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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
PCTEL, INC.
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(Name of Registrant as Specified In Its Charter)
PCTEL, INC.
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(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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
[Logo]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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TUESDAY, JUNE 3, 2003
10:00 A.M.
---------------------
To Our Stockholders:
The 2003 Annual Meeting of Stockholders of PCTEL, Inc., a Delaware
corporation, will be held on Tuesday, June 3, 2003 at 10:00 a.m. local time at
our headquarters, located at 8725 West Higgins Road, Suite 400, Chicago,
Illinois for the following purposes:
1. To elect two directors whose terms will expire at the 2006 annual
stockholders' meeting;
2. To obtain stockholder approval of our 1997 Stock Plan to preserve
the corporate income tax deduction available pursuant to Section 162(m) of
the Internal Revenue Code;
3. To amend and restate our 1998 Director Option Plan to (i) increase
the number of shares reserved for issuance thereunder by 200,000 shares,
and (ii) to increase the number of shares granted to each non-employee
director on January 1 of each year from 7,500 to 10,000 shares;
4. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent public accountants for the fiscal year ending December 31,
2003; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice. Only stockholders of record at the close of
business on April 18, 2003 are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has previously returned a
proxy.
Sincerely,
/s/ Martin H. Singer
MARTIN H. SINGER
Chief Executive Officer and
Chairman of the Board of Directors
Chicago, Illinois
April 29, 2003
YOUR VOTE IS IMPORTANT.
PLEASE SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE
BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
PCTEL, INC.
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PROXY STATEMENT FOR THE
2003 ANNUAL MEETING OF STOCKHOLDERS
---------------------
GENERAL INFORMATION
The board of directors of PCTEL, Inc. is soliciting proxies for the 2003
Annual Meeting of Stockholders. This proxy statement contains important
information for you to consider when deciding how to vote on the matters brought
before the meeting. Please read it carefully.
Our board of directors has set April 18, 2003 as the record date for the
meeting. Stockholders who owned our common stock at the close of business on
April 18, 2003 are entitled to vote at and attend the meeting, with each share
entitled to one vote. There were 19,615,156 shares of our common stock
outstanding on the record date. On the record date, the closing price of our
common stock on The Nasdaq National Stock Market was $9.77 per share.
This proxy statement is being mailed on or about April 29, 2003 to
stockholders entitled to vote at the meeting.
In this proxy statement:
- "We" and "PCTEL" mean PCTEL, Inc.
- If you hold shares in "street name," it means that your shares are held
in an account at a brokerage firm and the stock certificates and record
ownership are not in your name.
- "NASD" means the National Association of Securities Dealers.
- "SEC" means the Securities and Exchange Commission.
- "Beneficial ownership" of stock is defined under various SEC rules in
different ways for different purposes, but it generally means that,
although you (or the person or entity in question) do not hold the shares
of record in your name, you do have investment or voting control (and/or
an economic or "pecuniary" interest) in the shares through an agreement,
relationship or the like.
QUESTIONS AND ANSWERS
Q: WHEN AND WHERE IS THE STOCKHOLDER MEETING?
A: Our annual meeting of stockholders is being held on Tuesday, June 3, 2003 at
10:00 a.m. at our headquarters, located at 8725 West Higgins Road, Suite
400, Chicago, Illinois.
Q: WHY AM I RECEIVING THIS PROXY STATEMENT AND PROXY CARD?
A: You are receiving this proxy statement and the accompanying proxy card
because you owned shares of our common stock on the record date. This proxy
statement describes issues on which we would like you, as a stockholder, to
vote. It also gives you information on these issues so that you can make an
informed decision. The proxy card is used for voting.
Q: WHAT IS THE EFFECT OF SIGNING AND RETURNING MY PROXY CARD?
A: When you sign and return the proxy card, you appoint Martin H. Singer and
John Schoen as your representatives at the meeting. Messrs. Singer and
Schoen will vote your shares at the meeting as you have instructed them on
the proxy card. This way, your shares will be voted whether or not you
attend the annual meeting. Even if you plan to attend the meeting, it is a
good idea to complete, sign and return your
proxy card or vote via the Internet or telephone in advance of the meeting
just in case your plans change. You can vote in person at the meeting even
if you have already sent in your proxy card.
If an issue comes up for a vote at the meeting that is not described in this
proxy statement, Messrs. Singer and Schoen will vote your shares, under your
proxy, in their discretion.
If you do not indicate on the proxy card how you want your votes cast, the
proxies (as your representatives) will vote your shares FOR each of the
proposals.
Q: WHAT AM I VOTING ON?
A: You are being asked to vote on the following four proposals:
- the election of two directors whose terms will expire at the 2006 annual
stockholders' meeting;
- the approval of the material terms of our 1997 Stock Plan to preserve the
corporate income tax deduction available pursuant to Section 162(m) of the
Internal Revenue Code;
- the amendment and restatement of our 1998 Director Option Plan to (i)
increase the number of shares reserved for issuance thereunder by 200,000
shares, and (ii) to increase the number of shares granted to each
non-employee director on January 1 of each year from 7,500 to 10,000
shares; and
- the ratification of the appointment of PricewaterhouseCoopers LLP as our
independent public accountants for the fiscal year ending December 31,
2003.
Q: HOW DO I VOTE?
A: There are four methods by which you may vote. Please see the detailed
instructions provided on your proxy card for more information on each
method.
- Place your vote by telephone;
- Place your vote via the Internet;
- Mail in your completed, signed and dated proxy card; or
- Vote in person by attending our annual meeting.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It means that you have multiple accounts with the transfer agent and/or with
stockbrokers. Please sign and return all proxy cards to ensure that all of
your shares are voted.
Q: WHAT IF I CHANGE MY MIND AFTER I RETURN MY PROXY CARD?
A: You may revoke your proxy (that is, cancel it) and change your vote at any
time prior to the voting at the annual meeting by providing written notice
to our corporate secretary at the following address: 8725 West Higgins Road,
Suite 400, Chicago, Illinois 60631, Attn: John Schoen.
You may also do this by:
- Signing another proxy card with a later date;
- Voting in person at the meeting; or
- Voting via the Internet or by telephone on a date after the date on your
proxy card (your latest proxy is counted).
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Q: WILL MY SHARES BE VOTED IF I DO NOT SIGN AND RETURN MY PROXY CARD?
A: If your shares are held in street name, your brokerage firm may either vote
your shares on "routine matters" (such as the election of directors) or
leave your shares unvoted. Your brokerage firm may not vote on "non-routine
matters."
Q: HOW MANY VOTES MAY BE CAST AT THE MEETING?
A: As of the record date, 19,615,156 shares of common stock were outstanding.
Each outstanding share of common stock entitles the holder of such share to
one vote on all matters covered in this proxy statement. Therefore, there
are a maximum of 19,615,156 votes that may be cast at the meeting.
Q: WHAT IS A "QUORUM"?
A: A "quorum" is the number of shares that must be present, in person or by
proxy, in order for business to be transacted at the meeting. The required
quorum for the annual meeting is a majority of the shares outstanding on the
record date. There must be a quorum present for the meeting to be held. All
completed and signed proxy cards, Internet votes, telephone votes and votes
cast by those stockholders who attend the annual meeting in person, whether
representing a vote FOR, AGAINST, WITHHELD, ABSTAIN, or a broker non-vote,
will be counted toward the quorum.
Q: HOW ARE ABSTENTIONS COUNTED?
A: If you return a proxy card that indicates an abstention from voting in all
matters, the shares represented will be counted as present for the purpose
of determining a quorum, but they will not be voted on any matter at the
annual meeting.
Q: WHAT IS A "BROKER NON-VOTE?"
A: Under the rules that govern brokers who have record ownership of shares that
are held in "street name" for their clients (who are the beneficial owners
of the shares), brokers have the discretion to vote such shares on routine
matters, but not on non-routine matters. Thus, if the proposals to be acted
upon at the meeting include both routine and non-routine matters, the broker
may turn in a proxy card for uninstructed shares that votes "FOR" routine
matters, but expressly states that the broker is NOT voting on the
non-routine matters. The vote with respect to the non-routine matter in this
case is referred to as a "broker non-vote."
Q: HOW ARE BROKER NON-VOTES COUNTED?
A: Broker non-votes are counted for the purpose of determining the presence or
absence of a quorum, but are not counted for determining the number of votes
cast for or against a proposal.
Q: WHAT IS THE REQUIRED VOTE FOR EACH OF THE PROPOSALS TO PASS?
A: - The two nominees receiving the highest number of votes, in person or by
proxy, will be elected as directors.
- For the proposals to approve the terms of our 1997 Stock Plan, to amend
and restate our 1998 Director Option Plan and to approve the appointment
of our independent auditors, the required vote is the affirmative (i.e.
"FOR") vote of a majority of the votes cast.
The votes cast on a particular proposal include votes FOR, AGAINST and
ABSTAIN, but do not include broker non-votes.
Q: WHO IS SOLICITING MY VOTE?
A: We are making and will bear the entire cost of this proxy solicitation,
including the preparation, assembly, printing and mailing of proxy
materials. We may reimburse brokerage firms and other custodians for their
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reasonable out-of-pocket expenses for forwarding these proxy materials to
you. We expect our transfer agent, Wells Fargo Bank, MN N.A., to tabulate
the proxies and to act as the inspector of the election. In addition to this
solicitation by mail, proxies may be solicited by our directors, officers
and other employees by telephone, the Internet or fax, in person or
otherwise. None of these persons will receive any additional compensation
for assisting in the solicitation.
We shall provide without charge to each stockholder solicited by these
proxy solicitation materials a copy of our Annual Report on Form 10-K, together
with the financial statements and financial statement schedules required to be
filed with the Annual Report, upon written request sent to PCTEL, Inc., 8725
West Higgins Road, Suite 400, Chicago, Illinois 60631, Attn: John Schoen, Chief
Financial Officer.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
Stockholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules promulgated by
the SEC. Proposals of stockholders intended to be presented for consideration at
our 2004 annual meeting of stockholders must be received by us no later than
December 30, 2003 in order that they may be considered for inclusion in the
proxy statement and form of proxy relating to that meeting.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the annual meeting. If you intend to submit a
proposal at the 2004 annual meeting that is not eligible for inclusion in the
proxy statement and form of proxy relating to that meeting, you must do so no
later than March 15, 2004. If you fail to comply with the foregoing notice
provision, the proxy holders at the 2004 annual meeting will be allowed to use
their discretionary voting authority when the proposal is raised at that
meeting.
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SUMMARY OF PROPOSALS
The board of directors has included four proposals on the agenda for our
annual meeting. The following is a brief summary of the matters to be considered
and voted upon by our stockholders.
ELECTION OF DIRECTORS
We have a classified board of directors that currently consists of seven
directors. Each director serves a three year term. The first proposal on the
agenda for our annual meeting is the election of two Class I directors to serve
until our 2006 annual meeting. Our board of directors has nominated Brian J.
Jackman and John Sheehan to serve as our Class I directors. Additional
information about the election of directors and a brief biography of each
nominee begins on page 7.
OUR BOARD RECOMMENDS A VOTE FOR EACH OF THE TWO NOMINEES.
APPROVAL OF OUR 1997 STOCK PLAN
Our second proposal is for stockholder approval of the material terms of
our 1997 Stock Plan to preserve the corporate income tax deduction available
pursuant to Section 162(m) of the Internal Revenue Code. We are not seeking to
amend any terms of our 1997 Stock Plan.
Section 162(m) generally disallows a tax deduction for any publicly held
corporation for individual compensation exceeding $1.0 million in any taxable
year for any of the executive officers named in the proxy statement unless such
compensation is "performance-based." For purposes of Section 162(m),
compensation includes cash compensation, income arising from the exercise of
non-statutory stock options, and disqualifying dispositions of incentive stock
options. In general, it is our policy to qualify, to the maximum extent
possible, our executives' compensation for deductibility under applicable tax
laws, and we are asking our stockholders to approve the terms of the 1997 Stock
Plan in its existing form so that income recognized by certain executive
officers from the exercise of an option granted pursuant to the 1997 Stock Plan
will be considered "performance-based" compensation and may be deducted by us
for federal income tax purposes. Additional information about the proposal to
approve the material terms of our 1997 Stock Plan begins on page 11.
OUR BOARD RECOMMENDS A VOTE IN FAVOR OF THE APPROVAL OF THE MATERIAL TERMS
OF OUR 1997 STOCK PLAN.
AMENDMENT OF OUR 1998 DIRECTOR OPTION PLAN
Our 1998 Director Option Plan provides for automatic option grants to our
non-employee directors. Our third proposal is for stockholder approval of the
amendment and restatement of our 1998 Director Option Plan to (i) increase the
number of shares reserved for issuance thereunder by 200,000 shares, and (ii) to
increase the number of shares granted to each non-employee director on January 1
of each year from 7,500 to 10,000 shares. Currently, our board of directors is
comprised of seven members, only one of whom is also an employee of PCTEL. We
expect that the 200,000 share increase in the number of shares reserved for
issuance under the 1998 Director Option Plan will enable us to provide fixed
annual grants to our non-employee directors for the next three years, based on
the current size of our board of directors. Additional information about the
proposal to amend and restate our 1998 Director Option Plan begins on page 14.
OUR BOARD RECOMMENDS A VOTE IN FAVOR OF THE APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF OUR 1998 DIRECTOR OPTION PLAN.
RATIFY APPOINTMENT OF OUR INDEPENDENT AUDITORS
The fourth proposal is the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent auditors. More information about
this proposal begins on page 17.
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OUR BOARD RECOMMENDS A VOTE TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT AUDITORS.
OTHER MATTERS
Other than the proposals listed above, our board of directors does not
intend to present any other matters to be voted on at the meeting. Our board is
not currently aware of any other matters that will be presented by others for
action at the meeting. However, if other matters are properly presented at the
meeting and you have signed and returned your proxy card or voted on the
Internet or by telephone, the proxies will have discretion to vote your shares
on these matters to the extent authorized under the Exchange Act.
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PROPOSAL #1
ELECTION OF DIRECTORS
CLASSIFICATION OF BOARD OF DIRECTORS
We have a classified board of directors currently consisting of two Class I
directors, Brian J. Jackman and John Sheehan, whose terms are expiring at this
2003 annual stockholders' meeting; two Class II directors, Richard C. Alberding
and Carl A. Thomsen, whose terms will expire at our 2004 annual stockholders'
meeting; and three Class III directors, Richard D. Gitlin, Giacomo Marini and
Martin H. Singer, whose terms will expire at our 2005 annual stockholders'
meeting. At each annual meeting of stockholders, directors are elected for a
term of three years to succeed those directors whose terms expire on the annual
meeting dates.
In June 2002, Peter Chen, one of our founders, resigned as a member of our
board of directors. We would like to thank Mr. Chen for his service and counsel
as a director and as our chief executive officer from our inception in March
1994 until February 2001.
NOMINEES
The nominees for election at the annual stockholders' meeting as Class I
directors are John Sheehan and Brian J. Jackman. If elected, Messrs. Jackman and
Sheehan will serve as directors, and their terms shall expire at the annual
stockholders' meeting in 2006.
The proxy holders may not vote the proxies for a greater number of persons
than the number of nominees named. Unless otherwise instructed, the proxy
holders will vote the proxies received by them for our two Class I director
nominees. In the event that any of our nominees is unable or declines to serve
as a director at the time of the annual meeting, the proxies will be voted for
any nominee who shall be designated by the present board of directors to fill
the vacancy. We are not aware that any of our nominees will be unable or will
decline to serve as a director.
DIRECTORS AND NOMINEES
The following table sets forth certain information regarding our current
directors and nominees for directors to be elected at our 2003 annual
stockholders' meeting:
DIRECTOR
NAME AGE POSITION WITH PCTEL SINCE
---- --- ------------------- --------
CLASS I DIRECTOR NOMINEES TO BE ELECTED AT THE 2003
ANNUAL STOCKHOLDERS' MEETING WHOSE TERMS SHALL
EXPIRE AT THE 2006 ANNUAL STOCKHOLDERS' MEETING:
Brian J. Jackman.................................. 62 Director 2002
John Sheehan...................................... 65 Director 2002
CLASS II DIRECTORS WHOSE TERMS EXPIRE AT THE 2004
ANNUAL STOCKHOLDERS' MEETING:
Richard C. Alberding.............................. 72 Director 1999
Carl A. Thomsen................................... 58 Director 2001
CLASS III DIRECTORS WHOSE TERMS EXPIRE AT THE 2005
ANNUAL STOCKHOLDERS' MEETING:
Richard D. Gitlin................................. 60 Director 2002
Giacomo Marini.................................... 51 Director 1996
Martin H. Singer.................................. 51 Chief Executive Officer and 1999
Chairman of the Board of
Directors
7
Mr. Brian J. Jackman has been a director since February 2002. In September
2002, Mr. Jackman retired from Tellabs, a communications company that he had
been with since 1982. Mr. Jackman served as president, Global Systems and
Technology, and executive vice president of Tellabs since 1998, and he was
president of Tellabs Operations from 1993 to 1998. Mr. Jackman held various
senior management positions in sales and marketing for IBM from 1965 to 1982. He
is currently on the boards of directors of Open Text and Stratos Lightwave. Mr.
Jackman holds a bachelor of arts in English literature from Gannon University in
Erie, Pennsylvania and a masters in business administration from Penn State
University.
Mr. John Sheehan has been a director since October 2002. Mr. Sheehan has
served as a consultant in the London Perret Roche Group in Red Bank, New Jersey
since October 2001. He began his career at Bell Laboratories in 1962. In his 33
years at Bell Laboratories, Western Electric and AT&T, he worked in senior
positions in development, manufacturing, strategic planning and general
management of business units. Since leaving AT&T in 1996, Mr. Sheehan has held
senior management positions in three startup companies. Mr. Sheehan received a
bachelors of science degree in electrical engineering from Drexel University and
a masters of science degree in electrical engineering from New York University.
Mr. Richard C. Alberding has been a director since August 1999. Mr.
Alberding retired from Hewlett-Packard, then a computer, peripherals and
measurement products company, in June 1991, serving at that time as an executive
vice president with responsibility for worldwide company sales, support and
administration activities for measurement and computation products, as well as
all corporate level marketing activities. Mr. Alberding is a director of
Kennametal, Stratex Networks, Sybase and Elevon. Mr. Alberding holds a bachelor
of arts in business administration and marketing from Augustana College in Rock
Island, Illinois, and an associate of science degree in electrical engineering
from DeVry Technical Institute in Chicago.
Mr. Carl A. Thomsen has been a director since March 2001. Since February
1995, Mr. Thomsen has served as chief financial officer of Stratex Networks, a
manufacturer of wireless communication equipment. Currently, he serves as its
senior vice president, chief financial officer and corporate secretary. Mr.
Thomsen holds a bachelor of science in business administration from Valparaiso
University and a masters in business administration from the University of
Michigan. He is also a certified public accountant.
Dr. Richard D. Gitlin has been a director since May 2002. Since November
2001, Dr. Gitlin has served as vice president, technology of NEC Laboratories
America, Inc. Prior to November 2001, Dr. Gitlin was with Lucent Technologies, a
global communications networking company, for thirty-two years. At Lucent, Dr.
Gitlin held several senior executive positions, including chief technical
officer and vice president of research and development for the data networking
systems business unit. Dr. Gitlin also served as senior vice president for
communication sciences research at Bell Labs, with responsibility for managing
and leading research in wireless systems, broadband and optical networking,
multimedia communications and access technologies. Dr. Gitlin holds a doctorate
in engineering science from Columbia University, where he has also been a
visiting professor of electrical engineering.
Mr. Giacomo Marini has been a director since October 1996. Mr. Marini has
been the managing partner of CIR Ventures, an early-stage technology venture
capital firm, since March 2002, and he has served as chairman and president of
Marini Group LLC, a private investment and management consulting business that
invests in and advises high technology companies, since March 1995. From
February 1998 to February 1999 Mr. Marini also served as interim chief executive
officer of FutureTel, a digital video capture company. From August 1993 to
February 1995, Mr. Marini served as president and chief executive officer of
Common Ground Software (formerly No Hands Software), an electronic publishing
software company. Prior to this, Mr. Marini was the co-founder, executive
vice-president and chief operating officer of Logitech, a computer peripherals
company, and had previously held technical and management positions with
Olivetti and IBM. He is currently on the boards of several private companies.
Mr. Marini holds a computer science laureate degree from the University of Pisa,
Italy.
Dr. Martin H. Singer has been our chief executive officer and chairman of
the board since October 2001. Prior to that, Dr. Singer served as our
non-executive chairman of the board from February 2001 until October 2001, and
he has been a director since August 1999. From October 2000 to May 2001, Dr.
Singer served as president and chief executive officer of Ultra Fast Optical
Systems. From December 1997 to August 2000,
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Dr. Singer served as president and chief executive officer of SAFCO
Technologies, a wireless communications company. He left SAFCO in August 2000
after its sale to Agilent Technologies. From September 1994 to December 1997,
Dr. Singer served as vice president and general manager of the wireless access
business development division for Motorola, a communications equipment company.
Prior to this period, Dr. Singer held senior management and technical positions
in Motorola, Tellabs, AT&T and Bell Labs. Dr. Singer holds a bachelor of arts in
psychology from the University of Michigan, and a Master of Arts and a Ph.D. in
experimental psychology from Vanderbilt University.
BOARD AND COMMITTEE MEETINGS
Our board of directors held a total of seven meetings during fiscal 2002.
The board of directors has an audit committee and a compensation committee. Each
member of the audit committee meets the independence and experience requirements
of the National Association of Securities Dealers. The board of directors has no
nominating committee or any committee performing such functions. During our last
fiscal year, each of our directors attended at least 75% of the total number of
meetings of the board of directors and any committee on which such director
served.
DATE CURRENT
MEMBERS DURING WRITTEN CHARTER MEETINGS HELD IN
COMMITTEE FISCAL 2002 COMMITTEE FUNCTIONS ADOPTED FISCAL 2002
--------- ----------------- ------------------------------- ---------------- ----------------
Audit......... Richard Alberding - Oversees our internal October 31, 2002 Four
Giacomo Marini financial reporting and
Carl Thomsen accounting controls
- Consults with and reviews the
services provided by our
independent auditors
Compensation... Richard Alberding - Reviews and recommends to the October 31, 2002 Five
Giacomo Marini board of directors the
Brian J. Jackman compensation and benefits of
all of our officers and
directors, including stock
compensation and loans
- Establishes and reviews
general policies relating to
the compensation and benefits
of our employees
COMPENSATION OF DIRECTORS
Directors currently receive a yearly retainer of $12,500 and receive $2,500
per board meeting attended (unless the board meeting is conducted by
teleconference, in which case directors receive $1,000 for each such telephonic
meeting in which they participate) and $1,000 per committee meeting attended.
Our 1998 Director Option Plan provides for the non-discretionary, automatic
grant of options to each of our non-employee directors. Each new non-employee
director is automatically granted an option to purchase 15,000 shares on the
date on which such person first becomes a director. These initial grants vest
over a period of three years, with one-third of the number of shares granted
vesting on each anniversary of the date of grant, provided that the optionee
continues to serve as a director on these dates. Furthermore, each non-employee
director is automatically granted an additional option to purchase 7,500 shares
of common stock on January 1 of each year, provided that he or she has served on
the board of directors for at least six months. At this annual meeting, we are
proposing to amend our 1998 Director Option Plan in order to increase the amount
of these subsequent grants from 7,500 to 10,000 shares. The subsequent grants
vest fully on the first anniversary of the date of grant, provided that the
optionee continues to serve as a director on such date. Under the terms of our
1998 Director Option Plan, the exercise price of options granted to non-employee
directors must be 100% of the fair market value of our common stock on the last
trading day preceding the date of grant.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2002, none of the members of the compensation committee were
officers or employees of PCTEL while they served as members of the compensation
committee. No member of the compensation committee serves as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving as a member of our board of directors or compensation
committee.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
If a quorum is present and voting, the two nominees receiving the highest
number of votes will be elected to the board of directors. Abstentions and
"broker non-votes" are not counted in the election of directors. THE BOARD OF
DIRECTORS HAS UNANIMOUSLY APPROVED THE DIRECTOR NOMINEES AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE DIRECTOR NOMINEES LISTED ABOVE.
10
PROPOSAL #2
APPROVAL OF 1997 STOCK PLAN
Our 1997 Stock Plan provides for the granting to employees of incentive
stock options under Section 422 of the Code, and for the granting to employees,
directors and consultants of nonstatutory stock options and stock purchase
rights. The 1997 Stock Plan was originally approved by the board of directors
and stockholders in November 1996 and was last amended by our board of directors
and stockholders in August 1999. A copy of our 1997 Stock Plan is attached as
Appendix A.
STOCKHOLDER PROPOSAL
We are asking our stockholders to approve the material terms of the 1997
Stock Plan to preserve the corporate income tax deductions available to us
pursuant to Internal Revenue Code Section 162(m). We are not seeking to amend
any terms of our 1997 Stock Plan.
Section 162(m) generally disallows a tax deduction for any publicly held
corporation for individual compensation exceeding $1.0 million in any taxable
year for any of the executive officers named in the proxy statement unless such
compensation is "performance-based." For purposes of Section 162(m),
compensation includes cash compensation, income arising from the exercise of
non-statutory stock options, and disqualifying dispositions of incentive stock
options. We are asking our stockholders to approve the terms of the 1997 Stock
Plan in its existing form so that income recognized by certain executive
officers from the exercise of options granted pursuant to the 1997 Stock Plan
will be considered "performance-based" compensation and may be deducted by us
for federal income tax purposes, even if such compensation exceeds $1.0 million
in a single year.
In general, it is our policy to qualify, to the maximum extent possible,
our executives' compensation for deductibility under applicable tax laws.
Options granted under the 1996 Stock Option Plan are generally designed to
qualify as "performance-based" compensation within the meaning of Section
162(m). However, for these options to continue to qualify as "performance-based"
compensation under Section 162(m), our stockholders must approve the material
terms of the 1996 Stock Option Plan at the annual meeting.
We believe that we must retain the flexibility to respond to changes in the
market for top executives and offer compensation packages that are competitive
with those offered by others in our industry. In the event we are motivated by
competitive forces to offer compensation in excess of $1.0 million to executive
officers, our board of directors believes it would be in our best interests and
those of our stockholders to be able to deduct such compensation for federal
income tax purposes.
In order to comply with the stockholder approval requirements of Section
162(m), if stockholder approval of this proposal is not obtained, we will not
make any further grants under the 1997 Stock Plan to our chief executive officer
and our four other most highly compensated executive officers, determined as of
the end of the last fiscal year, until such time, if any, as stockholder
approval of a subsequent similar proposal is obtained. Any grants made under the
1997 Stock Plan to an individual who subsequently becomes our chief executive
officer or one of the four other most highly compensated executive officers
shall automatically terminate upon the determination that such person is a named
executive officer.
SUMMARY OF THE 1997 STOCK PLAN
General. The purposes of the 1997 Stock Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentive to employees, directors and consultants, and to promote the
success of our business.
Eligibility. Only our employees are eligible to receive incentive stock
options. Nonstatutory stock options and stock purchase rights may be granted to
our employees, directors and consultants.
Administration. The 1997 Stock Plan may be administered by the board of
directors or a committee of the board. The administrator has the power to
determine the terms of the options or stock purchase rights granted, including
the exercise price, the number of shares for each option or stock purchase
right, the
11
exercisability of the options or stock purchase rights granted and the form of
consideration payable upon exercise. In addition, the administrator has the
authority to amend, suspend or terminate the 1997 Stock Plan, provided that this
action may not affect any share of common stock previously issued and sold or
any option previously granted under the 1997 Stock Plan.
Limitations. No employee, director or consultant shall be granted, in any
fiscal year, options or rights to purchase more than 300,000 shares of our
common stock under the 1997 Stock Plan (with the exception that, in connection
with his or her initial service, such employee, director or consultant may be
granted an option to purchase up to 300,000 additional shares of our common
stock without respect to such limitation).
Term. The term of each option is set forth in the option agreement. The
term of incentive stock options granted to an employee who owns more than 10% of
the voting power of all classes of our stock or the stock of any parent or
subsidiary corporation must not exceed five years. The term of all other
incentive stock options granted under the 1997 Stock Plan may not exceed ten
years. No option may be exercised after the expiration of its term.
Exercise Price. The exercise price of all incentive stock options is 100%
of the fair market value per share of our common stock on the date of grant,
generally determined with reference to the closing price of our common stock as
reported on the Nasdaq National Market on the last market trading day prior to
the date the option is granted (except with respect to incentive stock options
granted to an employee who owns more than 10% of the voting power of all classes
of our stock or the stock of any parent or subsidiary corporation, in which case
the exercise price shall be no less than 110% of the fair market value per share
of our common stock on the date of grant). In the case of nonstatutory stock
options and stock purchase rights, the per share exercise price is determined by
the board of directors or a committee of the board. If the nonstatutory stock
option or stock purchase right is intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code,
the exercise price must be 100% of the fair market value per share of our common
stock on the date of grant.
Forms of Consideration. The means of payment for shares issued upon
exercise of an option is specified in each option agreement. The 1997 Stock Plan
permits payment to be made by cash, check, promissory note, other shares of our
common stock (with some restrictions), cashless exercise, reduction in the
amount of any outstanding liability we have to the optionee, or any combination
thereof.
Termination of Relationship. If an optionee's status as a service provider
terminates for any reason (other than death or disability), then all options
held by the optionee under the 1997 Stock Plan expire on the earlier of (i) the
date set forth in his or her notice of grant or (ii) the expiration date of such
option, and all shares covered by the option shall revert to the 1997 Stock
Plan. To the extent the option is exercisable at the time of such termination,
the optionee may exercise all or part of his or her option for up to three
months following the termination or for such other period of time as specified
in the option agreement.
Death or Disability. In the event an optionee's status as a service
provider terminates as a result of disability or death, the optionee (or the
optionee's estate or a person who acquired the right to exercise the option by
bequest or inheritance) may exercise the option, but only within twelve months
(or such other period as is specified in the option agreement) following the
date of such termination, and only to the extent that the optionee was entitled
to exercise it on the date of such termination (but in no event later than the
expiration of the option's term). To the extent that the optionee was not
entitled to exercise an option on the date of such termination, or if he or she
(or the optionee's estate or a person who acquired the right to exercise such
option) does not exercise such option before its expiration, the option shall
terminate, and all shares covered by the option shall revert to the 1997 Stock
Plan.
Nontransferability of Option and Stock Purchase Rights. Unless determined
otherwise by the administrator of the plan, options and stock purchase rights
granted under the 1997 Stock Plan are not transferable other than by will or the
laws of descent and distribution, and may be exercised during the optionee's
lifetime only by the optionee.
Other Provisions. Option agreements may contain other terms, provisions
and conditions not inconsistent with the 1997 Stock Plan as may be determined by
the administrator of the plan.
12
Adjustments Upon Changes in Capitalization. In the event that our
capitalization changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in our capital
structure effected without the receipt of consideration, appropriate adjustments
shall be made in the number of shares of stock authorized for issuance under the
1997 Stock Plan but as to which no options or stock purchase rights have yet
been granted or which have been returned to the 1997 Stock Plan upon
cancellation or expiration of an option or stock purchase right, the number of
shares of stock subject to any option or stock purchase right outstanding under
the 1997 Stock Plan, and the exercise price of any such outstanding option or
right.
The 1997 Stock Plan further provides that in the event of a merger of our
company with or into another corporation, a sale of substantially all of our
assets, each option or right shall be assumed or an equivalent option or right
substituted by the successor corporation. If the outstanding options or rights
are not assumed or substituted, the board of directors or a committee of the
board shall provide for the optionee to have the right to exercise the option or
stock purchase right as to all of the optioned stock, including shares that
would not otherwise be exercisable, for a period of fifteen days from the date
of the notice, and the option or stock purchase right will terminate upon the
expiration of the period.
Evergreen Provision. On January 1 of each year, the maximum number of
shares of common stock that may be optioned or sold under the 1997 Stock Plan is
increased by the lesser of 700,000 shares, 4% of the outstanding shares on such
date, or such lesser amount as is determined by the board.
Amendment and Termination of the 1997 Stock Plan. The board may amend,
alter, suspend or terminate the 1997 Stock Plan at any time and for any reason.
However, we shall obtain stockholder approval for any amendment to the 1997
Stock Plan to the extent necessary to comply with applicable laws. No such
action by the board of directors or stockholders may alter or impair any option
previously granted under the 1997 Stock Plan without the written consent of the
optionee.
PARTICIPATION IN THE 1997 STOCK PLAN
The grant of options under the 1997 Stock Plan to executive officers,
including the officers named in the Summary Compensation Table on page 21, is
subject to approval by the administrator of the plan. As of the date of this
proxy statement, there has been no determination by the administrator with
respect to future awards under our 1997 Stock Plan. Accordingly, future awards
are not determinable. The table entitled "Option Grants During Last Fiscal Year"
on page 23 provides information with respect to the option grants made to the
named executive officers during fiscal year 2002. All of our executive officers
as a group, which includes our five named executive officers as well as five
other executive officers, were granted options to purchase up to 765,000 shares
under the 1997 Stock Plan in 2002. As a group, our non-executive employees were
granted options to purchase up to 1,034,200 shares during the last fiscal year.
Our non-employee directors did not receive any grants under the 1997 Stock Plan
in 2002.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of our
common stock present or represented and voting at the annual meeting will be
required to approve the material terms of our 1997 Stock Plan. THE BOARD OF
DIRECTORS HAS UNANIMOUSLY APPROVED THE TERMS OF OUR 1997 STOCK PLAN AND
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE MATERIAL TERMS OF
OUR 1997 STOCK PLAN.
13
PROPOSAL #3
AMENDMENT OF OUR 1998 DIRECTOR OPTION PLAN
The 1998 Director Option Plan was adopted by the board of directors in May
1998 and became effective on October 19, 1999, the date of the closing of our
initial public offering. The 1998 Director Option Plan has a term of ten years,
unless it is terminated sooner by the board of directors.
Only non-employee directors are entitled to participate in the 1998
Director Option Plan. As of March 31, 2003, a total of 50,000 shares of common
stock were available for future issuance under the 1998 Director Option Plan,
and options to purchase an aggregate of 150,000 shares of common stock were
outstanding under the 1998 Director Option Plan.
STOCKHOLDER PROPOSAL
We are asking that the stockholders approve the amendment and restatement
of our 1998 Director Option Plan in the form attached hereto as Appendix B. We
are seeking the approval of the amendment and restatement of our 1998 Director
Option Plan to (i) increase the number of shares reserved for issuance
thereunder by 200,000 shares, and (ii) to increase the number of shares granted
to each non-employee director on January 1 of each year from 7,500 to 10,000
shares.
Currently, there are six non-employee directors serving on our board of
directors. Assuming that the composition of our board of directors remains the
same, we expect to grant options to purchase up to 10,000 shares of our common
stock to each of our six non-employee directors on January 1, 2004. If we do not
obtain the vote required to amend our 1998 Director Option Plan, we will exhaust
our reserve of shares available for grant under the plan on January 1, 2004, and
after such date, we would be unable to grant options to our non-employee
directors under the 1998 Director Option Plan. Our inability to grant options to
our non-employee directors under the 1998 Director Option Plan may affect our
ability to retain our non-employee directors or to attract new non-employee
directors to serve on our board. Furthermore, because our 2001 Nonstatutory
Stock Option Plan does not permit option grants to directors, in order to
provide incentives to our non-employee directors, we may have to grant options
to them under our 1997 Stock Plan, which does not provide for non-discretionary
grants. We expect that the proposed 200,000 share increase in the number of
shares reserved for issuance will be sufficient to permit the non-discretionary
grants provided for under our 1998 Director Option Plan to continue for
approximately three years.
In addition, we are proposing the amendment and restatement of the 1998
Director Option Plan to increase the number of shares granted to each
non-employee director on January 1 of each year. Currently, each non-employee
director is automatically granted an option to purchase 7,500 shares on January
1 of each year, provided that he or she shall have served on the board of
directors for at least six months. In recognition of the increased involvement
and responsibility of our directors, we wish to increase the amount of these
annual grants to 10,000 shares. The shares shall continue to vest completely on
the first anniversary of the date of grant, provided that the optionee continues
to serve as a director on the vesting date.
SUMMARY OF THE 1998 DIRECTOR OPTION PLAN
General. The purposes of the 1998 Director Option Plan are to attract and
retain the best available personnel for service as non-employee directors, to
provide additional incentive to the non-employee directors to serve as our
directors and to encourage their continued service as directors.
Eligibility. Only our non-employee directors are eligible to receive
nonstatutory stock options under the 1998 Director Option Plan.
Administration. Each new non-employee director, upon election to the board
of directors, is automatically granted an option to purchase 15,000 shares of
common stock. These initial grants vest over a period of three years, with
one-third of the number of shares granted vesting on each anniversary of the
date of grant, provided that the optionee continues to serve as a director on
these dates. After the initial 15,000 share option is granted to the
non-employee director, he or she is currently granted an option to purchase
7,500 shares on
14
January 1 of each year, provided that he or she shall have served on the board
of directors for at least six months. We are proposing to increase the number of
shares automatically granted to each non-employee director on January 1 of each
year from 7,500 to 10,000 shares. These subsequent grants vest completely on the
first anniversary of the date of grant, provided that the optionee continues to
serve as a director on the vesting date.
Term. All of the options granted under the 1998 Director Option Plan shall
have a term of 10 years from the date of grant. No option may be exercised after
the expiration of its term.
Exercise Price. The exercise price of all options shall be 100% of the
fair market value per share of our common stock on the date of grant, generally
determined with reference to the closing price of our common stock as reported
on the Nasdaq National Market on the last market trading day prior to the date
the option is granted.
Forms of Consideration. The means of payment for shares issued upon
exercise of an option is specified in each option agreement. The 1998 Director
Option Plan permits payment to be made by cash, check, other shares of our
common stock (with some restrictions), cashless exercise or any combination
thereof.
Termination of Directorship. If an optionee's status as a director
terminates for any reason (other than death or disability), then all options
held by the optionee under the 1998 Director Option Plan expire on the earlier
of (i) the date set forth in his or her notice of grant or (ii) the expiration
date of such option. To the extent the option is exercisable at the time of such
termination, the optionee may exercise all or part of his or her option for up
to three months following the termination or for such other period of time as
determined by the board.
Death or Disability. In the event an optionee's status as a director
terminates as a result of disability or death, the optionee (or the optionee's
estate or a person who acquired the right to exercise the option by bequest or
inheritance) may exercise the option, but only within twelve months following
the date of such termination, and only to the extent that the optionee was
entitled to exercise it on the date of such termination (but in no event later
than the expiration of its ten year term). To the extent that the optionee was
not entitled to exercise an option on the date of such termination, or if he or
she (or the optionee's estate or a person who acquired the right to exercise
such option) does not exercise such option before its expiration, the option
shall terminate.
Nontransferability of Options. Options granted under the 1998 Director
Option Plan are not transferable other than by will or the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by the
optionee.
Other Provisions. The director option agreement may contain other terms,
provisions and conditions not inconsistent with the 1998 Director Option Plan as
may be determined by the administrator of the plan.
Adjustments Upon Changes in Capitalization. In the event that our stock
changes by reason of any stock split, reverse stock split, stock dividend,
combination, reclassification or other similar change in our capital structure
effected without the receipt of consideration, appropriate adjustments shall be
made in the number of shares of stock authorized for issuance under the 1998
Director Option Plan but as to which no options have yet been granted or which
have been returned to the 1998 Director Option Plan upon cancellation or
expiration of an option, the number of shares of stock subject to any option
outstanding under the 1998 Director Option Plan, and the exercise price of any
such outstanding option.
The 1998 Director Option Plan further provides that in the event of a
merger of our company with or into another corporation or a sale of
substantially all of our assets, each option shall be assumed or an equivalent
option substituted by the successor corporation. If the outstanding options are
not assumed or substituted, the board of directors or a committee of the board
shall provide for the optionee to have the right to exercise the option as to
all of the optioned stock, including shares that would not otherwise be
exercisable, for a period of thirty days from the date of the notice, and the
option will terminate upon the expiration of the period.
Amendment and Termination of the 1998 Director Option Plan. The board may
amend, alter, suspend or terminate the 1998 Director Option Plan at any time and
for any reason. However, we shall obtain
15
stockholder approval for any amendment to the 1998 Director Option Plan to the
extent necessary to comply with applicable laws. No such action by the board of
directors or stockholders may alter or impair any option previously granted
under the 1998 Director Option Plan without the written consent of the optionee.
PARTICIPATION IN THE 1998 DIRECTOR OPTION PLAN
In January 2003, each of the five non-employee directors who had served on
our board of directors for at least six months was automatically granted an
option to purchase up to 7,500 shares of our common stock under the 1998
Director Option Plan. Mr. Sheehan, who was elected as a director in October
2002, was not entitled to receive the automatic annual grant under the terms of
the 1998 Director Option Plan because of his short tenure on the board of
directors. Assuming that the composition of our board of directors remains the
same, there will be no further grants made under our 1998 Director Option Plan
in fiscal year 2003, and if the amendment set forth in this proposal is approved
by our stockholders, we anticipate that each of our non-employee directors will
be granted an option to purchase up to 10,000 shares of our common stock on
January 1, 2004. The exercise price for such shares will be equal to the closing
price of our common stock as reported on the Nasdaq National Market on the last
market trading day prior to the date the option is granted.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of our
common stock present or represented and voting at the annual meeting will be
required to approve the amendment and restatement of our 1998 Director Option
Plan. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT AND
RESTATEMENT OF OUR 1998 DIRECTOR OPTION PLAN AND RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE PROPOSAL TO AMEND AND RESTATE THE 1998 DIRECTOR
OPTION PLAN.
16
PROPOSAL #4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Our board of directors, following the recommendation of our audit
committee, has appointed PricewaterhouseCoopers LLP, independent auditors, to
audit our financial statements for the fiscal year ending December 31, 2003.
This appointment is being presented to our stockholders for ratification at the
meeting.
TRANSITION FROM ARTHUR ANDERSEN LLP TO PRICEWATERHOUSECOOPERS LLP
The audit committee of our board of directors annually considers and
recommends to the board of directors the selection of our independent public
accountants. As recommended by our audit committee, on May 9, 2002, our board of
directors decided to terminate the engagement of Arthur Andersen LLP as our
independent auditors.
The reports of Arthur Andersen LLP on our financial statements for our
fiscal years ended December 31, 2000 and December 31, 2001 contained no adverse
opinion or disclaimer of opinion, nor were the reports qualified or modified as
to uncertainty, audit scope, or accounting principles.
In connection with the audits performed by Arthur Andersen LLP for fiscal
2000 and 2001 and during the period from January 1, 2002 through May 9, 2002,
there were no disagreements with Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope of
procedure, which disagreements, if not resolved to the satisfaction of Arthur
Andersen LLP, would have caused it to make reference to the subject matter of
the disagreement in its reports, and there have been no reportable events as
listed in Item 304(a)(1)(v) of Regulation S-K.
Effective May 17, 2002, we retained PricewaterhouseCoopers LLP to perform
the annual audit of our financial statements for the fiscal year ended December
31, 2002. During fiscal 2000 and 2001 and during the period from January 1, 2002
through May 17, 2002, neither we nor anyone acting on our behalf consulted with
PricewaterhouseCoopers LLP regarding the application of accounting principles to
a specified transaction, either completed or proposed, or the type of the audit
opinion that might be rendered on our financial statements, nor did we (or
anyone acting on our behalf) consult with PricewaterhouseCoopers LLP regarding
any other matter that was the subject of a disagreement (as defined in paragraph
304(a)(1)(iv) and the related instructions to Item 304 of Regulation S-K) or a
reportable event (as described in paragraph 304(a)(1)(v) of Item 304 of
Regulation S-K).
Before selecting PricewaterhouseCoopers LLP as our independent auditors for
fiscal year 2003, our audit committee carefully considered the firm's
qualifications as independent auditors. This included a review of the
qualifications of the engagement team, the quality control procedures the firm
has established and its reputation for integrity and competence in the fields of
accounting and auditing. The audit committee's review also included matters
required to be considered under the SEC's rules on auditor independence,
including the nature and extent of non-audit services, to ensure that
PricewaterhouseCoopers LLP's independence will not be impaired. The audit
committee expressed its satisfaction with PricewaterhouseCoopers LLP in all of
these respects.
PricewaterhouseCoopers LLP has been conducting independent audits of our
financial statements since May 2002. Representatives of PricewaterhouseCoopers
LLP are expected to be present at the meeting. They will have the opportunity to
address the audience at the meeting, and will be available to answer appropriate
questions from stockholders.
17
SUMMARY OF FEES
The following table summarizes the approximate aggregate fees billed to us
or expected to be billed to us by our independent auditors for our 2002 and 2001
fiscal years:
FISCAL YEAR FISCAL YEAR
TYPE OF FEES 2002 2001(1)
------------ ----------- -----------
Audit Fees.................................................. $188,407(5) $208,500
Financial Information System Design & Implementation
Fees(2)................................................... -- --
All Other Fees:
Audit-Related Fees(3)..................................... 15,800(6) 88,500
Tax Fees(4)............................................... 217,671(7) 97,200
Other Fees................................................ 10,000(8) --
-------- --------
Total Fees.................................................. $431,878 $394,200
======== ========
---------------
(1) This column reflects amounts billed to us by Arthur Andersen LLP. We
terminated the engagement of Arthur Andersen LLP in May 2002.
(2) We did not engage either Arthur Andersen LLP or PricewaterhouseCoopers LLP
to provide advice to us regarding financial information design and
implementation during the 2001 and 2002 fiscal years.
(3) Includes fees for assistance with SEC filings and accounting consultation.
(4) Includes fees for various advisory services related principally to tax
preparation services and tax consultation services associated with the
development and implementation of international tax strategies.
(5) Includes $25,000 billed to us by Arthur Andersen LLP and $163,407 billed or
expected to be billed to us by PricewaterhouseCoopers LLP.
(6) Billed to us by Arthur Andersen LLP in connection with assistance with SEC
filings and accounting consultation for the first quarter of 2002.
(7) Includes $31,400 billed to us by Arthur Andersen LLP and $186,271 billed or
expected to be billed to us by PricewaterhouseCoopers LLP.
(8) Includes fees billed by Arthur Andersen LLP relating to the transition to
PricewaterhouseCoopers LLP.
APPROVAL OF NON-AUDIT FEES
Our audit committee reviewed and approved all non-audit fees for services
provided by PricewaterhouseCoopers LLP and has determined that the firm's
provision of such non-audit services to us during fiscal 2002 is compatible with
and did not impair PricewaterhouseCoopers LLP's independence.
VOTE REQUIRED AND RECOMMENDATION
Stockholder ratification of the selection of PricewaterhouseCoopers LLP as
our independent auditors is not required by our bylaws or other applicable legal
requirement. However, our board of directors is submitting the selection of
PricewaterhouseCoopers LLP to our stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the selection, our
audit committee and the board of directors will reconsider whether or not to
retain PricewaterhouseCoopers LLP as our independent auditors. Even if the
selection is ratified, our board of directors, at its discretion, may direct the
appointment of a different firm to act as our independent auditors at any time
during the year if it determines that such a change would be in our best
interests and in the best interests of our stockholders.
The affirmative vote of the holders of a majority of the shares of our
common stock present or represented by proxy and entitled to vote at the annual
meeting will be required to approve this proposal. OUR BOARD OF DIRECTORS
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF PRICEWATERHOUSECOOPERS
LLP AS OUR INDEPENDENT AUDITORS.
18
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of March 31, 2003 by:
- each stockholder known by us to beneficially own more than 5% of our
common stock;
- each of our directors, including director nominees;
- each of our executive officers named in the summary compensation table on
page 21; and
- all of our directors and executive officers as a group, including
director nominees.
Beneficial ownership is determined based on the rules of the SEC. Percent
of beneficial ownership is based upon 19,542,702 shares of our common stock
outstanding as of March 31, 2003. In addition, shares of common stock subject to
options that are exercisable as of March 31, 2000 or will become exercisable on
or before May 30, 2003 (60 days subsequent to March 31), are treated as
outstanding and to be beneficially owned by the person holding the options for
the purpose of computing the percentage ownership of person and are listed below
under the "Number of Shares Underlying Options" column below, but those option
shares are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. Unless otherwise indicated, we believe
the stockholders listed below have sole voting or investment power with respect
to all shares listed beside each stockholder's name, subject to applicable
community property laws.
NUMBER OF NUMBER OF PERCENT OF
SHARES SHARES TOTAL SHARES SHARES
BENEFICIALLY UNDERLYING BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNERS OWNED OPTIONS OWNED OWNED(%)
----------------- ------------ ---------- ------------ ------------
5% STOCKHOLDERS
Entities affiliated with Barclays Global
Investors, NA.............................. 1,155,442 -- 1,155,442 5.91%
45 Fremont Street
San Francisco, CA 94105(1)
Royce & Associates LLC........................ 2,357,900 -- 2,357,900 12.07
1414 Avenue of the Americas
New York, NY 10019(2)
Entities affiliated with Cannell Capital
LLC........................................ 1,678,326 -- 1,678,326 8.59
150 California Street, Fifth Floor
San Francisco, CA 94111(3)
Dimensional Fund Advisors Inc................. 1,173,768 -- 1,173,768 6.01
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401(4)
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Martin Singer(5).............................. 139,197 261,805 401,002 2.02
John Schoen................................... 87,500 98,334 185,834 *
Jeffrey A. Miller(6).......................... 87,500 98,334 185,834 *
Biju Nair..................................... 75,000 65,000 140,000 *
Carlton Aihara................................ 66,591 95,759 162,350 *
Brian J. Jackman.............................. -- 5,000 5,000 *
Richard C. Alberding.......................... -- 30,000 30,000 *
Carl A. Thomsen............................... -- 17,500 17,500 *
Richard D. Gitlin............................. -- 5,000 5,000 *
Giacomo Marini................................ -- 22,500 22,500 *
John Sheehan.................................. -- -- -- *
All directors, director nominees and current
executive officers as a group (16
persons)................................... 530,846 927,982 1,458,828 7.13%
19
---------------
* Less than 1% of the outstanding shares of common stock.
(1) Information with respect to the number of shares beneficially owned is based
solely on the Schedule 13G filed with the SEC by Barclays Global Investors,
NA, Barclays Global Fund Advisors, Barclays Global Investors, LTD, Barclays
Trust and Banking Company (Japan) Limited, Barclays Life Assurance Company
Limited, Barclays Bank PLC, Barclays Capital Securities Limited, Barclays
Capital Investments, Barclays Private Bank & Trust (Isle of Man) Limited,
Barclays Private Bank and Trust (Jersey) Limited, Barclays Bank Trust
Company Limited and Barclays Private Bank and Trust Limited (Sussie) on
February 13, 2003.
(2) Information with respect to the number of shares beneficially owned is based
solely on the Schedule 13G/A filed with the SEC by Royce & Associates LLC on
February 4, 2003. Royce & Associates LLC, in its capacity as an investment
advisor, possesses sole dispositive control and voting power over such
shares, which are held of record by its clients.
(3) Information with respect to the number of shares beneficially owned is based
solely on the Schedule 13G/A filed with the SEC by Cannell Capital, LLC, J.
Carlo Cannell, The Anegada Fund Limited, The Cuttyhunk Fund Limited, Tonga
Partners, L.P., GS Cannell Portfolio, LLC and Pleiades Investment Partners,
L.P. on February 14, 2003. Cannell Capital, LLC, in its capacity as an
investment advisor, possesses shared dispositive control and shared voting
power over such shares, which are held of record by its clients. J. Carlo
Cannell is the managing member and majority owner of Cannell Capital and, as
a consequence, is deemed to control Cannell Capital and is thereby deemed to
beneficially own such shares.
(4) Information with respect to the number of shares beneficially owned is based
solely on the Schedule 13G/A filed with the SEC by Dimensional Fund Advisors
on February 10, 2003. Dimensional Fund Advisors Inc., in its capacity as an
investment advisor, possesses sole dispositive control and voting power over
such shares which are held of record by its clients. Dimensional disclaims
beneficial ownership of such securities.
(5) Includes 1,000 shares of common stock held by Mr. Singer's family trust.
(6) Includes 5,000 shares of common stock held by Mr. Miller's family trust.
20
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table presents the compensation earned, awarded or paid for
services rendered to us in all capacities for the fiscal years ended December
31, 2002, 2001 and 2000, respectively, by our chief executive officer and four
other executive officers whose salary and bonus for fiscal 2002 exceeded
$100,000. We refer to such individuals elsewhere in this proxy as "named
executive officers." Bonuses for a given fiscal year include bonuses earned and
paid in that fiscal year as well as bonuses earned in that fiscal year but paid
in subsequent years. No dividends will be paid on any of the shares of
restricted stock granted to the named executive officers as described below.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
--------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES ALL OTHER
FISCAL --------------------- STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(#) ($)
--------------------------- ------ --------- -------- ------------ ---------- ------------
Martin H. Singer........... 2002 $354,132 $125,000 $497,250(1) 100,000 $18,348(2)
Chief Executive Officer 2001 72,660(3) 125,000 499,500(4) 300,000(5) 25,015
2000 -- -- -- -- --
John Schoen................ 2002 193,866 5,000 497,250(1) 80,000 16,877(6)
Chief Operating Officer, 2001 26,810(7) 55,000(8) 120,000(9) 150,000 1,140
Chief Financial Officer 2000 -- -- -- -- --
Jeffrey A. Miller.......... 2002 193,008 -- 497,250(1) 80,000 16,877(6)
Vice President, Product 2001 29,104 55,000(8) 120,000(9) 150,000 1,140
Management and 2000 -- -- -- -- --
New Technology
Biju Nair.................. 2002 177,089 9,000(10) 497,250(1) 200,000 14,268(11)
Vice President, 2001 -- -- -- -- --
Product Development 2000 -- -- -- -- --
Carlton Aihara............. 2002 304,800(12) -- 397,800(13) 85,000 8,180(14)
Vice President, 2001 234,920 5,013 -- 40,800 3,015
Global Sales 2000 210,436 34,053 -- 8,000 2,062
---------------
(1) The executive was awarded 75,000 shares of restricted common stock on
December 30, 2002. The closing sales price of our common stock on December
30, 2002 as reported by The Nasdaq National Market was $6.63. Our
repurchase right with respect to 20% of such shares shall lapse on November
1 of each year beginning on November 1, 2004, such that our repurchase
right shall lapse with respect to all such shares on November 1, 2008.
Based on the $6.78 closing sales price of our common stock as reported by
The Nasdaq National Market on December 31, 2002, the value of the
executive's shares on such date was $508,500.
(2) Other compensation for fiscal 2002 consisted of (i) $180 in premiums paid
for term life insurance, (ii) a $12,000 car allowance, and (iii) $6,168 in
matching contributions under our 401(k) plan. Other compensation for fiscal
2001 consisted of (i) $23,500 in board of directors' fees, (ii) $15 in
premiums paid for term life insurance and (iii) a $1,500 car allowance.
(3) Mr. Singer's salary compensation for fiscal 2001 does not include $201,083
in consulting fees earned by Mr. Singer prior to the time he became our
chief executive officer in October 2001 or any fees earned as a
non-employee director prior to such time.
(4) Mr. Singer was awarded 75,000 shares of restricted common stock on October
23, 2001. The closing sales price of our common stock on October 23, 2001
as reported by The Nasdaq National Market was $6.60. Our repurchase right
with respect to 50% of such shares lapsed on November 10, 2002 and with
respect to the remaining shares shall lapse on November 10, 2003. Mr.
Singer continued to hold all such shares as of December 31, 2002. Based on
the $6.78 closing sales price of our common stock as reported
21
by The Nasdaq National Market on December 31, 2002, the value of Mr.
Singer's shares on such date was $508,500.
(5) Excludes (i) 7,500 shares subject to options granted to Mr. Singer in
January 2001 in connection with his service as a non-employee director and
(ii) 15,000 shares subject to an option granted to Mr. Singer in January
2001 in connection with his services as a consultant.
(6) Other compensation for fiscal 2002 consisted of (i) $180 in premiums paid
for term life insurance, (ii) a $9,000 car allowance; and (iii) $7,697 in
matching contributions under our 401(k) plan. Other compensation for fiscal
2001 consisted of (i) $15 in premiums paid for term life insurance and (ii)
a $1,125 car allowance.
(7) Mr. Schoen's salary compensation for fiscal 2001 does not include $10,297
in consulting fees earned by Mr. Schoen prior to the time he became our
chief operating officer and chief financial officer in November 2001.
(8) Each of Messrs. Schoen and Miller received a signing bonus of $55,000 when
he joined us in November 2001.
(9) Each of Messrs. Schoen and Miller was awarded 15,000 shares of restricted
common stock on November 15, 2001. The closing sales price of our common
stock on November 15, 2001, as reported by The Nasdaq National Market, was
$8.00. Our repurchase right with respect to 50% of such shares lapsed on
November 10, 2002 and with respect to the remaining shares shall lapse on
November 10, 2003. Each of Messrs. Schoen and Miller continued to hold all
such shares as of December 31, 2002. Based on the $6.78 closing sales price
of our common stock as reported by The Nasdaq National Market on December
31, 2002, the value of each of Messrs. Schoen and Miller's shares on such
date was $101,700.
(10) Mr. Nair received a signing bonus of $9,000 when he joined us in February
2002.
(11) Other compensation for fiscal 2002 consisted of (i) $180 in premiums paid
for term life insurance, (ii) a $8,250 car allowance; and (iii) $5,838 in
matching contributions under our 401(k) plan.
(12) Includes $138,682 in commissions paid to Mr. Aihara in fiscal year 2002.
(13) Mr. Aihara was awarded 60,000 shares of restricted common stock on December
30, 2002. The closing sales price of our common stock on December 30, 2002
as reported by The Nasdaq National Market was $6.63. Our repurchase right
with respect to 20% of such shares shall lapse on November 1 of each year
beginning on November 1, 2004, such that our repurchase right shall lapse
with respect to all such shares on November 1, 2008. Based on the $6.78
closing sales price of our common stock as reported by The Nasdaq National
Market on December 31, 2001, the value of the executive's shares on such
date was $406,800.
(14) Other compensation for fiscal 2002 consisted of (i) $180 in premiums paid
for term life insurance and (ii) $8,000 in matching contributions under our
401(k) plan. Other compensation for fiscal 2001 consisted of (i) $15 in
premiums paid for term life insurance, (ii) $2,000 in matching
contributions under our 401(k) plan and (iii) $1,000 paid as a referral
fee. Other compensation for fiscal 2000 consisted of (i) $62 in premiums
paid for term life insurance and (ii) $2,000 in matching contributions
under our 401(k) plan.
22
OPTION GRANTS DURING LAST FISCAL YEAR
The following table shows information regarding stock options granted to
the named executive officers during fiscal year 2002. Potential realizable
values with respect to such options are computed by:
- Multiplying the number of shares of common stock underlying each option
by the exercise price,
- Assuming that the total stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table for the entire
ten-year term of the option, and
- Subtracting from that result the total option exercise price.
The 5% and 10% annual return rate is based on the rules of the SEC and do
not reflect projections or estimates of future stock price growth. Actual gains,
if any, on stock option exercises will be dependent on the future performance of
our common stock.
The percentage of total options is based on an aggregate of 1,874,200
options granted by us to our employees, directors and consultants, including the
named executive officers, during fiscal 2002. We did not grant any options under
our 2001 Nonstatutory Stock Option Plan in fiscal 2002. The 1,874,200 shares of
common stock subject to options granted in fiscal 2002 does not include 547,000
shares of common stock awarded pursuant to restricted stock grants made in
fiscal 2002. See the summary compensation table on page 21 for a discussion of
the restricted stock awards that were made to our named executive officers.
The per share exercise price of stock option grants is equal to the closing
sales price of our common stock as reported by The Nasdaq National Market on the
date of grant.
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO OF STOCK APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM($)
OPTIONS DURING PRICE PER EXPIRATION ---------------------------
NAME GRANTED(#) PERIOD(%) SHARE($) DATE 5% 10%
---- ---------- ---------- --------- ---------- ----------- -------------
Martin Singer................ 100,000 7.2% $7.20 5/30/12 $452,804 $1,147,495
John Schoen.................. 80,000 4.27 7.95 3/15/12 399,977 1,013,620
Jeffrey A. Miller............ 80,000 4.27 7.95 3/15/12 399,977 1,013,620
Biju Nair.................... 160,000 8.54 9.00 1/31/12 905,608 2,294,989
40,000 2.13 7.95 3/15/12 199,988 506,810
Carlton Aihara............... 85,000 4.54 7.95 3/15/12 424,976 1,076,971
23
AGGREGATE OPTION EXERCISES DURING LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table presents information regarding the named executive
officers concerning option exercises for fiscal 2002 and exercisable and
unexercisable options held by such individuals as of December 31, 2002. The
"Value Realized" on option exercises is equal to the difference between the
closing sales price of our common stock as reported by The Nasdaq National
Market on the date of exercise less the option exercise price. The "Value of
Unexercised In-the-Money Options at December 31, 2002" is based on a price of
$6.78 closing sales price of our common stock on December 31, 2002 as reported
by The Nasdaq National Market, minus the weighted average per share exercise
price of options held by such named executive officer, multiplied by the
aggregate number of shares underlying the unexercised options held by such
officer. The option exercise information in the table does not include the
360,000 shares of common stock awarded to our named executive officers in fiscal
2002. Please see the summary compensation table on page 21 for more information
regarding the restricted stock awards made to named executive officers in fiscal
2002.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 2002 AT DECEMBER 31, 2002
ACQUIRED ON VALUE --------------------------------- ---------------------------------
EXERCISE(#) REALIZED($) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
----------- ----------- -------------- ---------------- -------------- ----------------
Martin H. Singer..... -- -- 157,466 280,034 $9,333 $14,667
John Schoen.......... -- -- 69,167 160,833 -- --
Jeffrey A. Miller.... -- -- 69,167 160,833 -- --
Biju Nair............ -- -- 7,500 192,500 -- --
Carlton Aihara....... -- -- 80,572 98,103 -- --
24
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2002 about our
common stock that may be issued upon the exercise of options and rights under
all of our existing equity compensation plans, including our 1997 Stock Plan,
1998 Director Stock Option Plan, 1998 Employee Stock Purchase Plan and 2001
Nonstatutory Stock Option Plan.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE EQUITY COMPENSATION
BE ISSUED UPON EXERCISE EXERCISE PRICE OF PLANS (EXCLUDING
OF OUTSTANDING OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY OPTIONS AND RIGHTS(#) WARRANTS AND RIGHTS($) THE FIRST COLUMN)(#)
------------- ----------------------- ---------------------- -----------------------
Equity compensation plans approved
by security holders(1).......... 4,151,905(3) $11.692(3) 3,702,217(4)
Equity compensation plans not
approved by security
holders(2)...................... 566,528 $ 7.986 473,178(5)
--------- ------- ---------
Total........................ 4,718,433 $11.247 4,175,395
---------------
(1) Information is provided with respect to our 1997 Stock Plan, 1998 Director
Stock Option Plan and 1998 Employee Stock Purchase Plan.
(2) Information is provided with respect to our 2001 Nonstatutory Stock Option
Plan and with respect to our grant of options to purchase 150,000 shares of
our common stock outside of a formalized plan to each of John Schoen and
Jeffrey A. Miller on November 15, 2001 in connection with their initial
employment with us. Under the terms of our 2001 Nonstatutory Stock Option
Plan, no options may be granted under such plan to our officers or
directors.
(3) We are unable to ascertain with specificity the number of securities to be
issued upon exercise of outstanding rights under our 1998 Employee Stock
Purchase Plan or the weighted average exercise price of outstanding rights
under our 1998 Employee Stock Purchase Plan. The 1998 Employee Stock
Purchase Plan provides that shares of our common stock may be purchased at a
per share price equal to 85% of the fair market value of the common stock at
the beginning of the offering period or a purchase date applicable to such
offering period, whichever is lower.
(4) This number includes 1,664,204 shares available for future issuance under
our 1997 Stock Plan, 87,500 shares available for future issuance under our
1998 Director Stock Option Plan and 1,950,513 shares available for future
issuance under our 1998 Employee Stock Purchase Plan as of December 31,
2002.
(5) All such shares are available for future issuance under our 2001
Nonstatutory Stock Option Plan.
25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a description of the transactions or series of similar
transactions that we have entered into since January 1, 2002 in which the amount
exceeds $60,000, and in which any director, executive officer, nominee for
election as a director, holder of more than 5% of our common stock, or any
member of the immediate family of any of the foregoing persons had or will have
a direct or indirect material interest, other than the change of contract
arrangements and employment agreements with the named executive officers that
are described under "Employment Agreements and Change in Control Arrangements"
on page 28.
MANAGEMENT RETENTION AGREEMENTS
Each of our executive officers is party to a management retention agreement
under which they are entitled to receive certain severance and vesting
acceleration benefits in the event their employment is involuntarily terminated
within 12 months following a change of control transaction. See "Employment
Agreements and Change in Control Arrangements" on page 28 for a further
description of such management retention agreements.
EMPLOYMENT AGREEMENT
In March 2003, in connection with our acquisition of the assets of Dynamic
Telecommunications, Inc., Paul A. Kline joined us as the President of PCTEL
Maryland, Inc., our wholly owned subsidiary. Under Mr. Kline's "at-will"
employment agreement, we agreed to pay Mr. Kline's annual base compensation of
$184,370 and bonus compensation targeted at up to 50% of his base salary,
subject to the achievement of certain milestones. In addition, we granted Mr.
Kline an option to purchase up to 150,000 shares of our common stock at a
purchase price equal to the fair market value of our common stock on the date of
grant, with 25% of the shares vesting on the 12-month anniversary of the date of
grant and the remaining shares vesting ratably on a monthly basis over the next
three years. Subject to Mr. Kline's continued employment with us on the 24-month
anniversary of his start date, he will be entitled to receive a retention bonus
of $150,000. Such employment agreement also provides that if, prior to the
24-month anniversary of his start date, Mr. Kline's employment is terminated
other than for cause or if he resigns as a result of relocation of his principal
place of employment outside of Germantown, Maryland (unless such relocation is
effected with his consent), Mr. Kline will receive continued salary, health
benefits and continued vesting with respect to his equity awards through the
24-month anniversary of his start date, and he will also be entitled to receive
the retention bonus payable on the 24-month anniversary of his start date.
DEFERRED COMPENSATION PLAN
Effective as of January 20, 2003, the board of directors approved the terms
of two deferred compensation plans for our management. The plans will be
administered by the compensation committee or as otherwise determined by our
board of directors. The principal purpose of the plans is to permit our officers
and director-level employees to defer current income and create a long-term
compensation benefit that supports our management retention objectives.
The first plan permits the deferral of cash compensation, including salary,
bonus and commission payments, and it provides that up to 50% of a participant's
salary and all of a participant's bonus or commission payments may be deferred.
The minimum annual contribution under the cash deferred compensation plan has
been set at $1,500. Under this plan, we have committed to a matching
contribution equal to 4% of the cash compensation deferred pursuant to the plan,
with such contribution vesting as to one-third of the total amount each year so
that the matching contribution vests fully after three years (subject to the
participant's continued employment with us).
The second plan permits the deferral of compensation earned as a result of
gains realized pursuant to equity awards, including stock options and restricted
stock. All contributions to this plan will be made in shares of our common
stock, and participants must specify the amounts to be contributed at least six
months before the date on which the stock is to be contributed. This plan does
not provide for matching contributions.
26
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers and
directors and persons who own more than ten percent of a registered class of our
equity securities to file reports of ownership and changes in ownership with the
SEC and the National Association of Securities Dealers, Inc. Executive officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish us with copies of all Section 16(a) forms they file. Based
solely on our review of the copies of such forms received by us, or written
representations from certain reporting persons, we believe that during fiscal
2002 all executive officers and directors complied with all applicable filing
requirements with the exceptions of (i) Michael Chen, a former director who
resigned in May 2001 and who failed to timely file a Form 4 covering one
transaction, and (ii) the following officers, each of whom was late in filing a
Form 4 to disclose one transaction: Carlton Aihara, our vice president of global
sales, Jeffrey A. Miller, our vice president, produce management and new
technology, Biju Nair, our vice president, product development, Michael Pastor
our vice president, human resources, John W. Schoen, our chief operating officer
and chief financial officer, Les W. Sgnilek, our vice president of finance,
Martin H. Singer, our chairman of the board and chief executive officer, and
Mark Wilson, our vice president, licensing programs.
27
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
MANAGEMENT RETENTION AGREEMENTS
In March 2000, our board of directors authorized the implementation of a
management retention program with members of our management and certain other
key employees. Upon the involuntary termination of such individual's employment
within 12 months following a change of control transaction, such executive
officers and key employees will receive the following benefits:
- Chief Executive Officer: cash severance equal to (i) 200% of annual
compensation plus (ii) 100% of targeted bonus compensation and 12 months
of continued health benefits;
- Vice-Presidents: cash severance equal to (i) 150% of annual compensation
plus (ii) 100% of targeted bonus compensation and 12 months of continued
health benefits;
- Director-level and other key employees: cash severance equal to (i) 75%
of annual compensation plus (ii) 100% of targeted bonus compensation and
12 months of continued health benefits.
In addition, the vesting with respect to all equity awards held by the
participants in our management retention program will accelerate so such equity
awards shall become fully vested. To date, the participants in the program at
the director level or below have not been designated. Each of our named
executive officers has entered into a management retention agreement.
EMPLOYMENT AGREEMENTS
In addition to our standard form of confidentiality agreement prohibiting
the disclosure of any of our confidential or proprietary information and
providing that, upon termination, the former employee will not solicit our
employees, we have executed "at-will" employment agreements with the following
named executive officers:
Martin H. Singer. In October 2001, Martin H. Singer became our chief
executive officer and chairman of the board. Dr. Singer's "at-will" employment
agreement provides that in the event Dr. Singer's employment is involuntarily
terminated other than for cause (other than following a change of control where
the benefits to be received under such scenario are governed by the management
retention agreements described above), Dr. Singer will receive 12 months
continued salary, up to 18 months continued health benefits and continued
vesting with respect to his equity awards for the 12 months following his
termination date.
John Schoen. In November 2001, John Schoen joined us as our chief
financial officer, chief operating officer and secretary. Mr. Schoen's "at-will"
employment agreement sets forth his annual salary and targeted bonus
compensation, which is subject to certain milestones. Such employment agreement
also provides that in the event Mr. Schoen's employment is involuntarily
terminated other than for cause (other than following a change of control where
the benefits to be received under such scenario are governed by the management
retention agreements referenced above), Mr. Schoen will receive 12 months
continued salary, up to 12 months continued health benefits and continued
vesting with respect to his equity awards for the 12 months following his
termination date.
Jeffrey A. Miller. In November 2001, Jeffrey A. Miller joined us as our
vice president, engineering and development. Mr. Miller's "at-will" employment
agreement sets forth his annual salary and targeted bonus compensation, which is
subject to certain milestones. Such employment agreement also provides that in
the event Mr. Miller's employment is involuntarily terminated other than for
cause (other than following a change of control where the benefits to be
received under such scenario are governed by the management retention agreements
referenced above), Mr. Miller will receive 12 months continued salary, up to 12
months continued health benefits and continued vesting with respect to his
equity awards for the 12 months following his termination date.
28
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding any statement to the contrary in any of our previous or
future filings with the SEC, this report of the audit committee of the board of
directors shall not be deemed "filed" with the SEC or "soliciting material"
under the Exchange Act, and shall not be incorporated by reference into any such
filings.
The audit committee of our board of directors was formed in March 2000 and
consists of Richard Alberding, Giacomo Marini and Carl Thomsen, each of whom
meets the independence and experience requirements of the National Association
of Securities Dealers. The audit committee operates under a written charter.
During the 2002 fiscal year, the audit committee reviewed its charter and
determined that certain amendments would be appropriate in consideration of the
provisions of the Sarbanes-Oxley Act and related rules of the SEC and the
National Association of Securities Dealers. Upon the recommendation of the audit
committee, in October 2002, the board of directors approved an amended and
restated charter for the audit committee in the form attached hereto as Appendix
C.
The purpose of the audit committee is to review the procedures of
management for the design, implementation and maintenance of a comprehensive
system of internal and disclosure controls and procedures focused on the
accuracy of our financial statements and the integrity of our financial
reporting systems. The audit committee provides our board of directors with the
results of the committee's examinations and recommendations and reports to the
board of directors as the committee may deem necessary to make the board aware
of significant financial matters that require the board's attention.
The audit committee does not conduct auditing reviews or procedures. The
audit committee relies on management's representation that our financial
statements have been prepared accurately and in conformity with United States
generally accepted accounting principles and on the representations of the
independent auditors included in such auditors' report on our financial
statements. The audit committee has also adopted a written policy that is
intended to encourage our employees to bring to the attention of management and
the audit committee any complaints regarding the integrity of our internal
financial controls or the accuracy or completeness of financial or other
information related to our financial statements.
Consistent with policies adopted by the SEC regarding auditor independence,
the audit committee has responsibility for appointing, setting compensation and
terminating the services of our independent auditors. In the early part of 2002,
the audit committee interviewed nationally recognized audit firms following its
determination to replace Arthur Andersen LLP, and in May 2002, we engaged
PricewaterhouseCoopers LLP as our independent auditors. In the course of this
engagement process, the audit committee considered that firm's qualifications as
independent auditors and matters relating to the SEC rules on auditor
independence.
The audit committee reviews reports and provides guidance to our
independent auditors with respect to their annual audit and approves all audit
and non-audit services provided by our independent auditors in accordance with
applicable regulatory requirements. In connection with the standards for
independence of external auditors promulgated by the SEC, during the 2003 fiscal
year, the audit committee will consider, in advance of the provision of any
non-audit services by our independent auditors, whether the provision of such
services is compatible with maintaining the independence of the external
auditors.
In accordance with its responsibilities, the audit committee has reviewed
and discussed with management the audited financial statements for the year
ended December 31, 2002. PricewaterhouseCoopers LLP issued their unqualified
report dated February 2003 on our financial statements. The audit committee has
also discussed with PricewaterhouseCoopers LLP the matters required to be
discussed by SAS No. 61, Communication with Audit Committees. The audit
committee has received the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees, and has discussed with
PricewaterhouseCoopers LLP its independence, including whether
PricewaterhouseCoopers LLP's provision of non-audit services is compatible with
its independence.
29
Based on these reviews and discussions, the audit committee recommended to
our board of directors that our audited financial statements for the year ended
December 31, 2002 be included in our Annual Report on Form 10-K for the fiscal
year then ended.
Respectfully submitted by:
THE AUDIT COMMITTEE
Richard Alberding
Giacomo Marini
Carl Thomsen
30
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding any statement to the contrary in any of our previous or
future filings with the SEC, this report of the compensation committee of the
board of directors shall not be deemed "filed" with the SEC or "soliciting
material" under the Exchange Act, and shall not be incorporated by reference
into any such filings.
The compensation committee of our board of directors was formed in March
2000 and currently consists of Richard C. Alberding, John Sheehan and Brian J.
Jackman. Decisions concerning the compensation of our executive officers are
made by the compensation committee and may be reviewed periodically by the full
board of directors (excluding any interested director).
During the 2002 fiscal year, the compensation committee reviewed its
charter and determined that certain amendments would be appropriate in
consideration of the provisions of the Sarbanes-Oxley Act and related rules of
the SEC and the National Association of Securities Dealers. Upon the
recommendation of the compensation committee, in October 2002, the board of
directors approved an amended and restated charter for the compensation
committee.
RESPONSIBILITIES OF THE COMMITTEE
Acting on behalf of the board of directors, the compensation committee's
responsibilities include the following:
- Reviewing the performance of the chief executive officer and other
executive officers;
- Recommending to the board of directors the total compensation package for
the chief executive officer and determining the compensation for the
other executive officers;
- Reviewing the compensation philosophy for our employees, including the
chief executive officer and other executive officers; and
- Administering our employee stock option and employee stock purchase
plans, including determining eligibility and the number and type of
options to be granted and the terms of such grants.
COMPENSATION PHILOSOPHY
Our philosophy in setting compensation policies for executive officers is
to maximize stockholder value over time. The primary goal of our executive
compensation program is, therefore, to closely align the interests of the
executive officers with those of our stockholders. To achieve this goal, we
attempt to offer compensation opportunities that give us the ability to attract
and retain executives whose skills are critical to our long-term success,
motivate individuals to perform at their highest level, and reward outstanding
achievement. In addition, we attempt to maintain a portion of each executive's
total compensation at risk and tied to our achievement of financial,
organizational and management performance goals, thus encouraging executives to
manage from the perspective of owners with an equity stake in us. To achieve
these goals, the compensation committee has established an executive
compensation program primarily consisting of cash compensation, stock options,
restricted stock grants, long-term equity incentives and other compensation and
benefit programs generally available to other employees. In January 2003, the
compensation committee recommended and the board of directors approved the
implementation of a deferred compensation plan for the benefit of our officers
and key managers.
EXECUTIVE OFFICER COMPENSATION
The cash component of total compensation, which consists of base salary and
bonus, is designed to compensate executives competitively within the industry
and marketplace. The compensation committee, on an annual basis, reviews and
recommends to the board of directors the base salary and bonus (with associated
milestones) for the chief executive officer and reviews and approves the base
salaries and target bonuses (with associated milestones) for our other
executives. Our executives' compensation in fiscal 2002 was established by the
compensation committee based upon each executive's scope of job
responsibilities, level of experience, past performance, contribution to our
business, and data on prevailing compensation levels in relevant markets for
executive talent. Regarding the latter measure, certain companies included in
the peer group index of the stock performance graph are also included in surveys
reviewed by the compensation committee in reviewing salary levels for our chief
executive officer and other executive officers.
31
In addition to base salary, we pay annual bonuses to our executive
officers. These annual bonuses are intended to provide a direct link between
management compensation and the achievement of corporate and individual
objectives. The amount of bonus is determined based upon an executive's
achievement of certain milestones, which are approved by the board of directors
for our chief executive officer and reviewed by the board of directors for our
other executive officers.
We provide long-term incentives through the grant of restricted stock and
stock options under our stock option plans, particularly our 1997 Stock Plan and
our 1998 Employee Stock Purchase Plan. The purpose of our 1997 Stock Plan is to
attract and retain the best employee talent available and to create a direct
link between compensation and our long-term performance. The compensation
committee believes that stock and options directly motivate an executive to
maximize long-term stockholder value. The stock and options also utilize vesting
periods to encourage key executives to continue in our employment. All stock
options granted to executive officers to date have been granted at the fair
market value of our common stock on the date of grant. The board considers each
stock and option grant subjectively, considering factors such as the individual
performance of the executive officer and the anticipated contribution of the
executive officer to the attainment of our long-term strategic performance
goals. Because the receipt of value by an executive officer under a stock option
is dependent upon an increase in the price of our common stock, this portion of
the executive's compensation is directly aligned with an increase in stockholder
value. Generally, restricted stock and/or stock options are granted to an
executive officer in conjunction with the executive officer's acceptance of
employment. When determining the number of shares of stock or the number of
stock options to be awarded to an executive officer, the compensation committee
considers the individual's current contribution to our performance, the
executive officer's anticipated contribution in meeting our long-term strategic
performance goals, and comparisons to formal and informal surveys of executive
stock and option grants made by other peer companies. The compensation committee
also reviews stock and option levels for executive officers at the beginning of
each fiscal year in light of long-term strategic and performance objectives and
each executive's current and anticipated contributions to our future
performance.
2001 CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation committee reviews the chief executive officer's salary
using the same criteria and policies as are employed for the other executive
officers. The compensation committee based its compensation recommendations for
fiscal 2002 on a variety of factors, including the scope and responsibility of
the chief executive officer and comparisons of chief executive officer
compensation levels for companies of similar size and maturity. The compensation
committee also focused on our performance during fiscal 2001 in setting the
compensation for fiscal 2002.
The compensation of Martin H. Singer for fiscal year 2002, as our current
chief executive officer and chairman of the board, consisted of $354,132 in base
salary, a $125,000 bonus, the grant of options to purchase up to 322,500 shares
of our common stock and a restricted stock grant of 75,000 shares of common
stock.
QUALIFYING COMPENSATION
In general, it is our policy to qualify, to the maximum extent possible,
our executives' compensation for deductibility under applicable tax laws. The
compensation committee has considered the potential impact of Section 162(m) of
the Internal Revenue Code on the compensation paid to our executive officers.
None of the executive officers named in the proxy statement were compensated
over $1.0 million in 2002.
Respectfully submitted by:
THE COMPENSATION COMMITTEE
Richard C. Alberding
John Sheehan
Brian J. Jackman
32
COMPANY PERFORMANCE
Notwithstanding any statement to the contrary in any of our previous or
future filings with the SEC, this company performance graph shall not be deemed
"filed" with the SEC or "soliciting material" under the Exchange Act and shall
not be incorporated by reference into any such filings.
The graph below compares the annual percentage change in the cumulative
return to our stockholders with the cumulative return of the Nasdaq Stock Market
Index and of the S&P Technology Sector Index from the date of our initial public
offering (October 19, 1999) and ending on December 31, 2002. Returns for the
indices are weighted based on market capitalization at the beginning of each
measurement point. Note that historic stock price performance is not necessarily
indicative of future stock price performance.
COMPARISON OF 38 MONTH CUMULATIVE TOTAL RETURN*
AMONG PCTEL, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S&P INFORMATION TECHNOLOGY INDEX
[COMPANY PERFORMANCE GRAPH]
------------------------------------------------------------------------------------------------------------
10/19/99 12/31/99 06/30/00 12/31/00 06/30/01 12/31/01 06/30/02 12/31/02
------------------------------------------------------------------------------------------------------------
PCTEL, INC. 100.00 308.82 223.53 63.24 54.18 57.12 39.82 39.88
NASDAQ STOCK MARKET
(U.S.) 100.00 147.72 144.31 88.93 78.22 70.55 53.28 48.78
S&P INFORMATION
TECHNOLOGY 100.00 135.87 140.06 80.30 66.89 59.53 40.78 37.26
* $100 invested on 10/19/99 in stock or on 9/30/99 in index-including
reinvestment of dividends. Fiscal year ending December 31.
33
OTHER MATTERS
We know of no other matters to be submitted at the meeting. If any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed form of proxy to vote the shares they represent as the
board of directors may recommend.
THE BOARD OF DIRECTORS
Dated: April 29, 2003
34
APPENDIX A
PC-TEL, INC.
1997 STOCK PLAN
(AS AMENDED AND RESTATED, AUGUST 3, 1999)
1. Purposes of the Plan. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for positions of
substantial responsibility,
- to provide additional incentive to Employees, Directors and Consultants,
and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options or
Stock Purchase Rights are, or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means PC-Tel, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options, no
such leave may exceed ninety days, unless reemployment upon expiration of
such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option. Neither
service as a Director nor payment of a director's fee by the Company shall
be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Gnostic SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day
prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase
Right grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise
price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1997 Stock Plan, as amended and restated.
(y) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted
Stock Purchase Agreement is subject to the terms and conditions of the Plan
and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.
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(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 5,500,000 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year equal to the lesser of (i) 700,000
Shares, (ii) 4% of the outstanding shares on such date or (iii) a lesser amount
determined by the Board. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered by
different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator determines
it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of
the Code, the Plan shall be administered by a Committee of two or more
"outside directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption
under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered
by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not
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limited to, the exercise price, the time or times when Options or Stock
Purchase Rights may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions,
and any restriction or limitation regarding any Option or Stock Purchase
Right or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator, in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
(x) to modify or amend each Option or Stock Purchase Right (subject to
Section 15(c) of the Plan), including the discretionary authority to extend
the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having
a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined. All elections by
an Optionee to have Shares withheld for this purpose shall be made in such
form and under such conditions as the Administrator may deem necessary or
advisable;
(xii) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option or Stock Purchase
Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or advisable
for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 300,000 Shares.
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(ii) In connection with his or her initial service, a Service Provider
may be granted Options to purchase up to an additional 300,000 Shares which
shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is canceled in the same fiscal year of the Company
in which it was granted (other than in connection with a transaction
described in Section 13), the canceled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if
the exercise price of an Option is reduced, the transaction will be treated
as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect until 2007
years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(1) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date of grant.
(2) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per
Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is granted,
the Administrator shall fix the period within which the Option may be exercised
and shall determine any conditions which must be satisfied before the Option may
be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the
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Administrator shall determine the acceptable form of consideration at the time
of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance
of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence. An
Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to
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the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service Provider
as a result of the Optionee's Disability, the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider, the
Option may be exercised within such period of time as is specified in the Option
Agreement (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquires the right to exercise the Option by bequest or inheritance, but
only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares an Option previously granted based on such terms
and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
in addition to, or in tandem with other awards granted under the Plan and/or
cash awards made outside of the Plan. After the Administrator determines that it
will offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically, by means of a Notice of Grant, of the terms,
conditions and restrictions related to the offer, including the number of Shares
that the offeree shall be entitled to purchase, the price to be paid, and the
time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
service with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock Purchase
Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a shareholder, and
shall be a shareholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 13 of the Plan.
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12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for an Optionee to have the
right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Stock Purchase Right shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully vested and exercisable for a period of fifteen
(15) days from the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
success or corporation, provide for
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the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder approval of
any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise
of an Option or Stock Purchase Right unless the exercise of such Option or Stock
Purchase Right and the issuance and delivery of such Shares shall comply with
Applicable Laws and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
(c) Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, 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.
17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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APPENDIX B
PC-TEL, INC.
1998 DIRECTOR OPTION PLAN
(AS PROPOSED TO BE AMENDED AND RESTATED)
19. Purposes of the Plan. The purposes of this 1998 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
20. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means PC-Tel, Inc., a Delaware corporation.
(e) "Director" means a member of the Board.
(f) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient in and
of itself to constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock for the last market trading
day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board.
(i) "Inside Director" means a Director who is an Employee.
(j) "Option" means a stock option granted pursuant to the Plan.
(k) "Optioned Stock" means the Common Stock subject to an Option.
(l) "Optionee" means a Director who holds an Option.
(m) "Outside Director" means a Director who is not an Employee.
(n) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
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(o) "Plan" means this 1998 Director Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986.
21. Stock Subject to the Plan. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 400,000 Shares of Common Stock (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised
in full, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
22. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside Directors under
this Plan shall be automatic and nondiscretionary and shall be made strictly in
accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to
be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an Option to
purchase 15,000 Shares (the "First Option") on the date on which the later
of the following events occurs: (A) the effective date of this Plan, as
determined in accordance with Section 6 hereof, or (B) the date on which
such person first becomes an Outside Director, whether through election by
the shareholders of the Company or appointment by the Board to fill a
vacancy; provided, however, that an Inside Director who ceases to be an
Inside Director but who remains a Director shall not receive a First
Option.
(iii) Each Outside Director shall be automatically granted an Option
to purchase 10,000 Shares (a "Subsequent Option") on January 1st of each
year provided he or she is then an Outside Director and if as of such date,
he or she shall have served on the Board for at least the preceding six (6)
months.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall
be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be as follows:
(1) the term of the First Option shall be ten (10) years.
(2) the First Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(3) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the First Option.
(4) subject to Section 10 hereof, the First Option shall become
exercisable as to 33 1/3 percent of the Shares subject to the First
Option on each anniversary of its date of grant, provided that the
Optionee continues to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall be as
follows:
(1) the term of the Subsequent Option shall be ten (10) years.
(2) the Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth
in Sections 8 and 10 hereof.
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(3) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the Subsequent Option.
(4) subject to Section 10 hereof, the Subsequent Option shall
become exercisable as to 100 percent of the Shares subject to the
Subsequent Option on each anniversary of its date of grant, provided
that the Optionee continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan would cause
the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options
to the Outside Directors on a pro rata basis. No further grants shall be
made until such time, if any, as additional Shares become available for
grant under the Plan through action of the Board or the shareholders to
increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.
23. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
24. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
25. Form of Consideration. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
26. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times as are set forth in Section 4
hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
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Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to Section 10
hereof, in the event an Optionee's status as a Director terminates (other than
upon the Optionee's death or total and permanent disability (as defined in
Section 22(e)(3) of the Code)), the Optionee may exercise his or her Option, but
only within three (3) months following the date of such termination, and only to
the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a Director
terminates as a result of total and permanent disability (as defined in Section
22(e)(3) of the Code), the Optionee may exercise his or her Option, but only
within twelve (12) months following the date of such termination, and only to
the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of an Optionee's death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or
inheritance may exercise the Option, but only within twelve (12) months
following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
27. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
28. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, to the extent that an Option has not been
previously exercised, it shall terminate immediately prior to the consummation
of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation or the sale of substantially all of the assets of the
Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the Option
or equivalent option shall continue to be
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exercisable as provided in Section 4 hereof for so long as the Optionee serves
as a Director or a director of the Successor Corporation. Following such
assumption or substitution, if the Optionee's status as a Director or director
of the Successor Corporation, as applicable, is terminated other than upon a
voluntary resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 8(b) through (d) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
29. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend, or discontinue the Plan, but no amendment, alteration, suspension, or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with any applicable law, regulation
or stock exchange rule, the Company shall obtain shareholder approval of any
Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options already granted and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated.
30. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
31. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, 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.
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32. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
33. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
34. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
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APPENDIX C
AMENDED AND RESTATED CHARTER
FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
PCTEL, INC.
(AS AMENDED OCTOBER 31, 2002)
PURPOSE:
The purpose of the Audit Committee of the Board of Directors (the "BOARD")
of PCTEL, Inc. (the "COMPANY") shall be to:
- Assist the Board in monitoring of (i) the integrity of the Company's
financial statements, (ii) the Company's accounting policies and
procedures, (iii) the Company's compliance with legal and regulatory
requirements, (iv) the independent auditor's qualifications, independence
and performance, (v) the Company's disclosure controls and procedures and
(vi) the Company's internal controls; and
- Provide to the Board such additional information and materials as it may
deem necessary to make the Board aware of significant financial matters
that require the attention of the Board.
In addition, the Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board may from time
to time prescribe.
MEMBERSHIP:
The Audit Committee members will be appointed by, and will serve at the
discretion of, the Board. The Audit Committee will consist of at least three
members of the Board. Members of the Audit Committee must meet the following
criteria:
- Each member will be an independent director, as defined in (i) Nasdaq
Rule 4200 and (ii) the rules of the Securities and Exchange Commission
(the "SEC"), as in effect from time to time;
- Each member will be able to read and understand fundamental financial
statements, in accordance with the Nasdaq National Market Audit Committee
requirements; and
- At least one member will have past employment experience in finance or
accounting, requisite professional certification in accounting, or other
comparable experience or background, including a current or past position
as a principal financial officer or other senior officer with financial
oversight responsibilities.
RESPONSIBILITIES:
The responsibilities of the Audit Committee shall include:
- Reviewing the reports by management and the independent auditors
concerning the design, implementation and maintenance for the Company's
system of internal controls and meeting periodically with the Company's
management and the independent auditors to review their assessment of the
adequacy of such internal controls;
- Exercising sole responsibility for appointing, compensating (including
all audit engagement fees and terms), and terminating the services of the
independent auditors for the purpose of preparing or issuing an audit
report or related work;
- Approving the audit and non-audit services provided to the Company by the
independent auditors in accordance with the applicable requirements of
the SEC;
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- Reviewing the independence of the outside auditors, including (i)
obtaining on a periodic basis a formal written statement from the
independent auditors regarding relationships and services with the
Company that may impact independence, as defined by applicable standards
and SEC requirements, (ii) presenting this statement to the Board, and
(iii) to the extent there are relationships, monitoring and investigating
them;
- Reviewing and providing guidance with respect to the external audit by
(i) reviewing the independent auditors' proposed audit scope and
approach; (ii) discussing with the Company's independent auditors the
financial statements and audit findings, including any significant
adjustments, management judgments and accounting estimates, significant
new accounting policies and disagreements with management and any other
matters described in SAS No. 61,; and (iii) reviewing reports submitted
to the audit committee by the independent auditors in accordance with the
applicable SEC requirements;
- Reviewing and discussing with management and the independent auditors the
annual audited financial statements and quarterly unaudited financial
statements, including the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," prior to filing the Company's Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q, respectively, with the SEC (which for
purposes of the annual report shall include a recommendation to the Board
as to whether the audited financial statements should be included in the
Company's Annual Report on Form 10-K);
- Reviewing the audit findings, including any suggestions for improvements,
provided to management by the independent auditors and management's
response to such findings;
- Reviewing with the Company's management and the independent auditors
before release the unaudited quarterly operating results in the Company's
quarterly earnings release;
- Reviewing the procedures of management for the design, implementation and
maintenance for the Company's system of disclosure controls (including
any reports by management relating to such controls and procedures) and
meeting periodically with the Company's management, independent auditors
and legal counsel to review their assessment of such disclosure controls
and procedures;
- If necessary, instituting special investigations with full access to all
books, records, facilities and personnel of the Company;
- Retaining, as appropriate, outside legal, accounting or other advisors to
advise or assist the Audit Committee;
- Reviewing and approving in advance any proposed related party
transactions;
- Reviewing the Audit Committee charter from time to time;
- Providing a report in the Company's proxy statement in accordance with
the rules and regulations of the SEC; and
- Reviewing the procedures developed by management for receiving, retaining
and treating complaints received from the Company's employees and
consultants regarding accounting or auditing matters and reviewing any
complaints submitted by employees or consultants.
MEETINGS:
The Audit Committee will meet at least four times each year. The Audit
Committee will meet separately with the Chief Executive Officer and separately
with the Chief Financial Officer of the Company at such times as are appropriate
to review the financial affairs of the Company. The Audit Committee will meet
separately with the independent auditors of the Company, at such times as it
deems appropriate, to fulfill the responsibilities of the Audit Committee under
this charter.
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MINUTES:
The Audit Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board.
REPORTS:
In addition to preparing the report in the Company's proxy statement in
accordance with the rules and regulations of the SEC, the Audit Committee will
summarize its discussions, reviews and recommendations to the Board as may be
appropriate, consistent with the Committee's charter.
DELEGATION OF AUTHORITY:
The Audit Committee may delegate to one or more designated members of the
Audit Committee the authority to pre-approve audit and permissible non-audit
services, provided such pre-approval decision is presented to the full Audit
Committee at its scheduled meetings.
C-3
PROXY FOR THE
PCTEL, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, JUNE 3, 2003
10:00 A.M. Local time
PCTEL, INC.
8725 WEST HIGGINS ROAD
SUITE 400
CHICAGO, ILLINOIS 60631
This proxy is solicited on behalf of the board of directors for use at
the annual meeting of stockholders on June 3, 2003.
The undersigned stockholder of PCTEL, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated April 29, 2003, and hereby appoints Martin H. Singer
and John Schoen, and each of them, proxies and attorneys-in-fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 2003 Annual Meeting of Stockholders of PCTEL,
Inc. to be held on June 3, 2003 at 10:00 a.m. local time at our headquarters,
located at 8725 West Higgins Road, Suite 400, Chicago, Illinois, 60631, and at
any adjournment or adjournments thereof, and to vote all shares of common stock
which the undersigned would be entitled to vote if then and there personally
present on the matters set forth on the reverse side.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED: FOR ALL NOMINEES TO THE BOARD OF DIRECTORS AND AS THE PROXY HOLDER MAY
DETERMINE IN HIS DISCRETION WITH REGARD TO ANY OTHER MATTER PROPERLY BROUGHT
BEFORE THE MEETING.
PLEASE VOTE BY TELEPHONE OR THE INTERNET OR MARK, SIGN, DATE
AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
See reverse for voting instructions.
COMPANY #
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CONTROL #
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THERE ARE THREE WAYS TO VOTE YOUR PROXY.
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed
and returned your proxy card.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK***EASY***IMMEDIATE
- Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m. (CT) on June 2, 2003.
- You will be prompted to enter your 3-digit Company Number, your 7-digit Control Number (these numbers are located on the
proxy card) and the last 4 digits of the U.S. Social Security Number or Tax Identification Number for this account. If
you do not have a U.S. SSN or TIN please enter 4 zeros.
- Follow the simple instructions the voice provides you.
VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/PCTI/ -- QUICK***EASY***IMMEDIATE
- Use the Internet to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m. (CT) on June 2, 2003.
- You will be prompted to enter your 3-digit Company Number and your 7-digit Control Number (these numbers are located on the
proxy card) and the last 4 digits of the U.S. Social Security Number or Tax Identification Number for this account to obtain
your records and create an electronic ballot. If you do not have a U.S. SSN or TIN please leave blank.
VOTE BY MAIL
- Mark, sign and date your proxy card and return it in the postage-paid envelope we've provided or return it to PCTEL, Inc.,
c/o Shareowner Services, P.O. Box 64873, St. Paul, MN 55164-9397.
IF YOU VOTE BY PHONE OR THE INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING PROPOSALS:
1. Election of directors 01 Brian J. Jackman 02 John Sheehan [ ] Vote FOR the [ ] Vote WITHHELD
to serve until 2006 nominee (except from the nominee
as marked)
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(Instructions: To withhold authority to vote for any indicated | |
nominees write the number(s) of the nominee(s) in the box provided to | |
the right.) | |
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2. Approval of the material terms of the 1997 Stock Plan: [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Amendment of the 1998 Director Stock Option Plan [ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of the appointment of PricewaterhouseCoopers LLP as [ ] FOR [ ] AGAINST [ ] ABSTAIN
independent auditors of PCTEL, Inc. for the fiscal year ending
December 31, 2003
IN THEIR DISCRETION, the proxy holders are authorized to vote upon such other business as may properly come before the
meeting or any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR ALL PROPOSALS.
I plan to attend the annual meeting [ ]
Address Change?
Mark Box [ ] Indicate changes below:
Date
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Signature(s) in Box
Please sign exactly as name appears hereon. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give title as such. If a corporation, please sign in
full corporate name by president or other authorized officer.
If a partnership, please sign in partnership name by
authorized person.