of which were set by arms length
bargaining and which had been approved by the Board of Directors in 1997. Mr.
Locklin's compensation as President, Telco Products and Services, including his
salary and bonus, was established by the Committee in July 1998 upon
recommendation of Mr. Eilers, then President and Chief Executive Officer.
Following Mr. Locklin's appointment as President and Chief Executive Officer in
September 1998, the compensation remained as set in July 1998, with the approval
of the Compensation Committee. Following Mr. Locklin's appointment as President
and Chief Executive Officer, the Compensation Committee granted Mr. Locklin a
stock option for 250,000 shares under the 1993 Plan. On November 12, 1998, Mr.
Locklin entered into an employment agreement with the Company providing certain
change-of-control benefits and severance benefits generally consistent with
similar benefits provided to other executive officers. The agreement was
ratified by the Compensation Committee in 1999.
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 would generally qualify for an exemption from these restrictions
so long as the options are granted by a committee whose members are non-employee
directors The Company expects that the Stock Option Committee will generally be
comprised of non-employee directors, and that to the extent such Committee is
not so constituted for any period of time, the options granted during such
period will not be likely to result in compensation exceeding $1,000,000 in any
year. 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. 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
Ernest K. Jacquet
Richard M. Moley
STOCK OPTION COMMITTEE
Daniel L. Eilers
Richard M. Moley
17
<PAGE> 21
REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS
On July 28, 1998, the Compensation Committee 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 and 1998 Plans
having exercise prices above the recent trading prices of the Company's Common
Stock (the "Underwater Options"). On July 28, 1998 the Compensation Committee
approved a repricing of options held by all employees who remained in active
service with the Company on August 17, 1998, the effective date of the
repricing.
The Compensation 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 Compensation
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 Compensation
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 Compensation
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 Compensation
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 Compensation 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
eligible employees holding Underwater Options could elect to cancel such options
and receive in exchange new options pursuant to the 1993 and 1998 Plans having
an exercise price equal to the closing price of the Company's Common Stock
quoted on the NASDAQ National Market on August 17, 1998, 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 maintains the same vesting schedule as the option
it replaced but may not be exercised by the optionee for one year following the
effective date of the repricing, subject to certain exceptions. The term of each
New Option is ten years, commencing on August 17, 1998, unless earlier
terminated in accordance with the provisions of the option agreement evidencing
such New Option. Subject to any provisions in an employment agreement with the
Company which are more favorable to the optionee, if the optionee's service
terminates for any reason except death or permanent disability, each New Option
terminates 30 days after such termination or, if earlier, the date on which the
New Option expires by its terms. Options for a total of 1,214,238 shares with
exercise prices ranging from $3.75 per share to $25.34 per share were exchanged
for options for an equal number of shares at an exercise price of $3.00 per
share.
COMPENSATION COMMITTEE
Ernest K. Jacquet
Richard M. Moley
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<PAGE> 22
REPORT OF THE STOCK OPTION COMMITTEE
ON REPRICING OF OPTIONS
On October 30, 1998, the Stock Option Committee approved a repricing of
options for three employees who were not in active service with the Company as
of the effective date of the August 17, 1998 repricing but who had returned to
active status prior to the expiration of stock options previously granted to
them. See "REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS." The
Stock Option Committee determined that it was in the best interests of the
Company and its stockholders to extend to such employees the opportunity to
receive new options on terms substantially equivalent to the August 17, 1998
repricing program. The Committee further determined that the exercise price of
the New Options would be equal to the greater of $3.00, the new exercise price
of the options repriced on August 17, 1998, or the closing price of the
Company's Common Stock quoted on the NASDAQ National Market on October 30, 1998,
the effective date of the new repricing. Options for a total of 78,850 shares
with exercise prices ranging from $12.43 per share to $18.75 per share were
exchanged for options for an equal number of shares at an exercise price of
$3.00.
STOCK OPTION COMMITTEE
Daniel L. Eilers
Richard M. Moley
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<PAGE> 23
REPORT OF THE BOARD OF DIRECTORS
ON REPRICING OF OPTIONS
The Board of Directors, not including Mr. Eilers, reviewed Mr. Eilers'
employment agreement with counsel in connection with the termination of his
employment as President and Chief Executive Officer in September 1998. The
separation agreement reflected the terms of the employment agreement relating to
severance benefits.
The Board then considered the assistance Mr. Eilers might be able to
provide in arranging for transactions for the sale or transfer of the Company's
Internet Solutions Division ("ISD") assets. The Board concluded that it was
appropriate to offer Mr. Eilers the right to reprice a portion of his options to
$3.00 in order to induce Mr. Eilers to seek out all possible transactions to
provide value to the stockholders. The percentage of options repriced to $3.00
was to be commensurate with the ISD assets actually sold or transferred. The
qualifying sales of ISD assets were those approved by the Board of Directors
within the six months following the termination.
THE BOARD OF DIRECTORS*
Joseph A. Graziano**
Paul G. Locklin
Richard M. Moley
Ernest K. Jacquet
- ----------------
* Not including Daniel L. Eilers who did not participate in any of these
discussions.
** Mr. Graziano resigned from the Board of Directors in March 1999.
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<PAGE> 24
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, the Hambrecht & Quist
Technology Index and the NASDAQ Telecommunications Index for the period
commencing on March 3, 1994, the date of the Company's initial public offering,
and ending on December 31, 1998.(1)
COMPARISON OF CUMULATIVE TOTAL RETURN
FROM MARCH 3, 1994 THROUGH DECEMBER 31, 1998:(1)
CIDCO INCORPORATED, THE NASDAQ STOCK MARKET-U.S. INDEX,
HAMBRECHT & QUIST TECHNOLOGY INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
<TABLE>
<CAPTION>
3/3/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CIDCO Incorporated 100 193 170 117 130 19
NASDAQ Stock Market - U.S. 100 97 137 168 207 291
Hambrecht & Quist Technology 100 109 163 202 237 369
NASDAQ Telecommunications 100 90 118 121 179 292
</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.
21
<PAGE> 25
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
The Company has a classified Board of Directors which currently consists
of five (5) directors, two (2) of whom are Class A directors, one (1) of which
is a Class B director, 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 2001, 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. Joseph A. Graziano, who previously served as a Class C director,
resigned from the Board in March 1999 and there is a vacancy in Class C of the
Board of Directors. The Nominating Committee is currently seeking a non-employee
candidate for such vacancy.
Management's nominee for election at the Annual Meeting to Class B of
the Board of Directors is Ernest K. Jacquet. If elected, the nominee will serve
as director until the Company's Annual Meeting of Stockholders in 2002, and
until his successor is elected and qualified. If a quorum is present and voting,
the nominee for the position as Class B director receiving the highest number of
votes will be elected. Abstentions and broker non-votes will have no effect on
the vote. If the nominee declines to serve or becomes 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 a
substitute nominee as the Board of Directors may designate. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEE NAMED ABOVE.
22
<PAGE> 26
PROPOSAL NUMBER TWO
APPROVAL OF THE COMPANY'S 1999 EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, the stockholders will be asked to approve the
CIDCO Incorporated 1999 Employee Stock Purchase Plan (the "Purchase Plan"). The
Purchase Plan authorizes the issuance of up to 350,000 shares of the Company's
Common Stock (subject to adjustment for certain changes in the capital structure
of the Company).
The Purchase Plan is intended to replace the Company's 1994 Employee
Stock Purchase Plan (the "1994 Plan"). As of December 31, 1998, the most recent
purchase date under the 1994 Plan, of the aggregate of 200,000 shares of Common
Stock authorized for issuance under the 1994 Plan, a total of 157,491 shares had
been issued and 42,509 shares remained available for employee purchases on June
30, 1999, the final purchase date under the 1994 Plan. The Board of Directors
has elected to terminate the 1994 Plan immediately following the June 30, 1999
purchase date.
The Board of Directors believes that the Purchase Plan benefits the
Company and its stockholders by providing its employees with an opportunity
through payroll deductions to purchase shares of Common Stock that is helpful in
attracting, retaining, and motivating valued employees. To provide an adequate
reserve of shares to permit the Company to continue offering employees a stock
purchase opportunity, the Board of Directors has adopted the Purchase Plan,
subject to and effective upon the date of stockholder approval.
SUMMARY OF THE PURCHASE PLAN
The following summary of the Purchase Plan is qualified in its entirety
by the specific language of the Purchase Plan, a copy of which is available to
any stockholder upon request.
GENERAL. The Purchase Plan is intended to qualify as an "employee stock
purchase plan" under section 423 of the Code. Each participant in the Purchase
Plan is granted at the beginning of each offering under the plan (an "Offering")
the right to purchase through accumulated payroll deductions up to a number of
shares of the Common Stock of the Company (a "Purchase Right") determined on the
first day of the Offering. The Purchase Right is automatically exercised on each
purchase date during the Offering unless the participant has withdrawn from
participation in the Purchase Plan prior to such date.
Shares Subject to Plan. A maximum of 350,000 of the Company's authorized
but unissued or reacquired shares of Common Stock may be issued under the
Purchase Plan, subject to appropriate adjustment in the event of any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company, or
in the event of any merger, sale of assets or other reorganization of the
Company. If any Purchase Right expires or terminates, the shares subject to the
unexercised portion of such Purchase Right will again be available for issuance
under the Purchase Plan.
ADMINISTRATION. The Purchase Plan is administered by the Board of
Directors or a duly appointed committee of the Board (hereinafter referred to as
the "Board"). Subject to the provisions of the Purchase Plan, the Board
determines the terms and conditions of Purchase Rights granted under the plan.
The Board will interpret the Purchase Plan and Purchase Rights granted
thereunder, and all determinations of the Board will be final and binding on all
persons having an interest in the Purchase Plan or any Purchase Right. The
Purchase Plan provides, subject to certain limitations, for indemnification by
the Company of any director, officer or employee against all reasonable
expenses, including attorneys' fees, incurred in connection with any legal
action arising from such person's action or failure to act in administering the
plan.
ELIGIBILITY. Any employee of the Company or of any present or future
parent or subsidiary corporation of the Company designated by the Board for
inclusion in the Purchase Plan is eligible to participate in an Offering under
the plan so long as the employee is customarily employed for at least 20 hours
per week and more than five months in any calendar year. However, no employee
who owns or holds options to purchase, or who, as a result of participation in
the Purchase Plan, would own or hold options to purchase, five percent or more
of the total combined voting power or value of all classes of stock of the
Company or of any parent or subsidiary corporation of
23
<PAGE> 27
the Company is eligible to participate in the Purchase Plan. As of April 2,
1999, approximately 247 employees, including 5 executive officers, would be
eligible to participate in the Purchase Plan were it then in effect.
OFFERINGS. Generally, each Offering under the Purchase Plan will be for
a period of six months (an "Offering Period") commencing on or about February 1
and August 1 of each year. If the Purchase Plan is approved by the stockholders,
the first Offering Period will commence on or about August 1, 1999 and end on or
about January 31, 2000. The Board may establish a different term for one or more
Offerings, not to exceed 27 months, or different commencement or ending dates
for any Offering Period.
PARTICIPATION AND PURCHASE OF SHARES. Participation in an Offering under
the Purchase Plan is limited to eligible employees who authorize payroll
deductions prior to the first day of an Offering Period (the "Offering Date").
Payroll deductions may not exceed 10% (or such other rate as the Board
determines) of an employee's compensation on any payday during the Offering
Period. An employee who becomes a participant in the Purchase Plan will
automatically participate in each subsequent Offering Period beginning
immediately after the last day of the Offering Period in which he or she is a
participant until the employee withdraws from the Purchase Plan, becomes
ineligible to participate, or terminates employment.
Subject to any uniform limitations or notice requirements imposed by the
Company, a participant may increase or decrease his or her rate of payroll
deductions or withdraw from the Purchase Plan at any time during an Offering.
Upon withdrawal, the Company will refund without interest the participant's
accumulated payroll deductions not previously applied to the purchase of shares.
Once a participant withdraws from an Offering, that participant may not again
participate in the same Offering.
Subject to certain limitations, each participant in an Offering is
granted a Purchase Right equal to the number of whole shares determined by
dividing $12,500 by the fair market value of a share of Common Stock on the
Offering Date. These dollar and share amounts will be prorated if the Board
establishes an Offering Period of other than six months. However, no participant
may purchase shares of Common Stock under the Purchase Plan or any other
employee stock purchase plan of the Company having a fair market value exceeding
$25,000 in for each calendar year (measured by the fair market value of the
Company's Common Stock on the first day of the Offering Period in which the
shares are purchased) in which a Purchase Right is outstanding at any time.
Purchase Rights are nontransferable and may only be exercised by the
participant.
On the last day of each Offering Period (a "Purchase Date"), the Company
issues to each participant in the Offering the number of shares of the Company's
Common Stock determined by dividing the amount of payroll deductions accumulated
for the participant during the Offering Period by the purchase price, limited in
any case by the number of shares subject to the participant's Purchase Right for
that Offering. The price at which shares are sold under the Purchase Plan is
established by the Board but may not be less than 85% of the lesser of the fair
market value per share of Common Stock on the Offering Date or on the Purchase
Date. The fair market value of the Common Stock on any relevant date generally
will be the closing price per share as reported on the NASDAQ National Market.
On April 5, 1999, the closing price per share of Common Stock was $4.31. Any
payroll deductions under the Purchase Plan not applied to the purchase of shares
will be returned to the participant without interest, unless the amount
remaining is less than the amount necessary to purchase a whole share of Common
Stock, in which case the remaining amount may be applied to the next Offering
Period.
CHANGE IN CONTROL. The Purchase Plan defines a "Change in Control" of
the Company as any of the following events upon which the stockholders of the
Company immediately before the event do not retain immediately after the event,
in substantially the same proportions as their ownership of shares of the
Company's voting stock immediately before the event, direct or indirect
beneficial ownership of more than 50% of the total combined voting power of the
stock of the Company, its successor, or the corporation to which the assets of
the Company were transferred: (i) a sale or exchange by the stockholders in a
single or series of related transactions of more than 50% of the Company's
voting stock, (ii) a merger or consolidation in which the Company is a party,
(iii) the sale, exchange or transfer of all or substantially all of the assets
of the Company, or (iv) a liquidation or dissolution of the Company. If a Change
in Control occurs, the surviving, continuing, successor or purchasing
corporation or parent corporation thereof may assume the Company's rights and
obligations under the Purchase
24
<PAGE> 28
Plan. However, if such corporation elects not to assume the outstanding Purchase
Rights, the Purchase Date of the then current Offering Period will be
accelerated to a date before the Change in Control specified by the Board. Any
Purchase Rights that are not assumed or exercised prior to the Change in Control
will terminate.
TERMINATION OR AMENDMENT. The Purchase Plan will continue until
terminated by the Board or until all of the shares reserved for issuance under
the plan have been issued. The Board may at any time amend or terminate the
Purchase Plan, except that the approval of the Company's stockholders is
required within twelve months of the adoption of any amendment increasing the
number of shares authorized for issuance under the Purchase Plan, or changing
the definition of the corporations which may be designated by the Board as
corporations the employees of which may participate in the Purchase Plan.
SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of participation
in the Purchase Plan and does not attempt to describe all possible federal or
other tax consequences of such participation or tax consequences based on
particular circumstances.
Generally, there are no tax consequences to an employee of either
becoming a participant in the Purchase Plan or purchasing shares under the
Purchase Plan. The tax consequences of a disposition of shares vary depending on
the period such stock is held before its disposition. If a participant disposes
of shares within two years after the Offering Date or within one year after the
Purchase Date on which the shares are acquired (a "disqualifying disposition"),
the participant recognizes ordinary income in the year of disposition in an
amount equal to the difference between the fair market value of the shares on
the Purchase Date and the purchase price. Such income may be subject to
withholding of tax. Any additional gain or resulting loss recognized by the
participant from the disposition of the shares is a capital gain or loss. If the
participant disposes of shares at least two years after the Offering Date and at
least one year after the Purchase Date on which the shares are acquired, the
participant recognizes ordinary income in the year of disposition in an amount
equal to the lesser of (i) the difference between the fair market value of the
shares on the date of disposition and the purchase price or (ii) the difference
between the fair market value of the shares on the Offering Date and purchase
price (determined as if the Purchase Right were exercised on the Offering Date).
Any additional gain recognized by the participant on the disposition of the
shares is a capital gain. If the fair market value of the shares on the date of
disposition is less than the purchase price, there is no ordinary income, and
the loss recognized is a capital loss. If the participant owns the shares at the
time of the participant's death, the lesser of (i) the difference between the
fair market value of the shares on the date of death and the purchase price or
(ii) the difference between the fair market value of the shares on the Offering
Date and purchase price (determined as if the Purchase Right were exercised on
the Offering Date) is recognized as ordinary income in the year of the
participant's death.
If the exercise of a Purchase Right does not constitute an exercise
pursuant to an "employee stock purchase plan" under section 423 of the Code, the
exercise of the Purchase Right will be treated as the exercise of a nonstatutory
stock option. The participant would therefore recognize ordinary income on the
Purchase Date equal to the excess of the fair market value of the shares
acquired over the purchase price. Such income is subject to withholding of
income and employment taxes. Any gain or loss recognized on a subsequent sale of
the shares, as measured by the difference between the sale proceeds and the sum
of (i) the purchase price for such shares and (ii) the amount of ordinary income
recognized on the exercise of the Purchase Right, will be treated as a capital
gain or loss, as the case may be.
A capital gain or loss will be long-term if the participant holds the
shares for more than 12 months and short-term if the participant holds the
shares for 12 months or less. Currently, long-term capital gains are generally
subject to a maximum tax rate of 20%.
If the participant disposes of the shares in a disqualifying
disposition, the Company should be entitled to a deduction equal to the amount
of ordinary income recognized by the participant as a result of the disposition,
except to the extent such deduction is limited by applicable provisions of the
Code or the regulations thereunder. In all other cases, no deduction is allowed
the Company.
25
<PAGE> 29
NEW PLAN BENEFITS
Because benefits under the Purchase Plan will depend on employees'
elections to participate and the fair market value of the Company's Common Stock
at various future dates, it is not possible to determine the benefits that will
be received by executive officers and other employees if the Purchase Plan is
approved by the stockholders. Non-employee directors are not eligible to
participate in the Purchase Plan. As of April 21, 1999, no purchases had been
made by any employee conditioned on stockholder approval of the Purchase Plan.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
Approval of this proposal requires a number of votes "For" the proposal
that represents a majority of the shares present or represented by proxy and
entitled to vote at the Annual Meeting, with abstentions and broker non-votes
each being counted as present for purposes of determining the presence of a
quorum, abstentions having the same effect as a negative vote and broker
non-votes having no effect on the outcome of the vote.
The Board of Directors believes that the opportunity to purchase shares
under the Purchase Plan is important to attracting and retaining qualified
employees essential to the success of the Company, and that stock ownership is
important to providing such persons with an incentive to perform in the best
interest of the Company and its stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE PURCHASE PLAN.
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<PAGE> 30
PROPOSAL NUMBER THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
The Board of Directors of the Company has selected
PricewaterhouseCoopers LLP as independent public auditors to audit the
consolidated financial statements of the Company for the year ending December
31, 1998. PricewaterhouseCoopers LLP has acted in such capacity since its
appointment in 1993. A representative of PricewaterhouseCoopers 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 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. 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 PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT PUBLIC
AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1999.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
The Company has an advance notice provision under its bylaws for
stockholder business to be presented at meetings of stockholders. Such provision
states that in order for stockholder business to be properly brought before a
meeting by a stockholder, such stockholder must have given timely notice thereof
in writing to the Secretary of the Company. A stockholder proposal to be timely
must be received at the Company's principal executive offices not less than 120
calendar days in advance of the one year anniversary of the date the Company's
proxy statement was released to stockholders in connection with the previous
year's annual meeting of stockholders; except that (i) if no annual meeting was
held in the previous year, (ii) if the date of the annual meeting has been
changed by more than thirty calendar days from the date contemplated at the time
of the previous year's proxy statement or (iii) in the event of a special
meeting, then notice must be received not later than the close of business on
the tenth day following the day on which notice of the date of the meeting was
mailed or public disclosure of the meeting date was made.
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
December 23, 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.
27
<PAGE> 31
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 Annual Meeting 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,
/s/ Richard D. Kent
---------------------------
RICHARD D. KENT
Secretary
April 21, 1999
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<PAGE> 32
APPENDIX
CIDCO INCORPORATED
1999 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The CIDCO Incorporated 1999 Employee
Stock Purchase Plan (the "PLAN") is hereby established effective as of the date
on which it is approved by the stockholders of the Company (the "EFFECTIVE
DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of Company and its stockholders by providing an incentive to attract,
retain and reward Eligible Employees of the Participating Company Group and by
motivating such persons to contribute to the growth and profitability of the
Participating Company Group. The Plan provides Eligible Employees with an
opportunity to acquire a proprietary interest in the Company through the
purchase of Stock. The Company intends that the Plan qualify as an "employee
stock purchase plan" under Section 423 of the Code (including any amendments or
replacements of such section), and the Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in effect until
the earlier of its termination by the Board or the date on which all of the
shares of Stock available for issuance under the Plan have been issued.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Any term not expressly defined in the Plan
but defined for purposes of Section 423 of the Code shall have the same
definition herein. Whenever used herein, the following terms shall have their
respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as specified by the
Board. Unless the powers of the Committee have been specifically limited, the
Committee shall have all of the powers of the Board granted herein, including,
without limitation, the power to amend or terminate the Plan at any time,
subject to the terms of the Plan and any applicable limitations imposed by law.
(d) "COMPANY" means CIDCO Incorporated, a Delaware
corporation, or any successor corporation thereto.
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<PAGE> 33
(e) "COMPENSATION" means, with respect to any
Offering Period, base wages or salary, overtime, bonuses, commissions, shift
differentials, payments for paid time off, payments in lieu of notice, and
compensation deferred under any program or plan, including, without limitation,
pursuant to Section 401(k) or Section 125 of the Code. Compensation shall be
limited to amounts actually payable in cash or deferred during the Offering
Period. Compensation shall not include moving allowances, payments pursuant to a
severance agreement, termination pay, relocation payments, sign-on bonuses, any
amounts directly or indirectly paid pursuant to the Plan or any other stock
purchase or stock option plan, or any other compensation not included above.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets
the requirements set forth in Section 5 for eligibility to participate in the
Plan.
(g) "EMPLOYEE" means a person treated as an employee
of a Participating Company for purposes of Section 423 of the Code. A
Participant shall be deemed to have ceased to be an Employee either upon an
actual termination of employment or upon the corporation employing the
Participant ceasing to be a Participating Company. For purposes of the Plan, an
individual shall not be deemed to have ceased to be an Employee while on any
military leave, sick leave, or other bona fide leave of absence approved by the
Company of ninety (90) days or less. If an individual's leave of absence exceeds
ninety (90) days, the individual shall be deemed to have ceased to be an
Employee on the ninety-first (91st) day of such leave unless the individual's
right to reemployment with the Participating Company Group is guaranteed either
by statute or by contract. The Company shall determine in good faith and in the
exercise of its discretion whether an individual has become or has ceased to be
an Employee and the effective date of such individual's employment or
termination of employment, as the case may be. For purposes of an individual's
participation in or other rights, if any, under the Plan as of the time of the
Company's determination, all such determinations by the Company shall be final,
binding and conclusive, notwithstanding that the Company or any governmental
agency subsequently makes a contrary determination.
(h) "FAIR MARKET VALUE" means, as of any date if on
such date the Stock is listed on a national or regional securities exchange or
market system or is regularly quoted by a recognized securities dealer, the Fair
Market Value of a share of Stock shall be the closing sale price of a share of
Stock (or the mean of the closing bid and asked prices of a share of Stock if
the Stock is so quoted instead) as quoted on the NASDAQ National Market, The
NASDAQ SmallCap Market, such other national or regional securities exchange or
market system constituting the primary market for the Stock, or by such
recognized securities dealer, as reported in the Wall Street Journal or such
other source as the Company deems reliable. If the relevant date does not fall
on a day on which the Stock has traded, the date on which the Fair Market Value
is established shall be the last day on which the Stock was so traded prior to
the relevant date, or such other appropriate day as determined by the Board, in
its discretion. If, on the relevant date, there is no public market for the
Stock, the Fair Market Value of a share of Stock shall be as determined in good
faith by the Board.
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(i) "OFFERING" means an offering of Stock as
provided in Section 6. Offerings may be sequential or concurrent.
(j) "OFFERING DATE" means, for any Offering, the
first day of the Offering Period.
(k) "OFFERING PERIOD" means a period established in
accordance with Section 6.1.
(l) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(m) "PARTICIPANT" means an Eligible Employee who has
become a participant in an Offering Period in accordance with Section 7 and
remains a participant in accordance with the Plan.
(n) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation designated by the Board as a
corporation the Employees of which may, if Eligible Employees, participate in
the Plan. The Board shall have the sole and absolute discretion to determine
from time to time which Parent Corporations or Subsidiary Corporations shall be
Participating Companies.
(o) "PARTICIPATING COMPANY GROUP" means, at any
point in time, the Company and all other corporations collectively which are
then Participating Companies.
(p) "PURCHASE DATE" means, for any Offering, the
last day of the Offering Period; provided, however, that the Board in its
discretion may establish one or more additional Purchase Dates during any
Offering Period.
(q) "PURCHASE PRICE" means the price at which a
share of Stock may be purchased under the Plan, as determined in accordance with
Section 9.
(r) "PURCHASE RIGHT" means an option granted to a
Participant pursuant to the Plan to purchase such shares of Stock as provided in
Section 8, which the Participant may or may not exercise during the Offering
Period in which such option is outstanding. Such option arises from the right of
a Participant to withdraw any accumulated payroll deductions of the Participant
not previously applied to the purchase of Stock under the Plan and to terminate
participation in the Plan at any time during an Offering Period.
(s) "STOCK" means the common stock of the Company,
as adjusted from time to time in accordance with Section 4.2.
(t) "SUBSCRIPTION AGREEMENT" means a written
agreement in such form as specified by the Company, stating an Employee's
election to participate in the Plan and authorizing payroll deductions under the
Plan from the Employee's Compensation.
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(u) "SUBSCRIPTION DATE" means the last business day
prior to the Offering Date of an Offering Period or such earlier date as the
Company shall establish.
(v) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are
for convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be
administered by the Board. All questions of interpretation of the Plan, of any
form of agreement or other document employed by the Company in the
administration of the Plan, or of any Purchase Right shall be determined by the
Board and shall be final and binding upon all persons having an interest in the
Plan or the Purchase Right. Subject to the provisions of the Plan, the Board
shall determine all of the relevant terms and conditions of Purchase Rights;
provided, however, that all Participants granted Purchase Rights shall have the
same rights and privileges within the meaning of Section 423(b)(5) of the Code.
All expenses incurred in connection with the administration of the Plan shall be
paid by the Company.
3.2 AUTHORITY OF OFFICERS. Any officer of the Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, determination or election that is the responsibility of or
that is allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.
3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The
Company may, from time to time, consistent with the Plan and the requirements of
Section 423 of the Code, establish, change or terminate such rules, guidelines,
policies, procedures, limitations, or adjustments as deemed advisable by the
Company, in its discretion, for the proper administration of the Plan,
including, without limitation, (a) a minimum payroll deduction amount required
for participation in an Offering, (b) a limitation on the frequency or number of
changes permitted in the rate of payroll deduction during an Offering, (c) an
exchange ratio applicable to amounts withheld in a currency other than United
States dollars, (d) a payroll deduction greater than or less than the amount
designated by a Participant in order to adjust for the Company's delay or
mistake in processing a Subscription Agreement or in otherwise effecting a
Participant's election under the Plan or as advisable to comply with the
requirements of Section 423 of the Code, and (e) determination of the date and
manner by which the Fair Market Value of a share of Stock is determined for
purposes of administration of the Plan.
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4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be three hundred fifty thousand (350,000) and
shall consist of authorized but unissued or reacquired shares of Stock, or any
combination thereof. If an outstanding Purchase Right for any reason expires or
is terminated or canceled, the shares of Stock allocable to the unexercised
portion of that Purchase Right shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the
event of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, or in the event of any merger (including a merger effected for the
purpose of changing the Company's domicile), sale of assets or other
reorganization in which the Company is a party, appropriate adjustments shall be
made in the number and class of shares subject to the Plan and each Purchase
Right and in the Purchase Price. If a majority of the shares of the same class
as the shares subject to outstanding Purchase Rights are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "NEW SHARES"), the Board may
unilaterally amend the outstanding Purchase Rights to provide that such Purchase
Rights are exercisable for New Shares. In the event of any such amendment, the
number of shares subject to, and the Purchase Price of, the outstanding Purchase
Rights shall be adjusted in a fair and equitable manner, as determined by the
Board, in its discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded down
to the nearest whole number, and in no event may the Purchase Price be decreased
to an amount less than the par value, if any, of the stock subject to the
Purchase Right. The adjustments determined by the Board pursuant to this Section
4.2 shall be final, binding and conclusive.
5. ELIGIBILITY.
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Each Employee of a
Participating Company is eligible to participate in the Plan and shall be deemed
an Eligible Employee, except the following:
(a) Any Employee who is customarily employed by the
Participating Company Group for less than twenty (20) hours per week.; or
(b) Any Employee who is customarily employed by the
Participating Company Group for not more than five (5) months in any calendar
year.
5.2 EXCLUSION OF CERTAIN STOCKHOLDERS. Notwithstanding any
provision of the Plan to the contrary, no Employee shall be granted a Purchase
Right under the Plan if, immediately after such grant, the Employee would own,
or hold options to purchase, stock of the Company or of any Parent Corporation
or Subsidiary Corporation possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of such corporation,
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as determined in accordance with Section 423(b)(3) of the Code. For purposes of
this Section 5.2, the attribution rules of Section 424(d) of the Code shall
apply in determining the stock ownership of such Employee.
6. OFFERINGS.
The Plan initially shall be implemented on and after the
Effective Date by sequential Offerings of approximately six (6) months duration
or such other duration as the Board shall determine (an "OFFERING PERIOD").
Offering Periods shall commence on or about February 1 and August 1 of each year
and end on or about the last days of the next July and January, respectively,
occurring thereafter. Notwithstanding the foregoing, the Board may establish, a
different duration effective for one or more future Offering Periods, different
commencing or ending dates for such Offering Periods or concurrent Offering
Periods; provided, however, that no Offering Period may have a duration
exceeding twenty-seven (27) months. If the first or last day of an Offering
Period is not a day on which the national securities exchanges or NASDAQ Stock
Market are open for trading, the Company shall specify the trading day that will
be deemed the first or last day, as the case may be, of the Offering Period.
7. PARTICIPATION IN THE PLAN.
7.1 INITIAL PARTICIPATION. An Eligible Employee may become a
Participant in an Offering Period by delivering a properly completed
Subscription Agreement to the office designated by the Company not later than
the close of business for such office on the Subscription Date established by
the Company for such Offering Period. An Eligible Employee who does not deliver
a properly completed Subscription Agreement to the Company's designated office
on or before the Subscription Date for an Offering Period shall not participate
in the Plan for that Offering Period or for any subsequent Offering Period
unless the Eligible Employee subsequently delivers a properly completed
Subscription Agreement to the appropriate office of the Company on or before the
Subscription Date for such subsequent Offering Period. An Employee who becomes
an Eligible Employee after the Offering Date of an Offering Period shall not be
eligible to participate in that Offering Period but may participate in any
subsequent Offering Period provided the Employee is still an Eligible Employee
as of the Offering Date of such subsequent Offering Period.
7.2 CONTINUED PARTICIPATION. A Participant shall
automatically participate in the next Offering Period commencing immediately
after the Purchase Date of each Offering Period in which the Participant
participates provided that the Participant remains an Eligible Employee on the
Offering Date of the new Offering Period and has not either (a) withdrawn from
the Plan pursuant to Section 12.1 or (b) terminated employment as provided in
Section 13. A Participant who may automatically participate in a subsequent
Offering Period, as provided in this Section, is not required to deliver any
additional Subscription Agreement for the subsequent Offering Period in order to
continue participation in the Plan. However, a Participant may deliver a new
Subscription Agreement for a subsequent Offering Period in accordance with the
procedures set forth in Section 7.1 if the Participant desires to change any of
the elections contained in the Participant's then effective Subscription
Agreement. In the event that the Board
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establishes concurrent Offerings, Eligible Employees may not participate
simultaneously in more than one Offering.
8. RIGHT TO PURCHASE SHARES.
8.1 GRANT OF PURCHASE RIGHT. Except as set forth below, on
the Offering Date of each Offering Period, each Participant in that Offering
Period shall be granted automatically a Purchase Right consisting of an option
to purchase the lesser of that number of whole shares of Stock determined by
dividing Twelve Thousand Five Hundred Dollars ($12,500) by the Fair Market Value
of a share of Stock on such Offering Date. No Purchase Right shall be granted on
an Offering Date to any person who is not, on such Offering Date, an Eligible
Employee.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT. Notwithstanding
the provisions of Section 8.1, if the Board establishes an Offering Period of
any duration other than six months, then the dollar amount in Section 8.1 shall
be determined by multiplying $2,083.33 by the number of months (rounded to the
nearest whole month) in the Offering Period and rounding to the nearest whole
dollar.
8.3 CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any
provision of the Plan to the contrary, no Participant shall be granted a
Purchase Right which permits his or her right to purchase shares of Stock under
the Plan to accrue at a rate which, when aggregated with such Participant's
rights to purchase shares under all other employee stock purchase plans of a
Participating Company intended to meet the requirements of Section 423 of the
Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or
such other limit, if any, as may be imposed by the Code) for each calendar year
in which such Purchase Right is outstanding at any time. For purposes of the
preceding sentence, the Fair Market Value of shares purchased during a given
Offering Period shall be determined as of the Offering Date for such Offering
Period. The limitation described in this Section shall be applied in conformance
with applicable regulations under Section 423(b)(8) of the Code.
9. PURCHASE PRICE.
The Purchase Price at which each share of Stock may be acquired
in an Offering Period upon the exercise of all or any portion of a Purchase
Right shall be established by the Board; provided, however, that the Purchase
Price shall not be less than eighty-five percent (85%) of the lesser of (a) the
Fair Market Value of a share of Stock on the Offering Date of the Offering
Period or (b) the Fair Market Value of a share of Stock on the Purchase Date.
Unless otherwise provided by the Board prior to the commencement of an Offering
Period, the Purchase Price for that Offering Period shall be eighty-five percent
(85%) of the lesser of (a) the Fair Market Value of a share of Stock on the
Offering Date of the Offering Period, or (b) the Fair Market Value of a share of
Stock on the Purchase Date.
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10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION.
Shares of Stock acquired pursuant to the exercise of all or any
portion of a Purchase Right may be paid for only by means of payroll deductions
from the Participant's Compensation accumulated during the Offering Period for
which such Purchase Right was granted, subject to the following:
10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise
provided herein, the amount to be deducted under the Plan from a Participant's
Compensation on each payday during an Offering Period shall be determined by the
Participant's Subscription Agreement. The Subscription Agreement shall set forth
the percentage of the Participant's Compensation to be deducted on each payday
during an Offering Period in whole percentages of not less than one percent (1%)
(except as a result of an election pursuant to Section 10.3 to stop payroll
deductions effective following the first payday during an Offering) or more than
ten percent (10%). The Board may change the foregoing limits on payroll
deductions effective as of any future Offering Date.
10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions
shall commence on the first payday following the Offering Date and shall
continue to the end of the Offering Period unless sooner altered or terminated
as provided herein.
10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an
Offering Period, a Participant may elect to increase or decrease the rate of or
to stop deductions from his or her Compensation by delivering to the Company's
designated office an amended Subscription Agreement authorizing such change on
or before the Change Notice Date, as defined below. A Participant who elects,
effective following the first payday of an Offering Period, to decrease the rate
of his or her payroll deductions to zero percent (0%) shall nevertheless remain
a Participant in the current Offering Period unless such Participant withdraws
from the Plan as provided in Section 12.1. The "CHANGE NOTICE DATE" shall be a
date prior to the end of the first pay period for which such election is to be
effective as established by the Company from time to time and announced to the
Participants. Unless otherwise established by the Company, the Change Notice
Date shall be the seventh (7th) day prior to the end of the first pay period for
which such election is to be effective.
10.4 ADMINISTRATIVE SUSPENSION OF PAYROLL DEDUCTIONS. The
Company may, in its sole discretion, suspend a Participant's payroll deductions
under the Plan as the Company deems advisable to avoid accumulating payroll
deductions in excess of the amount that could reasonably be anticipated to
purchase the maximum number of shares of Stock permitted (a) under the
Participant's Purchase Right or (b) during a calendar year under the limit set
forth in Section 8.3. Payroll deductions shall be resumed at the rate specified
in such Participant's then effective Subscription Agreement at the beginning,
respectively, of (a) the next Offering Period or (b) the next Offering Period
the Purchase Date of which falls in the following calendar year, unless the
Participant has either withdrawn from the Plan as provided in Section 12.1 or
has ceased to be an Eligible Employee.
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10.5 PARTICIPANT ACCOUNTS. Individual bookkeeping accounts
shall be maintained for each Participant. All payroll deductions from a
Participant's Compensation shall be credited to such Participant's Plan account
and shall be deposited with the general funds of the Company. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose.
10.6 NO INTEREST PAID. Interest shall not be paid on sums
deducted from a Participant's Compensation pursuant to the Plan.
10.7 VOLUNTARY WITHDRAWAL FROM PLAN ACCOUNT. A Participant
may withdraw all or any portion of the payroll deductions credited to his or her
Plan account and not previously applied toward the purchase of Stock by
delivering to the Company's designated office a written notice on a form
provided by the Company for such purpose. A Participant who withdraws the entire
remaining balance credited to his or her Plan account shall be deemed to have
withdrawn from the Plan in accordance with Section 12.1. Amounts withdrawn shall
be returned to the Participant as soon as practicable after the notice of
withdrawal and may not be applied to the purchase of shares in any Offering
under the Plan. The Company may from time to time establish or change
limitations on the frequency of withdrawals permitted under this Section,
establish a minimum dollar amount that must be retained in the Participant's
Plan account, or terminate the withdrawal right provided by this Section.
11. PURCHASE OF SHARES.
11.1 EXERCISE OF PURCHASE RIGHT. On the Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Plan and whose
participation in the Plan has not otherwise terminated before such Purchase Date
shall automatically acquire pursuant to the exercise of the Participant's
Purchase Right the number of whole shares of Stock determined by dividing (a)
the total amount of the Participant's payroll deductions accumulated in the
Participant's Plan account during the Offering Period and not previously applied
toward the purchase of Stock by (b) the Purchase Price. However, in no event
shall the number of shares purchased by the Participant during an Offering
Period exceed the number of shares subject to the Participant's Purchase Right.
No shares of Stock shall be purchased on a Purchase Date on behalf of a
Participant whose participation in the Offering or the Plan has terminated
before such Purchase Date.
11.2 PRO RATA ALLOCATION OF SHARES. If the number of shares
of Stock which might be purchased by all Participants in the Plan on a Purchase
Date exceeds the number of shares of Stock available in the Plan as provided in
Section 4.1, the Company shall make a pro rata allocation of the remaining
shares in as uniform a manner as practicable and as the Company determines to be
equitable. Any fractional share resulting from such pro rata allocation to any
Participant shall be disregarded.
11.3 DELIVERY OF CERTIFICATES. As soon as practicable after
each Purchase Date, the Company shall arrange the delivery to each Participant
of a certificate representing the shares acquired by the Participant on such
Purchase Date; provided that the Company may deliver such
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shares to a broker designated by the Company that will hold such shares for the
benefit of the Participant. Shares to be delivered to a Participant under the
Plan shall be registered in the name of the Participant, or, if requested by the
Participant, in the name of the Participant and his or her spouse, or, if
applicable, in the names of the heirs of the Participant.
11.4 RETURN OF CASH BALANCE. Any cash balance remaining in a
Participant's Plan account following any Purchase Date shall be refunded to the
Participant as soon as practicable after such Purchase Date. However, if the
cash balance to be returned to a Participant pursuant to the preceding sentence
is less than the amount that would have been necessary to purchase an additional
whole share of Stock on such Purchase Date, the Company may retain the cash
balance in the Participant's Plan account to be applied toward the purchase of
shares in the subsequent Offering Period.
11.5 TAX WITHHOLDING. At the time a Participant's Purchase
Right is exercised, in whole or in part, or at the time a Participant disposes
of some or all of the shares he or she acquires under the Plan, the Participant
shall make adequate provision for the federal, state, local and foreign tax
withholding obligations, if any, of the Participating Company Group which arise
upon exercise of the Purchase Right or upon such disposition of shares,
respectively. The Participating Company Group may, but shall not be obligated
to, withhold from the Participant's compensation the amount necessary to meet
such withholding obligations.
11.6 EXPIRATION OF PURCHASE RIGHT. Any portion of a
Participant's Purchase Right remaining unexercised after the end of the Offering
Period to which the Purchase Right relates shall expire immediately upon the end
of the Offering Period.
11.7 REPORTS AND STOCKHOLDER INFORMATION TO PARTICIPANTS.
Each Participant who has exercised all or part of his or her Purchase Right
shall receive, as soon as practicable after the Purchase Date, a report of such
Participant's Plan account setting forth the total payroll deductions
accumulated prior to such exercise, the number of shares purchased, the Purchase
Price for such shares, the date of purchase and the cash balance, if any,
remaining immediately after such purchase that is to be refunded or retained in
the Participant's Plan account pursuant to Section 11.4. The report required by
this Section may be delivered in such form and by such means, including by
electronic transmission, as the Company may determine. In addition, each
Participant shall be provided information concerning the Company equivalent to
that information generally made available to the Company's common stockholders.
12. WITHDRAWAL FROM OFFERING OR PLAN.
12.1 VOLUNTARY WITHDRAWAL FROM THE PLAN. A Participant may
withdraw from the Plan by signing and delivering to the Company's designated
office a written notice of withdrawal on a form provided by the Company for this
purpose. Such withdrawal may be elected at any time prior to the end of an
Offering Period; provided, however, that if a Participant withdraws from the
Plan after a Purchase Date, the withdrawal shall not affect shares acquired by
the Participant on such Purchase Date. A Participant who voluntarily withdraws
from the Plan is prohibited from resuming participation in the Plan in the same
Offering from which he or she
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withdrew, but may participate in any subsequent Offering by again satisfying the
requirements of Sections 5 and 7.1. The Company may impose, from time to time, a
requirement that the notice of withdrawal from the Plan be on file with the
Company's designated office for a reasonable period prior to the effectiveness
of the Participant's withdrawal.
12.2 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's
voluntary withdrawal from the Plan pursuant to Section 12.1, the Participant's
accumulated payroll deductions which have not been applied toward the purchase
of shares shall be refunded to the Participant as soon as practicable after the
withdrawal, without the payment of any interest, and the Participant's interest
in the Plan shall terminate. Such accumulated payroll deductions to be refunded
in accordance with this Section may not be applied to any other Offering under
the Plan.
13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY.
Upon a Participant's ceasing, prior to a Purchase Date, to be an
Employee of the Participating Company Group for any reason, including
retirement, disability or death, or upon the failure of a Participant to remain
an Eligible Employee, the Participant's participation in the Plan shall
terminate immediately. In such event, the Participant's accumulated payroll
deductions which have not been applied toward the purchase of shares shall, as
soon as practicable, be returned to the Participant or, in the case of the
Participant's death, to the person or persons entitled thereto under Section 16,
and all of the Participant's rights under the Plan shall terminate. Interest
shall not be paid on sums returned pursuant to this Section 13. A Participant
whose participation has been so terminated may again become eligible to
participate in the Plan by satisfying the requirements of Sections 5 and 7.1.
14. CHANGE IN CONTROL.
14.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company: (i)
the direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For
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purposes of the preceding sentence, indirect beneficial ownership shall include,
without limitation, an interest resulting from ownership of the voting stock of
one or more corporations which, as a result of the Transaction, own the Company
or the Transferee Corporation(s), as the case may be, either directly or through
one or more subsidiary corporations. The Board shall have the right to determine
whether multiple sales or exchanges of the voting stock of the Company or
multiple Ownership Change Events are related, and its determination shall be
final, binding and conclusive.
14.2 EFFECT OF CHANGE IN CONTROL ON PURCHASE RIGHTS. In the
event of a Change in Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"ACQUIRING CORPORATION"), may assume the Company's rights and obligations under
the Plan. If the Acquiring Corporation elects not to assume the Company's rights
and obligations under outstanding Purchase Rights, the Purchase Date of the then
current Offering Period shall be accelerated to a date before the date of the
Change in Control specified by the Board, but the number of shares of Stock
subject to outstanding Purchase Rights shall not be adjusted. Each Participant
shall be notified in writing at least three (3) business days prior to such
accelerated Purchase Date that the Participant's Purchase Right shall be
exercised automatically on the accelerated Purchase Date, unless prior to such
date the Participant has withdrawn from the Plan as provided in Section 12.1.
All Purchase Rights which are neither assumed by the Acquiring Corporation in
connection with the Change in Control nor exercised as of the date of the Change
in Control shall terminate and cease to be outstanding effective as of the date
of the Change in Control.
15. NONTRANSFERABILITY OF PURCHASE RIGHTS.
Neither payroll deductions credited to a Participant's Plan
account nor a Participant' Purchase Right may be assigned, transferred, pledged
or otherwise disposed of in any manner other than by will or the laws of descent
and distribution or as provided in Section 16. Any such attempted assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw from the Plan as provided
in Section 12.1. A Purchase Right shall be exercisable during the lifetime of
the Participant only by the Participant.
16. DESIGNATION OF BENEFICIARY.
16.1 DESIGNATION PROCEDURE. A Participant may file a written
designation of a beneficiary who is to receive (a) shares and cash, if any, from
the Participant's Plan account if the Participant dies subsequent to a Purchase
Date but prior to delivery to the Participant of such shares and cash or (b)
cash, if any, from the Participant's Plan account if the Participant dies prior
to the exercise of the Participant's Purchase Right. If a married Participant
designates a beneficiary other than the Participant's spouse, the effectiveness
of such designation shall be subject to the consent of the Participant's spouse.
A Participant may change his or her beneficiary designation at any time by
written notice to the Company.
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16.2 ABSENCE OF BENEFICIARY DESIGNATION. If a Participant
dies without an effective designation pursuant to Section 16.1 of a beneficiary
who is living at the time of the Participant's death, the Company shall deliver
any shares or cash credited to the Participant's Plan account to the
Participant's legal representative.
17. COMPLIANCE WITH SECURITIES LAW.
The issuance of shares under the Plan shall be subject to
compliance with all applicable requirements of federal, state and foreign law
with respect to such securities. A Purchase Right may not be exercised if the
issuance of shares upon such exercise would constitute a violation of any
applicable federal, state or foreign securities laws or other law or regulations
or the requirements of any securities exchange or market system upon which the
Stock may then be listed. In addition, no Purchase Right may be exercised unless
(a) a registration statement under the Securities Act of 1933, as amended, shall
at the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (b) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the Purchase
Right may be issued in accordance with the terms of an applicable exemption from
the registration requirements of said Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares under the Plan shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of a
Purchase Right, the Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation, and to make any representation or warranty
with respect thereto as may be requested by the Company.
18. RIGHTS AS A STOCKHOLDER AND EMPLOYEE.
A Participant shall have no rights as a stockholder by virtue of
the Participant's participation in the Plan until the date of the issuance of a
certificate for the shares purchased pursuant to the exercise of the
Participant's Purchase Right (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 4.2. Nothing herein shall confer upon a Participant any
right to continue in the employ of the Participating Company Group or interfere
in any way with any right of the Participating Company Group to terminate the
Participant's employment at any time.
19. LEGENDS.
The Company may at any time place legends or other identifying
symbols referencing any applicable federal, state or foreign securities law
restrictions or any provision convenient in the administration of the Plan on
some or all of the certificates representing shares issued under the Plan. The
Participant shall, at the request of the Company, promptly present to
13
<PAGE> 45
the Company any and all certificates representing shares acquired pursuant to a
Purchase Right in the possession of the Participant in order to carry out the
provisions of this Section. Unless otherwise specified by the Company, legends
placed on such certificates may include but shall not be limited to the
following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN
EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE
REGISTERED HOLDER HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED
UNDER THE PLAN IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY
NOMINEE)."
20. NOTIFICATION OF DISPOSITION OF SHARES.
The Company may require the Participant to give the Company
prompt notice of any disposition of shares acquired by exercise of a Purchase
Right within two years from the date of granting such Purchase Right or one year
from the date of exercise of such Purchase Right. The Company may require that
until such time as a Participant disposes of shares acquired upon exercise of a
Purchase Right, the Participant shall hold all such shares in the Participant's
name (or, if elected by the Participant, in the name of the Participant and his
or her spouse but not in the name of any nominee) until the lapse of the time
periods with respect to such Purchase Right referred to in the preceding
sentence. The Company may direct that the certificates evidencing shares
acquired by exercise of a Purchase Right refer to such requirement to give
prompt notice of disposition.
21. NOTICES.
All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. INDEMNIFICATION.
In addition to such other rights of indemnification as they may
have as members of the Board or officers or employees of the Participating
Company Group, members of the Board and any officers or employees of the
Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them
14
<PAGE> 46
in settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such person
is liable for gross negligence, bad faith or intentional misconduct in duties;
provided, however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.
23. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may at any time amend or terminate the Plan, except
that (a) such termination shall not affect Purchase Rights previously granted
under the Plan, except as permitted under the Plan, and (b) no amendment may
adversely affect a Purchase Right previously granted under the Plan (except to
the extent permitted by the Plan or as may be necessary to qualify the Plan as
an employee stock purchase plan pursuant to Section 423 of the Code or to obtain
qualification or registration of the shares of Stock under applicable federal,
state or foreign securities laws). In addition, an amendment to the Plan must be
approved by the stockholders of the Company within twelve (12) months of the
adoption of such amendment if such amendment would authorize the sale of more
shares than are authorized for issuance under the Plan or would change the
definition of the corporations that may be designated by the Board as
Participating Companies.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the CIDCO Incorporated 1999 Employee Stock
Purchase Plan as duly adopted by the Board of Directors of the Company on April
8, 1999.
----------------------------------------
Richard D. Kent, CFO, COO and Secretary
15
<PAGE> 47
PLAN HISTORY
April 8, 1999 Board adopts Plan, with an initial reserve of 350,000 shares.
____________, 1999 Stockholders approve the Plan.
<PAGE> 48
CIDCO INCORPORATED
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1999
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul G. Locklin and Richard D. Kent, 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 26,
1999 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 21, 1999 (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 1998 Annual Report to Stockholders.
THE SHARE REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1, 2 AND 3.
-----------
CONTINUED, AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 49
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
CIDCO INCORPORATED
May 26, 1999
Please detach and Mail in the Envelope Provided
- ----- Please mark your
X votes as in this
- ----- example.
<TABLE>
<S> <C> <C> <C>
FOR the nominees WITHHOLD
listed at right (except AUTHORITY to A vote FOR the following proposals is recommended
as marked to the vote for the nominee by the Board of Directors:
contrary below) listed at right
1. To elect the following [ ] [ ] Nominee: Ernest K. Jacquet
person as Class B
director to hold FOR AGAINST ABSTAIN
office for a three-year term and until his 2. To approve the Company's [ ] [ ] [ ]
successor is selected and qualified. 1999 Employee Stock
Purchase Plan
INSTRUCTIONS: To withhold authority to vote for
the nominee, mark a line through the nominee's 3. To consider, approve and [ ] [ ] [ ]
name above. ratify the appointment of
PricewaterhouseCoopers LLP
as the Company's independent
public auditors for the
Company for the fiscal year
ending December 31, 1999.
MARK HERE FOR ADDRESS [ ]
CHANGE AND NOTE AT LEFT
MARK HERE IF YOU PLAN [ ]
TO ATTEND THE MEETING
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.
</TABLE>
SIGNATURE(S) DATE
---------------------------------------------- --------------
Note: PLEASE SIGN HERE. Sign exactly as your name(s) appears on your stock
certificate. If shares of stock are held 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 sign their full title. Please
date the Proxy.
