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 Rule 240.14a-11(c) or Rule 240.14a-12
PCTEL, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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:
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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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(PCTEL LOGO)
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
MONDAY, JUNE 5, 2006
10:00 A.M.
---------------------
To Our Stockholders:
The 2006 annual meeting of stockholders of PCTEL, Inc., a Delaware
corporation, will be held on Monday, June 5, 2006 at 10:00 a.m. local time at
our headquarters, located at 8725 West Higgins Road, Suite 400, Chicago,
Illinois 60631 for the following purposes:
1. To elect two Class I directors whose terms will expire at the 2009
annual meeting of stockholders;
2. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent registered public accounting firm for the fiscal year ending
December 31, 2006;
3. To approve the amendment and restatement of the 1997 Stock Plan,
including an increase in the reserve of shares under the Plan; and
4. To transact such other business as may properly come before the
meeting or any adjournment or postponement 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 17, 2006 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 deliver
your proxy by telephone or the Internet or 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 27, 2006
YOUR VOTE IS IMPORTANT.
PLEASE SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE
BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
PCTEL, INC.
8725 WEST HIGGINS ROAD, SUITE 400
CHICAGO, ILLINOIS 60631
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PROXY STATEMENT FOR THE
2006 ANNUAL MEETING OF STOCKHOLDERS
---------------------
GENERAL INFORMATION
The board of directors of PCTEL, Inc. is soliciting proxies for the 2006
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 17, 2006 as the record date for the
meeting. Stockholders of record at the close of business on April 17, 2006 are
entitled to vote at and attend the meeting, with each share entitled to one
vote. There were 21,626,304 shares of our common stock outstanding on the record
date. On the record date, the closing price of our common stock on The Nasdaq
Stock Market was $10.45 per share.
This proxy statement is being mailed on or about April 27, 2006 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 Monday, June 5, 2006 at
10:00 a.m. at our headquarters, located at 8725 West Higgins Road, Suite 400,
Chicago, Illinois 60631.
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 are the stockholder of record 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 W. Schoen as your representatives at the meeting. Dr. Singer is our
Chief Executive Officer and Chairman of the Board and Mr. Schoen is our Chief
Financial Officer. 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 three proposals:
- the election of two Class I directors whose terms will expire at the 2009
annual meeting of stockholders;
- the ratification of the appointment of PricewaterhouseCoopers LLP as our
independent registered public accounting firm for the fiscal year ending
December 31, 2006; and
- the approval of the amendment and restatement of the 1997 Stock Plan,
including an increase in the reserve of shares under the Plan.
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 W. 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).
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 and the
ratification of the appointment of our independent registered public
accounting firm) or leave your shares unvoted. Your brokerage firm may not
vote on "non-routine matters" (such as the amendment and restatement of the
1997 Stock Plan), without specific instructions from you. 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.
Q: HOW MANY VOTES MAY BE CAST AT THE MEETING?
A: As of the record date, 21,626,304 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 21,626,304 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
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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 (such as the election of directors and the ratification of the
appointment of our independent registered public accounting firm), but not on
non-routine matters (such as the amendment and restatement of the 1997 Stock
Plan), without specific instructions from their clients. The vote with
respect to the non-routine matter in this case is referred to as a "broker
non-vote." 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. A broker non-vote
may also occur with respect to routine matters if the broker expressly
instructs on the proxy card that it is not voting on a certain matter.
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, whether such proposal is a routine or
non-routine matter.
Q: WHAT IS THE REQUIRED VOTE FOR EACH OF THE PROPOSALS TO PASS?
A: - The two director nominees receiving the highest number of votes, in person
or by proxy, will be elected as directors.
- For the proposal to ratify the appointment of PricewaterhouseCoopers LLP,
our independent registered public accounting firm, the required vote is the
affirmative (i.e. "FOR") vote of a majority of the shares present,
represented and voting at the annual meeting.
- For the proposal to amend and restate the 1997 Stock Plan, the required
vote is the affirmative (i.e., "FOR") vote of a majority of the shares
present, represented and voting at the annual meeting.
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 reasonable
out-of-pocket expenses for forwarding these proxy materials to you. We expect
our transfer agent, Wells Fargo Bank, 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 W. SCHOEN,
CHIEF FINANCIAL OFFICER.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS AND NOMINATIONS FOR 2007 ANNUAL
MEETING OF STOCKHOLDERS
Stockholders are entitled to present proposals for action and director
nominations at the 2007 annual meeting of stockholders only if they comply with
the applicable requirements of the proxy rules established by
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the Securities Exchange Commission and the applicable provisions of our bylaws.
Stockholders must ensure that such proposals and nominations are received by our
Corporate Secretary at the following address: 8725 West Higgins Road, Suite 400,
Chicago, Illinois 60631, Attn: Corporate Secretary, on or prior to the deadline
for receiving such proposals and nominations.
Proposals for the 2007 annual meeting of stockholders that are intended to
be considered for inclusion in the proxy statement and form of proxy relating to
such meeting must be received no later than December 26, 2006, and must comply
with the procedures of Rule 14a-8 under the Securities Exchange Act of 1934 (the
"Exchange Act") and the provisions of our bylaws.
If a stockholder intends to submit a proposal or director nomination for
consideration at our 2007 annual meeting of stockholders outside the procedures
of Rule 14a-8 under the Exchange Act, the stockholder must comply with the
requirements of our bylaws and we are not required to include such proposal or
nomination in the proxy statement and form of proxy relating to such meeting.
Our bylaws contain an advance notice provision that requires stockholders to
submit a written notice containing certain information not less than 120 days
prior to the date of our proxy statement for the previous year's annual meeting
of stockholders. For purposes of the 2007 annual meeting of stockholders, this
means that such proposals or nominations must also be received by December 26,
2006. A copy of the relevant bylaw provision is available upon written request
to our Corporate Secretary at the address provided above.
The attached proxy card grants the proxy holders discretionary authority to
vote on any business raised at the annual meeting. If you fail to comply with
the advance notice provisions set forth above in submitting a proposal or
nomination for the 2007 annual meeting of stockholders, the proxy holders will
be allowed to use their discretionary voting authority if such proposal or
nomination is raised at that meeting.
4
SUMMARY OF PROPOSALS
The board of directors has included three proposals on the agenda for our
2006 annual meeting of stockholders. 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 2009 annual meeting of stockholders. Our board of directors has
nominated Brian J. Jackman and John R. 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.
RATIFY APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The second proposal is the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting firm.
More information about this proposal begins on page 13.
OUR BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
APPROVAL OF AMENDMENT AND RESTATEMENT OF 1997 STOCK PLAN
The third proposal is the approval of the amendment and restatement of our
1997 Stock Plan, including an increase in the reserve of shares under the Plan.
More information about this proposal begins on page 15.
OUR BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF OUR 1997 STOCK PLAN, INCLUDING AN INCREASE IN THE RESERVE OF
SHARES UNDER THE PLAN.
OTHER MATTERS
Other than the proposals listed above, our board of directors does not
currently 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.
5
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 R. Sheehan, whose terms are expiring at
this 2006 annual meeting of stockholders; two Class II directors, Richard C.
Alberding and Carl A. Thomsen, whose terms will expire at our 2007 annual
meeting of stockholders; and three Class III directors, Giacomo Marini, Martin
H. Singer and Steven D. Levy, whose terms will expire at our 2008 annual meeting
of stockholders. At each annual meeting of stockholders, certain directors are
elected for a term of three years to succeed those directors whose terms expire
on the annual meeting dates. Mr. Levy was appointed as a member of our board of
directors in March 2006.
In March 2006, Richard D. Gitlin resigned as a member of the board of
directors due to time constraints, after serving on our board of directors for
approximately four years. We would like to thank Mr. Gitlin for his service as a
director of our company.
NOMINEES
On the recommendation of the board of directors, the nominees for election
at the 2006 annual meeting of stockholders as Class I directors are Brian J.
Jackman and John R. Sheehan. If elected, Messrs. Jackman and Sheehan will serve
as directors, and their terms will expire at the annual meeting of stockholders
in 2009.
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 either 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 either of our nominees will be unable or
will decline to serve as a director.
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.
OUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE DIRECTOR NOMINEES AND
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE DIRECTOR NOMINEES
LISTED ABOVE.
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DIRECTORS AND NOMINEES
The following table sets forth certain information regarding our current
directors and nominees for directors to be elected at our 2006 annual meeting of
stockholders:
DIRECTOR
NAME AGE POSITION WITH PCTEL SINCE
---- --- ------------------- --------
CLASS I DIRECTOR NOMINEES TO BE ELECTED AT
THE 2006 ANNUAL MEETING OF STOCKHOLDERS
WHOSE TERMS WILL EXPIRE AT THE 2009 ANNUAL
MEETING OF STOCKHOLDERS:
Brian J. Jackman.......................... 65 Director 2002
John R. Sheehan........................... 69 Director 2002
CLASS II DIRECTORS WHOSE TERMS EXPIRE AT THE
2007 ANNUAL MEETING OF STOCKHOLDERS:
Richard C. Alberding...................... 75 Director 1999
Carl A. Thomsen........................... 61 Director 2001
CLASS III DIRECTORS WHOSE TERMS EXPIRE AT
THE 2008 ANNUAL MEETING OF STOCKHOLDERS:
Steven D. Levy............................ 49 Director 2006
Giacomo Marini............................ 54 Director 1996
Martin H. Singer.......................... 54 Chief Executive Officer and 1999
Chairman of the Board of
Directors
Mr. Jackman has been a director since February 2002. Mr. Jackman is
currently the President of The Jackman Group, Inc., a management consulting
company that he formed in 2005. In September 2001, 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 management positions in sales and marketing for
IBM from 1965 to 1982. He is currently on the boards of directors of Open Text,
Inc., an enterprise content management solutions company, and Keithley
Instruments, a test and measurement equipment company. In addition, Mr. Jackman
serves on the board of trustees of Gannon University. Mr. Jackman holds a
bachelor of arts degree in English literature from Gannon University in Erie,
Pennsylvania and a master degree in business administration from Penn State
University.
Mr. Sheehan has been a director since October 2002. Mr. Sheehan has served
as a senior 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
bachelor of science degree in electrical engineering from Drexel University and
a master of science degree in electrical engineering from New York University.
Mr. 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 Stratex Networks,
Inc., a provider of wireless transmission solutions, and Sybase, Inc., an
enterprise software company. Mr. Alberding holds a bachelor of arts degree in
business administration and marketing from Augustana College, and an associate
of science degree in electrical engineering from DeVry Technical Institute in
Chicago.
Mr. Thomsen has been a director since March 2001. Since February 1995, Mr.
Thomsen has served as Chief Financial Officer of Stratex Networks, Inc., a
provider of wireless transmission solutions. Currently, he
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serves as its Senior Vice President, Chief Financial Officer and Corporate
Secretary. Mr. Thomsen holds a bachelor of science degree in business
administration from Valparaiso University and a master degree in business
administration from the University of Michigan. He is also a certified public
accountant.
Mr. Levy has been a director since March 2006. Mr. Levy most recently
served as a Managing Director and Global Head of Communications Technology
Research at Lehman Brothers from July 1998 until September 2005. Before joining
Lehman Brothers, Mr. Levy was a Director of Telecommunications Research at
Salomon Brothers from March 1997 to July 1998, a Managing Director and Head of
the Communications Research Team at Oppenheimer & Co. from July 1994 to March
1997, and a senior communications analyst at Hambrecht & Quist from July 1986 to
July 1994. Mr. Levy is also currently a member of the board of directors of Tut
Systems, a broadband equipment vendor. Mr. Levy holds a master degree in
business administration and a bachelor of science degree in materials
engineering from Rensselaer Polytechnic Institute.
Mr. Marini has been a director since October 1996. Mr. Marini has been the
founder and Managing Director of Cypress Ventures/CIR Ventures, an early-stage
technology venture capital firm, since March 2002. Since March 1995 he has
served as Managing Member of Marini Group LLC (and predecessor entities), a
private investment and management consulting business that invests in and
advises high technology companies. 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. 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 was an
independent consultant. From December 1997 to August 2000, 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 degree in psychology
from the University of Michigan, and a master of arts degree and a Ph.D. in
experimental psychology from Vanderbilt University. Dr. Singer currently serves
as the Chairman of the Midwest council of the AeA (American Electronics
Association). He is also on the advisory board for the Master of Management &
Manufacturing program at Northwestern University (Kellogg) and serves on the
standing advisory group for the Public Company Accounting Oversight Board, the
organization established to manage the implementation of the Sarbanes-Oxley Act
of 2002.
BOARD AND COMMITTEE MEETINGS
Our board of directors held a total of nine meetings during fiscal 2005.
The board of directors has currently an audit committee, a compensation
committee and a nominating and governance committee. Each member of the audit
committee, compensation committee and nominating and governance committee meets
The Nasdaq Stock Market independence requirements. The board has determined that
Mr. Thomsen qualifies as an "audit committee financial expert" as defined under
the rules and regulations of the SEC, and that all members of our audit
committee meet the Nasdaq financial literacy requirements. During our last
fiscal year,
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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.
MEETINGS
HELD IN
DATE CURRENT WRITTEN FISCAL
COMMITTEE MEMBERS DURING FISCAL 2005 COMMITTEE FUNCTIONS CHARTER ADOPTED 2005
--------- ---------------------------- ------------------------------ ---------------------- ---------
Audit.............. Carl A. Thomsen (Chair) - Selects our independent Originally adopted 9
Richard C. Alberding auditors August 1999; last
Giacomo Marini - Oversees our internal amended November 2004
financial reporting and
accounting controls
- Consults with and reviews
the services provided by our
independent auditors
Compensation....... Richard C. Alberding (Chair) - Reviews and recommends to Originally adopted 7
John R. Sheehan the board of directors the August 1999; last
Brian J. Jackman compensation and benefits of amended March 2005
our chief executive officer
- Establishes and reviews
general policies relating to
the compensation and
benefits of our employees
Nominating and
Governance......... John R. Sheehan (Chair) - Assists the board of Originally adopted 3
Brian J. Jackman directors in identifying and February 2004; last
selecting prospective amended March 2005
director nominees for the
annual meeting of
stockholders
- Reviews and makes
recommendations on matters
regarding corporate
governance, board
composition, evaluation and
nominations, board
committees and conflicts of
interest
- Establishes, maintains and
improves corporate
governance guidelines
A copy of each of the charters for our board committees is available on our
website located at www.pctel.com. They may be found on the website in "Corporate
Governance" under "Investor Relations."
Mr. Jackman is currently the lead independent director of our board of
directors. As lead independent director, his principal responsibilities are (i)
working with the Chairman and Chief Executive Officer and the other board
members to set the agenda for each meeting of the board, (ii) serving as a
liaison for communications between our board and the Chief Executive Officer,
(iii) acting as the chair for executive sessions held at regularly scheduled
meetings of the board of directors, and (iv) consulting with our General Counsel
regarding communications received from our stockholders.
COMPENSATION OF DIRECTORS
Cash and Stock Compensation. Our non-employee directors currently receive
a yearly cash retainer of $12,500 and shares of restricted common stock
equivalent to $4,000. They also 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. In addition, our
non-employee directors annually receive additional shares of restricted stock as
set forth below:
- the chairs of our compensation committee and nominating and governance
committee each receive shares of restricted common stock equivalent to
$7,000;
- our lead independent director and audit committee chair receive shares of
restricted common stock equivalent to $10,000; and
9
- the chair of our business development committee (an advisory committee of
our board of directors) receives shares of restricted common stock
equivalent to $3,000.
All of the shares of restricted common stock received by our non-employee
directors vest six months after the date of grant, provided that the individual
continues to serve as a director on such date. The number of shares granted is
based on the total dollar value divided by the per share closing price of our
stock on the date of grant.
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 10,000 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. These 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.
In the event the amendment and restatement of our 1997 Stock Plan set forth
in Proposal #3 is approved by the stockholders at the annual meeting, our 1998
Director Option Plan will be replaced by the amended and restated 1997 Stock
Plan and all option grants to non-employee directors after the annual meeting
will be governed by the terms and conditions of the amended and restated 1997
Stock Plan. Please see Proposal #3 on page 15 for more information regarding the
amendment and restatement of the 1997 Stock Plan.
Deferred Compensation Plan. Our non-employee directors are eligible to
participate in the Board of Directors Deferred Compensation Plan (the "Directors
Deferred Compensation Plan"). The principal purpose of the Directors Deferred
Compensation Plan is to provide additional retirement benefits and income tax
deferral opportunities for our non-employee directors. The Directors Deferred
Compensation Plan permits the deferral of cash compensation that would otherwise
be received by the non-employee directors for their service on PCTEL's board of
directors. Compensation that is deferred under the Directors Deferred
Compensation Plan will be paid out by PCTEL upon the termination of a
non-employee director's service on the board of directors. If such termination
occurs after the non-employee director has reached the age of 55, such
non-employee director may elect to receive the deferred compensation in a lump
sum, annually over 15 years, or over the lifetime of the non-employee director
in 20 annual payments.
Reimbursements. In addition, each of our non-employee directors is
reimbursed for all reasonable out of pocket expenses incurred in connection with
his service on our board of directors.
DIRECTOR NOMINATION PROCESS
STOCKHOLDER RECOMMENDATIONS AND NOMINATIONS.
It is the policy of our nominating and governance committee to consider
director candidates recommended by our stockholders holding on the date of
submission of such recommendation at least 1% of the then outstanding shares of
our common stock continuously for at least 12 months prior to such date.
Stockholders desiring to recommend a candidate for election to the board of
directors should send their recommendation in writing to the attention of our
Corporate Secretary, at our offices located at 8725 West Higgins Road, Suite
400, Chicago, Illinois 60631. This written recommendation must include the
information and materials required by our bylaws as well as the candidate's
name, home and business contact information, detailed biographical data,
relevant qualifications, a signed letter from the candidate confirming
willingness to serve, information regarding any relationships between the
candidate and PCTEL within the last three years and evidence of the required
ownership of our common stock by the recommending stockholder. A copy of the
relevant bylaw provision is available upon written request to our Corporate
Secretary at the address provided above.
10
In accordance with the advance notice provision in our bylaws, director
nominations to be considered at the next annual meeting of stockholders must be
received not less than 120 days prior to the date of our proxy statement for the
previous year's annual meeting of stockholders. For purposes of our 2007 annual
meeting of stockholders, director nominations must be received by December 26,
2006.
IDENTIFYING AND EVALUATING NOMINEES FOR DIRECTOR.
The nominating and governance committee uses the following procedures for
identifying and evaluating any individual recommended or offered for nomination
to the board of directors:
- The committee considers candidates recommended by stockholders in the
same manner as candidates recommended by other sources.
- The committee considers the following factors in its evaluation of
candidates:
- The current size and composition of the board of directors and the needs
of the board of directors and the respective committees of the board of
directors.
- The candidate's judgment, independence, character and integrity, age,
area of expertise, diversity of experience, length of service and
potential conflicts of interest.
- Other factors that the committee considers appropriate.
The nominating and governance committee requires the following minimum
qualifications to be satisfied by any candidate recommended or offered for
nomination to the board of directors:
- The highest personal and professional ethics and integrity.
- Proven achievement and competence in the candidate's field and the
ability to exercise sound business judgment.
- Skills that are complementary to those of the existing board of
directors.
- The ability to assist and support management and make significant
contributions to our success.
- An understanding of the fiduciary responsibilities that are required of a
member of the board of directors and the commitment of time and energy
necessary to diligently carry out those responsibilities.
The nominating and governance committee is comprised of Messrs. Sheehan and
Jackman, both of whom are also the nominees for election at the 2006 annual
meeting of stockholders as Class I directors. As a result, the qualification and
nomination of Messrs. Sheehan and Jackman were undertaken by the entire board of
directors, rather than the nominating and governance committee. The board of
directors unanimously approved Messrs. Sheehan's and Jackman's nomination.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders who wish to communicate directly with our independent
directors may do so by sending an e-mail message to Varda Goldman, our Vice
President and General Counsel, at generalcounsel@pctel.com. Mrs. Goldman
monitors these communications, consults with Mr. Jackman, our current lead
independent director, and provides a summary of all received messages to the
board of directors at its regularly scheduled meetings. Where the nature of the
communication warrants, Mrs. Goldman may determine to obtain more immediate
attention of the appropriate committee or independent director of the board of
directors, of independent advisors or of our management. Mrs. Goldman may decide
in her judgment whether a response to any stockholder communication is
necessary.
11
ATTENDANCE AT THE ANNUAL MEETING OF STOCKHOLDERS
All directors are welcome to attend the 2006 annual meeting of stockholders
and it is expected that our lead independent director will be in attendance at
every annual meeting of stockholders. At the 2005 annual meeting of
stockholders, two of our directors were in attendance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2005, none of the members of the compensation committee were
officers or employees of PCTEL while they served as members of the compensation
committee. In addition, no executive officer of PCTEL served 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.
12
PROPOSAL #2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Our audit committee has appointed PricewaterhouseCoopers LLP, independent
registered public accounting firm, to audit our financial statements for the
fiscal year ending December 31, 2006. This appointment is being presented to our
stockholders for ratification at the 2006 annual meeting of stockholders.
Before selecting PricewaterhouseCoopers LLP as our independent registered
public accounting firm for fiscal year 2006, 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.
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 2006 annual meeting of stockholders. They
will have the opportunity to address the audience at the meeting, and will be
available to answer appropriate questions from stockholders.
SUMMARY OF FEES
The following table summarizes the approximate aggregate fees billed to us
or expected to be billed to us by our independent registered public accounting
firm for our 2005 and 2004 fiscal years:
TYPE OF FEES FISCAL YEAR 2005 FISCAL YEAR 2004
------------ ---------------- ----------------
Audit Fees(1).......................................... $1,284,575 $ 863,230
Audit-Related Fees(2).................................. -- --
Tax Fees(3)............................................ -- 195,760
All Other Fees(4)...................................... 1,500 --
---------- ----------
Total Fees............................................. $1,286,075 $1,058,990
========== ==========
---------------
(1) Audit Fees -- These are fees for professional services performed by
PricewaterhouseCoopers LLP for auditing our annual financial statements and
reviewing our quarterly financial statements, and services that are normally
provided in connection with statutory and regulatory filings or engagements.
In fiscal 2005 and 2004, audit fees also include fees for professional
services performed by PricewaterhouseCoopers LLP for the audits of
management's assessment of the effectiveness of internal control over
financial reporting.
(2) Audit-Related Fees -- These are fees for the assurance and related services
performed by PricewaterhouseCoopers LLP that are reasonably related to the
performance of the audit or review of the Company's financial statements.
For fiscal 2005 and 2004, PricewaterhouseCoopers LLP did not perform any
services that fell within this category.
(3) Tax Fees -- These are fees for professional services performed by
PricewaterhouseCoopers LLP with respect to various advisory services related
principally to tax preparation services and tax consultation services. In
fiscal 2005, we engaged another audit firm to perform these services.
(4) All Other Fees -- These are fees for permissible services performed by
PricewaterhouseCoopers LLP that do not fall within the above categories. For
fiscal 2005, these fees were comprised of a subscription fee for an
Internet-based system to access accounting disclosure information. For
fiscal 2004, PricewaterhouseCoopers LLP did not perform any services that
fell within this category.
13
PRE-APPROVAL OF INDEPENDENT AUDITOR SERVICES AND FEES
Our audit committee reviewed and pre-approved all audit and non-audit fees
for services provided by PricewaterhouseCoopers LLP and has determined that the
firm's provision of such services to us during fiscal 2005 is compatible with
and did not impair PricewaterhouseCoopers LLP's independence. It is the practice
of the audit committee to consider and approve in advance all auditing and
non-auditing services provided to us by our independent registered public
accounting firm in accordance with the applicable requirements of the SEC.
VOTE REQUIRED AND RECOMMENDATION
Stockholder ratification of the selection of PricewaterhouseCoopers LLP as
our independent registered public accounting firm 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. Notwithstanding the
selection by the audit committee of PricewaterhouseCoopers LLP or stockholder
ratification of that selection, the audit committee may direct the appointment
of a new independent registered public accounting firm at any time during the
year if the audit committee determines that such a change would be in our best
interest and in that of our stockholders. In the event of a negative vote on
ratification, the audit committee will reconsider its selection.
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 REGISTERED PUBLIC
ACCOUNTING FIRM.
14
PROPOSAL #3
APPROVAL OF THE 1997 STOCK PLAN AS AMENDED AND RESTATED
The stockholders are being asked to approve an amendment and restatement of
the 1997 Stock Plan (the "Stock Plan"), including an increase in the number of
shares reserved for issuance under the Stock Plan as described below. The board
of directors has approved the proposed amendment and restatement of the Stock
Plan, subject to approval from the stockholders at this 2006 annual meeting. If
the stockholders approve the amendment and restatement of the Stock Plan, it
will replace the current version of our Stock Plan and our 1998 Director Option
Plan (the "Director Plan"). If the Stock Plan is approved, no further awards
will be made under the Director Plan, but it will continue to govern awards
previously granted thereunder. If the stockholders do not approve the Stock
Plan, the current Stock Plan and Director Plan will remain in effect through the
remainder of their respective terms. Approval of the Stock Plan requires the
affirmative vote of the holders of a majority of the shares of our common stock
that are present in person or by proxy and entitled to vote at this 2006 annual
meeting.
The board of directors believes that long-term incentive compensation
programs align the interests of management, employees and the stockholders to
create long-term stockholder value. The board of directors believes that plans
such as the Stock Plan increase our ability to achieve this objective,
especially, in the case of the Stock Plan, by allowing for several different
forms of long-term incentive awards, which the board of directors believes will
help us to recruit, reward, motivate and retain talented personnel. The recent
changes in the equity compensation accounting rules, which became effective for
PCTEL in the first quarter of fiscal 2006, also make it important for us to have
greater flexibility under our Stock Plan. As the new equity compensation
accounting rules come into effect for all companies, competitive equity
compensation practices may change materially, especially as they pertain to the
use of equity compensation vehicles other than stock options.
CHANGES BEING MADE TO THE PLAN
The following is a summary of some of the changes being made to the Stock
Plan:
- The stockholders are being asked to approve a change in the number of
shares of common stock authorized for issuance under the Stock Plan. The
Stock Plan as originally adopted in 1997 provided for the issuance of
5,500,000 shares, plus an annual increase to be added on the first day of
our fiscal year equal to the lesser of 700,000 shares, 4% of the
outstanding shares on such date, or a lesser amount determined by the
board of directors. The Stock Plan as amended eliminates the provision
for automatic annual increases in the reserve. As a result, any future
increases will require stockholder approval in accordance with the rules
of The Nasdaq Stock Market.
- The Stock Plan as amended provides that the maximum number of shares that
may be issued under the Stock Plan after the effective date of the
amendment is equal to the sum of (i) 2,300,000 shares, plus (ii) any
shares returned (or that would have otherwise returned) to the Stock Plan
on or after the date of approval of the amendment and restatement of the
Stock Plan by the board of directors as a result of termination of
options or repurchase of shares issued under the Stock Plan prior to the
date of approval of the amendment and restatement of the Stock Plan by
the board of directors, plus (iii) any shares returned (or that would
have otherwise returned) to the Director Plan on or after the date of
approval of the amendment and restatement of the Stock Plan by the board
of directors as a result of termination of options or repurchase of
shares issued under the Director Plan.
- The Stock Plan currently allows for the grant of stock options, stock
appreciation rights, and stock purchase rights (through which awards of
restricted stock can be made). In addition to awards of stock options,
stock appreciation rights and restricted stock, the amended and restated
Stock Plan would permit the award of restricted stock units, performance
units, performance shares, dividend equivalents, and other stock or cash
awards as determined by the administrator of the Stock Plan.
- The amended Stock Plan provides that shares used to pay the tax and
exercise price of an award will not become available for future grant or
sale under the Stock Plan. To the extent an award under the
15
Stock Plan is paid out in cash rather than shares, the cash payment will
not result in reducing the number of shares available for issuance under
the Stock Plan.
- The Stock Plan as amended provides that the per share exercise price of a
nonstatutory stock option will be no less than 100% of the fair market
value per share on the date of grant.
- The amended Stock Plan provides that the administrator of the Stock Plan
generally may not modify or amend an option or stock appreciation right
to reduce the exercise price of such option or stock appreciation right
after it has been granted, nor may the administrator of the Stock Plan
cancel any outstanding option or stock appreciation right and replace it
with a new option or stock appreciation right with a lower exercise
price, unless, in either case, such action is approved by our
stockholders.
- The Stock Plan has been amended to add limitations to the number of
shares that may be granted on an annual basis through individual awards.
Additionally, specific performance criteria have been added to the Stock
Plan so that the administrator of the Stock Plan may establish
performance objectives upon achievement of which certain awards will vest
or be issued, which in turn will allow PCTEL to receive income tax
deductions under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
- The Stock Plan has been amended to incorporate the provisions of the
Director Plan. Under the amended and restated Stock Plan, each director
who is not an employee of PCTEL (an "Outside Director") will
automatically receive an option to purchase 15,000 shares on the date he
or she first becomes an Outside Director and an option to purchase 10,000
shares on January 1 of each year, provided he or she has served as an
Outside Director for at least the preceding six months.
- The Stock Plan has been amended to specify the treatment of
non-performance based awards in the event of a change in control of
PCTEL. The amended and restated Stock Plan provides that in the event of
the change in control of PCTEL, each outstanding award, other than awards
which vest or are paid-out based upon the satisfaction of performance
goals, will be assumed or an equivalent award substituted by the
successor corporation or a parent or subsidiary of the successor
corporation. In the event that the successor corporation, or the parent
or subsidiary of the successor corporation, refuses to assume or
substitute for the awards, the participant will fully vest in and have
the right to exercise all of his or her outstanding non-performance based
awards, including shares as to which such awards would not otherwise be
vested or exercisable, and all non-performance based restrictions on
restricted stock will lapse. With respect to any restricted stock,
restricted stock unit, performance share, performance unit, or other
performance-based award which is not assumed or substituted for, all
performance goals or other vesting criteria will be deemed achieved at
target levels and all other terms and conditions met. If the change in
control occurs during a performance period, the participant will receive
a pro-rated amount of the performance-based award based on the amount of
time he or she was a service provider during the performance period
before the change in control. If an award becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a
change in control, the administrator of the Stock Plan will notify the
participant in writing or electronically that the award will be fully
vested and exercisable for fifteen days from the date of such notice, and
the award will terminate upon the expiration of such period.
- The Stock Plan has been amended to specify the treatment of awards
granted to Outside Directors in the event of a change in control of
PCTEL. The amended and restated Stock Plan provides that in the event of
a change in control of PCTEL, an Outside Director will fully vest in and
have the right to exercise all of his or her awards, including shares as
to which such awards would not otherwise be vested or exercisable, all
restrictions on restricted stock will lapse, and, with respect to
restricted stock units, performance shares and performance units, all
performance goals or other vesting criteria will be deemed achieved at
target levels and all other terms and conditions met. The Outside
Director will receive payment of a pro-rated amount of the performance
shares, performance units, or other performance-based award that would
have actually been earned had the Outside Director remained a service
provider through the end of the performance period based on the amount of
time the Outside Director was a service provider during the performance
period before the change in control.
16
The board of directors believes strongly that the approval of the amended
and restated Stock Plan is essential to our continued success. In particular, we
believe that our employees are PCTEL's most valuable assets and that the awards
permitted under the Stock Plan are vital to our ability to attract and retain
outstanding and highly skilled individuals in the extremely competitive labor
markets in which we compete. Such awards also are crucial to our ability to
motivate employees to achieve PCTEL's goals.
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 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 ADOPTION
OF THE 1997 STOCK PLAN, AS AMENDED AND RESTATED, INCLUDING AN INCREASE IN THE
RESERVE OF SHARES UNDER THE PLAN AND THE NUMBER OF SHARES RESERVED FOR ISSUANCE
THEREUNDER.
SUMMARY OF THE 1997 STOCK PLAN, AS AMENDED AND RESTATED
The following is a summary of the principal features of the amended and
restated Stock Plan and its operation. The summary is qualified in its entirety
by reference to the Stock Plan itself set forth in Appendix A.
The Stock Plan provides for the grant of the following types of incentive
awards: (i) stock options, (ii) stock appreciation rights, (iii) restricted
stock, (iv) restricted stock units, (v) performance shares, (vi) performance
units, (vii) dividend equivalents, and (viii) other stock or cash awards. Each
of these is referred to individually as an "Award." Those who will be eligible
for Awards under the Stock Plan include employees, directors and consultants who
provide services to PCTEL and its affiliates. As of April 17, 2006,
approximately 390 employees, directors and consultants would be eligible to
participate in the Stock Plan.
Number of Shares of Common Stock Available Under the Stock Plan. The
maximum aggregate number of shares that may be awarded and sold under the Stock
Plan after the effective date of the amendment is equal to the sum of (i)
2,300,000 shares, plus (ii) any shares returned (or that would have otherwise
returned) to the Stock Plan on or after the date of approval of the amendment
and restatement of the Stock Plan by the board of directors as a result of
termination of options or repurchase of shares issued under the Stock Plan prior
to the date of approval of the amendment and restatement of the Stock Plan by
the board of directors, plus (iii) any shares returned (or that would have
otherwise returned) to the Director Plan on or after the date of approval of the
amendment and restatement of the Stock Plan by the board of directors as a
result of termination of options or repurchase of shares issued under the
Director Plan. The shares may be authorized, but unissued, or reacquired common
stock.
If PCTEL declares a stock dividend or engages in a reorganization or other
change in its capital structure, including a merger, the board of directors will
have the discretion to adjust (i) the number of shares available for issuance
under the Stock Plan, (ii) the number and price of shares subject to outstanding
Awards, and (iii) the number of shares specified as per-person limits on Awards,
as appropriate, to reflect the change.
Administration of the Stock Plan. The board of directors or a committee of
directors or of other individuals satisfying applicable laws and appointed by
the board of directors will administer the Stock Plan. To make grants to certain
of our officers and key employees, the members of the committee must qualify as
"non-employee directors" under Rule 16b-3 of the Securities Exchange Act of
1934. The committee members must also qualify as "outside directors" under
Section 162(m) of the Code (so that PCTEL can receive a federal tax deduction
for certain compensation paid under the Stock Plan). Subject to the terms of the
Stock Plan, the board of directors or its committee has the sole discretion to
select the employees, consultants, and directors who will receive Awards,
determine the terms and conditions of Awards, and to interpret the provisions of
the Stock Plan and outstanding Awards. Notwithstanding the foregoing, the board
of directors or committee may not modify or amend an option or stock
appreciation right to reduce the exercise price of that Award after it has been
granted or to cancel any outstanding option or stock appreciation right and
replace it with a new option or stock appreciation right with a lower exercise
price unless such action is approved by our
17
stockholders. The board of directors or other committee administering the Stock
Plan is referred to below as the "Administrator."
Options. The Administrator is able to grant nonstatutory stock options and
incentive stock options under the Stock Plan. The Administrator determines the
number of shares subject to each option, although the Stock Plan provides that a
participant may not receive options for more than 300,000 shares in any fiscal
year, except in connection with his or her initial service as an employee, in
which case he or she may be granted an option to purchase up to an additional
150,000 shares.
The Administrator determines the exercise price of options granted under
the Stock Plan, provided the exercise price must be at least equal to the fair
market value of our common stock on the date of grant. In addition, the exercise
price of an incentive stock option granted to any participant who owns more than
10% of the total voting power of all classes of our outstanding stock must be at
least 110% of the fair market value of the common stock on the grant date.
The term of an option may not exceed ten years, except that, with respect
to any participant who owns 10% of the voting power of all classes of our
outstanding capital stock, the term of an incentive stock option may not exceed
five years.
After a termination of service with PCTEL, a participant will be able to
exercise the vested portion of his or her option for the period of time stated
in the Award agreement. If no such period of time is stated in the participant's
Award agreement, the participant will generally be able to exercise his or her
option for (i) three months following his or her termination for reasons other
than death or disability, and (ii) twelve months following his or her
termination due to death or disability.
Stock Appreciation Rights. The Administrator will be able to grant stock
appreciation rights, which are the rights to receive the appreciation in fair
market value of common stock between the exercise date and the date of grant.
PCTEL can pay the appreciation in either cash or shares of common stock. Stock
appreciation rights will become exercisable at the times and on the terms
established by the Administrator, subject to the terms of the Stock Plan. The
Administrator, subject to the terms of the Stock Plan, will have complete
discretion to determine the terms and conditions of stock appreciation rights
granted under the Stock Plan, provided, however, that the exercise price will
not be less than 100% of the fair market value of a share on the date of grant.
The term of a stock appreciation right may not exceed ten years. No participant
will be granted stock appreciation rights covering more than 300,000 shares
during any fiscal year, except that a participant may be granted stock
appreciation rights covering up to an additional 150,000 shares in connection
with his or her initial service as an employee with PCTEL or its affiliates.
After termination of service with PCTEL, a participant will be able to
exercise the vested portion of his or her stock appreciation right for the
period of time stated in the Award agreement. If no such period of time is
stated in a participant's Award agreement, a participant will generally be able
to exercise his or her stock appreciation right for (i) three months following
his or her termination for reasons other than cause, death, or disability, and
(ii) twelve months following his or her termination due to death or disability.
In no event will a stock appreciation right be exercised later than the
expiration of its term.
Restricted Stock. Awards of restricted stock are rights to acquire or
purchase shares of our common stock, which vest in accordance with the terms and
conditions established by the Administrator in its sole discretion. For example,
the Administrator may set restrictions based on the achievement of specific
performance goals, or on the passage of time subject to the participant's
continued service as an employee with PCTEL. The Administrator, in its
discretion, may accelerate the time at which any restrictions will lapse or be
removed. On the date set forth in the Award agreement, the restricted stock for
which restrictions have not lapsed will revert to PCTEL and again will become
available for grant under the Stock Plan.
The Award agreement will generally grant PCTEL a right to repurchase or
reacquire unvested shares upon the termination of the participant's service with
PCTEL for any reason (including death or disability). The Administrator will
determine the number of shares granted pursuant to an Award of restricted stock,
but no participant will be granted a right to purchase or acquire more than
150,000 shares of restricted stock
18
during any fiscal year, except that a participant may be granted up to an
additional 75,000 shares of restricted stock in connection with his or her
initial service as an employee with PCTEL or its affiliates.
Restricted Stock Units. Awards of restricted stock units result in a
payment to a participant only if the vesting criteria the Administrator
establishes is satisfied. For example, the Administrator may set restrictions
based on the achievement of specific performance goals. Upon satisfying the
applicable vesting criteria, the participant will be entitled to the payout
specified in the Award agreement. Notwithstanding the foregoing, at any time
after the grant of restricted stock units, the Administrator, in its sole
discretion, may reduce or waive any vesting criteria that must be met to receive
a payout. The Administrator, in its sole discretion, may pay earned restricted
stock units in cash, shares, or a combination thereof. Restricted stock units
that are fully paid in cash will not reduce the number of shares available for
grant under the Stock Plan. On the date set forth in the Award agreement, all
unearned restricted stock units will be forfeited to PCTEL.
The Administrator determines the number of restricted stock units granted
to any participant, but during any fiscal year of PCTEL, no participant may be
granted more than 150,000 restricted stock units during any fiscal year, except
that the participant may be granted up to an additional 75,000 restricted stock
units in connection with his or her initial employment with PCTEL or its
affiliates.
Performance Units and Performance Shares. The Administrator will be able
to grant performance units and performance shares, which are Awards that will
result in a payment to a participant only if the performance goals or other
vesting criteria the Administrator may establish are achieved or the Awards
otherwise vest. The Administrator will establish performance or other vesting
criteria in its discretion, which, depending on the extent to which they are
met, will determine the number and/or the value of performance units and
performance shares to be paid out to participants. Notwithstanding the
foregoing, after the grant of performance units or shares, the Administrator, in
its sole discretion, may reduce or waive any performance objectives or other
vesting provisions for such performance units or shares.
During any fiscal year, no participant will receive performance units
having an initial value greater than $500,000. In addition, no participant will
receive more than 150,000 performance shares during any fiscal year, except that
a participant may be granted performance shares covering up to an additional
75,000 performance shares in connection with his or her initial employment with
PCTEL. Performance units and performance shares will have an initial value equal
to the fair market value of a share of our common stock on the date of grant.
Dividend Equivalents. The Administrator may, in its discretion, include in
any award agreement a dividend equivalent right entitling the participant to
receive amounts equal to the dividends that would be paid, during the time any
such Award is outstanding, on the shares of our common stock covered by such
Award as if such shares were then outstanding. The participant of a dividend
equivalent right will have only the rights of a general unsecured creditor until
payment of such amount is made as specified in the applicable Award agreement.
Performance Goals. The granting or vesting of Awards of restricted stock,
restricted stock units, performance shares, performance units and other
incentives under the Stock Plan may be made subject to the attainment of
performance goals relating to one or more business criteria within the meaning
of Section 162(m) of the Code and may provide for a targeted level or levels of
achievement including: cash flow; cash position; earnings before interest and
taxes; earnings before interest, taxes, depreciation and amortization; earnings
per share; economic profit; economic value added; equity or stockholder's
equity; market share; net income; net profit; net sales; operating earnings;
operating income; profit before tax; ratio of debt to debt plus equity; ratio of
operating earnings to capital spending; return on equity; return on net assets;
return on sales, revenue, sales growth; or total return to stockholders. The
performance goals may differ from participant to participant and from Award to
Award and may be used to measure the performance of PCTEL as a whole or a
business unit of PCTEL and may be measured relative to a peer group or index.
Option Awards to Outside Directors. Each Outside Director will
automatically receive an option to purchase 15,000 shares on the date he or she
first becomes an Outside Director and an option to purchase 10,000 shares on
January 1 of each year, provided he or she has served as an Outside Director for
at
19
least the preceding six months. The options granted to Outside Directors will
have an exercise price equal to the fair market value of our common stock on the
date of grant and a term of ten years.
Transferability of Awards. Awards granted under the Stock Plan are
generally not transferable, and all rights with respect to an Award granted to a
participant generally will be available during a participant's lifetime only to
the participant.
Change in Control. In the event of a change in control of PCTEL, each
outstanding Award, other than Awards that vest or are paid-out based upon the
satisfaction of performance goals, will be assumed or an equivalent Award
substituted by the successor corporation or a parent or subsidiary of the
successor corporation. In the event that the successor corporation, or the
parent or subsidiary of the successor corporation, refuses to assume or
substitute for the Awards, the participant will fully vest in and have the right
to exercise all of his or her outstanding non-performance based Awards,
including shares as to which such Awards would not otherwise be vested or
exercisable, and all non-performance based restrictions on restricted stock will
lapse. With respect to any restricted stock, restricted stock unit, performance
share, performance unit, or other performance-based Award which is not assumed
or substituted for, all performance goals or other vesting criteria will be
deemed achieved at target levels and all other terms and conditions met. If the
change in control occurs during a performance period, the participant will
receive a pro-rated amount of the performance-based Award based on the amount of
time he or she was a service provider during the performance period before the
change in control. If an Award becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a change in control, the
Administrator will notify the participant in writing or electronically that the
Award will be fully vested and exercisable for 15 days from the date of such
notice, and the Award will terminate upon the expiration of such period.
With respect to Awards granted to Outside Directors, in the event of a
change of control of PCTEL, the Outside Director will fully vest in and have the
right to exercise all of his or her Awards, including shares as to which such
Awards would not otherwise be vested or exercisable, all restrictions on
restricted stock will lapse, and, with respect to restricted stock units,
performance shares and performance units, all performance goals or other vesting
criteria will be deemed achieved at target levels and all other terms and
conditions met. The Outside Director will receive payment of a pro-rated amount
of the performance shares, performance units, or other performance-based Award
that would have actually been earned had the Outside Director remained a service
provider through the end of the performance period based on the amount of time
the Outside Director was a service provider during the performance period before
the change in control.
Amendment and Termination of the Stock Plan. The Administrator will have
the authority to amend, alter, suspend or terminate the Stock Plan, except that
stockholder approval will be required for any amendment to the Stock Plan to the
extent required by any applicable laws. No amendment, alteration, suspension or
termination of the Stock Plan will impair the rights of any participant, unless
mutually agreed otherwise between the participant and the Administrator and
which agreement must be in writing and signed by the participant and PCTEL. The
Stock Plan will terminate in 2016, unless the board of directors terminates it
earlier.
NUMBER OF AWARDS GRANTED TO EMPLOYEES, CONSULTANTS, AND DIRECTORS
The number of Awards that an employee, director or consultant may receive
under the Stock Plan is in the discretion of the Administrator and therefore
cannot be determined in advance. The following table sets forth (a) the
aggregate number of shares of common stock subject to Awards granted under the
Stock Plan
20
and the Director Plan during the last fiscal year, and (b) the average per share
exercise price or value of such Awards.
NUMBER OF NUMBER OF
SHARES AVERAGE SHARES OF VALUE OF
UNDERLYING PER SHARE RESTRICTED RESTRICTED
NAME OF INDIVIDUAL OR GROUP OPTIONS GRANTED EXERCISE PRICE STOCK GRANTED STOCK GRANTS
--------------------------- --------------- -------------- ------------- ------------
Martin H. Singer, Chief Executive
Officer, Chairman of the Board........ 100,000 $9.09 118,200 $1,012,726
John W. Schoen, Chief Financial Officer
and Secretary......................... -- -- 59,900 $ 452,207
Jeffrey A. Miller, Vice President,
Global Sales.......................... -- -- 40,300 $ 307,039
Biju Nair, Vice President and General
Manager, Mobility Solutions Group..... -- -- 40,300 $ 307,039
Steven L. Deppe, Vice President and
General Manager, Antenna Products
Group................................. -- -- 26,000 $ 191,360
All executive officers, as a group...... 100,000 $9.09 284,700 $2,270,371
All directors who are not executive
officers, as a group.................. 60,000 $7.93 5,668 $ 63,993
All employees who are not executive
officers, as a group.................. 378,850 $8.30 374,100 $2,841,958
FEDERAL TAX ASPECTS
The following paragraphs are a summary of the general federal income tax
consequences to U.S. taxpayers and PCTEL of Awards granted under the Stock Plan.
Tax consequences for any particular individual may be different.
Nonstatutory Stock Options. No taxable income is reportable when a
nonstatutory stock option with an exercise price equal to the fair market value
of the underlying stock on the date of grant is granted to a participant. Upon
exercise, the participant will recognize ordinary income in an amount equal to
the excess of the fair market value (on the exercise date) of the shares
purchased over the exercise price of the option. Any taxable income recognized
in connection with an option exercise by an employee of PCTEL is subject to tax
withholding by PCTEL. Any additional gain or loss recognized upon any later
disposition of the shares would be capital gain or loss.
Incentive Stock Options. No taxable income is reportable when an incentive
stock option is granted or exercised (except for purposes of the alternative
minimum tax, in which case taxation is the same as for nonstatutory stock
options). If the participant exercises the option and then later sells or
otherwise disposes of the shares more than two years after the grant date and
more than one year after the exercise date, the difference between the sale
price and the exercise price will be taxed as capital gain or loss. If the
participant exercises the option and then later sells or otherwise disposes of
the shares before the end of the two- or one-year holding periods described
above, he or she generally will have ordinary income at the time of the sale
equal to the fair market value of the shares on the exercise date (or the sale
price, if less) minus the exercise price of the option.
Stock Appreciation Rights. No taxable income is reportable when a stock
appreciation right with an exercise price equal to the fair market value of the
underlying stock on the date of grant is granted to a participant. Upon
exercise, the participant will recognize ordinary income in an amount equal to
the amount of cash received and the fair market value of any shares received.
Any additional gain or loss recognized upon any later disposition of the shares
would be capital gain or loss.
Restricted Stock, Restricted Stock Units, Performance Units and Performance
Shares. A participant generally will not have taxable income at the time an
Award of restricted stock, restricted stock units, performance shares or
performance units are granted. Instead, he or she will recognize ordinary income
in the first taxable year in which his or her interest in the shares underlying
the Award becomes either (i) freely
21
transferable, or (ii) no longer subject to substantial risk of forfeiture.
However, the recipient of a restricted stock Award may elect to recognize income
at the time he or she receives the Award in an amount equal to the fair market
value of the shares underlying the Award (less any cash paid for the shares) on
the date the Award is granted.
Dividend Equivalent Awards. A participant generally will recognize
ordinary compensation income each time a dividend is paid pursuant to the
dividend equivalent rights Award equal to the fair market value of the dividend
received. If the dividends are deferred, additional requirements must be met to
ensure that the dividend is taxable upon actual delivery of the shares, instead
of the grant of the dividend.
Tax Effect for PCTEL. PCTEL generally will be entitled to a tax deduction
in connection with an Award under the Stock Plan in an amount equal to the
ordinary income realized by a participant and at the time the participant
recognizes such income (for example, the exercise of a nonstatutory stock
option). Special rules limit the deductibility of compensation paid to our Chief
Executive Officer and to each of our four most highly compensated executive
officers. Under Section 162(m) of the Code, the annual compensation paid to any
of these specified executives will be deductible only to the extent that it does
not exceed $1,000,000. However, we can preserve the deductibility of certain
compensation in excess of $1,000,000 if the conditions of Section 162(m) are
met. These conditions include stockholder approval of the Stock Plan, setting
limits on the number of Awards that any individual may receive and for Awards
other than certain stock options, establishing performance criteria that must be
met before the Award actually will vest or be paid. The Stock Plan has been
designed to permit the Administrator to grant Awards that qualify as
performance-based compensation for purposes of satisfying the conditions of
Section 162(m), thereby permitting PCTEL to continue to receive a federal income
tax deduction in connection with such Awards.
Section 409A. Section 409A of the Code, which was added by the American
Jobs Creation Act of 2004, provides certain new requirements on non-qualified
deferred compensation arrangements. These include new requirements with respect
to an individual's election to defer compensation and the individual's selection
of the timing and form of distribution of the deferred compensation. Section
409A also generally provides that distributions must be made on or following the
occurrence of certain events (e.g., the individual's separation from service, a
predetermined date, or the individual's death). Section 409A imposes
restrictions on an individual's ability to change his or her distribution timing
or form after the compensation has been deferred. For certain individuals who
are officers, Section 409A requires that such individual's distribution commence
no earlier than six months after such officer's separation from service.
Awards granted under the Stock Plan with a deferral feature will be subject
to the requirements of Section 409A. If an Award is subject to and fails to
satisfy the requirements of Section 409A, the recipient of that award may
recognize ordinary income on the amounts deferred under the Award, to the extent
vested, which may be prior to when the compensation is actually or
constructively received. Also, if an Award that is subject to Section 409A fails
to comply with Section 409A's provisions, Section 409A imposes an additional 20%
federal income tax on compensation recognized as ordinary income, as well as
interest on such deferred compensation. The Internal Revenue Service has not
issued final regulations under Section 409A and, accordingly, the requirements
of Section 409A (and the application of those requirements to Awards issued
under the Stock Plan) are not entirely clear.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON PARTICIPANTS AND PCTEL WITH RESPECT TO THE GRANT AND EXERCISE OF AWARDS
UNDER THE STOCK PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS
THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF THE INCOME
TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT
MAY RESIDE.
22
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, 2006 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 26;
- 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 21,559,921 shares of our common stock
outstanding as of March 31, 2006. In addition, shares of common stock that are
exercisable as of March 31, 2006 or will become exercisable on or before May 30,
2006 (60 days subsequent to March 31), are treated as outstanding and
beneficially owned by the person holding the options for the purpose of
computing the percentage ownership of such 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
23
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.
PERCENT OF
NUMBER OF NUMBER OF TOTAL SHARES
SHARES SHARES SHARES BENEFICIALLY
BENEFICIALLY UNDERLYING BENEFICIALLY OWNED
BENEFICIAL OWNERS OWNED OPTIONS OWNED (%)
----------------- ------------ ---------- ------------ ------------
5% STOCKHOLDERS
Entities affiliated with Dimensional Fund
Advisors Inc. .............................. 1,821,658 -- 1,821,658 8.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401(1)
Royce & Associates LLC......................... 1,771,400 -- 1,771,400 8.2%
1414 Avenue of the Americas
New York, NY 10019(2)
Whitman Capital, LLC/Whitman Partners, LP...... 1,438,557 -- 1,438,557 6.7%
525 University Avenue, Suite 701
Palo Alto, CA 94301(3)
Entities and persons affiliated with Gruber &
McBaine Capital Management, LLC............. 1,430,746 -- 1,430,746 6.7%
50 Osgood Place, Penthouse
San Francisco, CA 94133(4)
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Martin H. Singer(5)............................ 353,478 526,850 880,328 4.1%
John W. Schoen................................. 200,286 180,125 380,411 1.8%
Jeffrey A. Miller(6)........................... 139,633 206,582 346,215 1.6%
Biju Nair...................................... 155,870 186,167 342,037 1.6%
Steve Deppe.................................... 72,683 150,000 222,683 1.0%
Giacomo Marini................................. 33,212 50,000 83,212 *
Richard C. Alberding(7)........................ 3,027 57,500 60,527 *
Carl A. Thomsen(8)............................. 3,703 50,000 53,703 *
Brian J. Jackman............................... 3,467 42,500 45,967 *
John R. Sheehan(9)............................. 1,681 35,000 36,681 *
Steven D. Levy(10)............................. -- 15,000 15,000 *
All directors, director nominees and current
executive officers as a group (11
persons).................................... 967,040 1,484,724 2,451,764 10.07%
---------------
* 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/A filed with the SEC by Dimensional Fund
Advisors Inc. ("Dimensional") on February 6, 2006. Dimensional, 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 all of such shares.
(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 January 31, 2006. Royce & Associates LLC, in its capacity as an
investment advisor, possesses sole dispositive control and voting power
over such shares.
(3) Information with respect to the number of shares beneficially owned is
based solely on the Schedule 13G/A filed with the SEC by Whitman Capital,
LLC/Whitman Partners LP ("Whitman") on February 15, 2006. According to such
Schedule 13G/A, Whitman possesses sole dispositive control and voting power
over such shares.
24
(4) Information with respect to the number of shares beneficially owned is
based solely on the Schedule 13G filed with the SEC by Gruber & McBaine
Capital Management, LLC ("Gruber & McBaine") on February 13, 2006.
According to such Schedule 13G, Gruber & McBaine, Jon D. Gruber, J.
Patterson McBride and Eric B. Swergold each has shared dispositive control
and voting power with respect to 1,163,945 of such shares. In addition,
sole dispositive control and voting power is held by Mr. Gruber with
respect to 227,976 of such shares, by Mr. McBaine with respect to 30,500 of
such shares, and by Mr. Swergold with respect to 8,325 of such shares.
(5) Includes 1,000 shares of common stock held by the Andrea Singer Trust,
112,386 shares of common stock held by the Martin Singer Trust, 2,500
shares held by Martin and Andrea Singer jointly and 18 shares held by his
son.
(6) Includes 38,260 shares of common stock held by the Lorena Miller Trust.
(7) Includes 2,034 shares of common stock held by the Alberding Family Trust.
(8) Includes 3,703 shares of common stock held by the Thomsen Family Trust.
(9) Includes 498 shares of common stock held the Two Rivers Associates LLC
("Two Rivers"). Mr. Sheehan is the Managing Director of Two Rivers.
(10) Mr. Levy was appointed as a member of our board of directors in March 2006.
25
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, 2005, 2004 and 2003, respectively, by our chief executive officer and our
other executive officers whose salary and bonus for fiscal 2005 exceeded
$100,000. We refer to these individuals elsewhere in this proxy as "named
executive officers." Bonuses for a given fiscal year include bonuses earned and
paid in that fiscal year as well as bonuses earned in that fiscal year but paid
in subsequent years. No dividends will be paid on any of the shares of
restricted stock granted to the named executive officers as described below.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
-------------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING ALL OTHER
FISCAL ---------------------- STOCK OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARDS ($) (#) ($)
--------------------------- ------ ---------- --------- ---------- ---------- ------------
Martin H. Singer.......... 2005 $350,000 $509,998(1) $1,012,726(2) 100,000 $ 22,748(3)
Chief Executive Officer 2004 385,000 196,607 466,000(4) 100,000 45,712
and Chairman of the Board 2003 367,500 302,281 580,000(5) 160,000 41,906
John W. Schoen............ 2005 215,000 193,498(6) 452,207(7) -- 20,468(8)
Chief Financial Officer 2004 225,000 84,380 371,400(9) 67,000 33,712
2003 222,083 131,161 -- 50,000 31,501
Jeffrey A. Miller......... 2005 205,000 127,537(10) 307,039(11) -- 20,468(8)
Vice President, Global 2004 213,333 58,450 309,500(12) 52,000 33,712
Sales 2003 203,750 120,117 -- 40,000 31,501
Biju Nair................. 2005 205,000 112,047(13) 307,039(11) -- 20,668(14)
Vice President and
General 2004 213,333 56,440 309,500(12) 62,000 34,112
Manager, Mobility 2003 203,750 120,117 -- 40,000 31,515
Solutions Group
Steven L. Deppe(15)....... 2005 239,961 169,548(16) 191,360(17) -- 28,226(18)
Vice President and
General 2004 229,000 124,000 267,500(19) 150,000 25,844
Manager, Antenna Products 2003 -- -- -- -- --
Group
---------------
(1) For fiscal 2005, the executive was awarded a bonus that consisted of 67,460
shares of common stock. The closing sales price of our common stock on
February 27, 2006, the day immediately prior to the date of the award, as
reported by The Nasdaq Stock Market was $7.56.
(2) The executive was awarded 53,200 shares of restricted common stock on
January 1, 2005. The closing sales price of our common stock on December
31, 2004 as reported by The Nasdaq Stock Market was $7.93. Our repurchase
right with respect to 20% of the shares shall lapse on November 1 of each
year beginning on November 1, 2005 such that our repurchase right shall
lapse with respect to all such shares on November 1, 2009. Based on the
$8.76 closing sales price of our common stock as reported by The Nasdaq
Stock Market on December 30, 2005, the value of the executive's shares on
such date was $466,032. In addition, the executive was awarded 65,000
shares of restricted common stock on August 1, 2005. The closing sales
price of our common stock on August 1, 2005 as reported by The Nasdaq Stock
Market was $9.09. Our repurchase right with respect to 100% of the shares
shall lapse on July 1, 2010. Our repurchase right may be accelerated prior
to July 1, 2010 based on company performance. Based on the $8.76 closing
sales price of our common stock as reported by The Nasdaq Stock Market on
December 30, 2005, the value of the executive's shares on such date was
$569,400.
(3) Other compensation for fiscal 2005 consisted of (i) $688 in premiums paid
for term life insurance, (ii) $11,580 in premiums for health insurance,
(iii) $8,200 in matching contributions under our 401(k) plan and (iv)
$2,280.00 in matching contributions under our executive deferred
compensation plan.
26
(4) The executive was awarded 40,000 shares of restricted common stock on July
1, 2004. The closing sales price of our common stock on July 1, 2004 as
reported by The Nasdaq Stock Market was $11.65. Our repurchase right with
respect to 20% of the shares shall lapse on August 1 of each year beginning
on August 1, 2005 such that our repurchase right shall lapse with respect
to all such shares on August 1, 2009. Based on the $8.76 closing sales
price of our common stock as reported by The Nasdaq Stock Market on
December 30, 2005, the value of the executive's shares on such date was
$350,400.
(5) The executive was awarded 50,000 shares of restricted common stock on
September 2, 2003. The closing sales price of our common stock on September
2, 2003 as reported by The Nasdaq Stock Market was $11.60. Our repurchase
right with respect to 100% of the shares shall lapse on August 1, 2008.
Based on the $8.76 closing sales price of our common stock as reported by
The Nasdaq Stock Market on December 30, 2005, the value of the executive's
shares on such date was $438,000.
(6) For fiscal 2005, the executive was awarded a bonus that consisted of 25,595
shares of common stock. The closing sales price of our common stock on
February 27, 2006, the day immediately prior to the date of the award, as
reported by The Nasdaq Stock Market was $7.56.
(7) The executive was awarded 19,900 shares of restricted common stock on
January 1, 2005. The closing sales price of our common stock on December
31, 2004 as reported by The Nasdaq Stock Market was $7.93. Our repurchase
right with respect to 20% of the shares shall lapse on November 1 of each
year beginning on November 1, 2005 such that our repurchase right shall
lapse with respect to all such shares on November 1, 2009. Based on the
$8.76 closing sales price of our common stock as reported by The Nasdaq
Stock Market on December 30, 2005, the value of the executive's shares on
such date was $174,324. In addition, the executive was awarded 40,000
shares of restricted common stock on March 7, 2005. The closing sales price
of our common stock on March 7, 2005 as reported by The Nasdaq Stock Market
was $7.36. Our repurchase right with respect to 20% of the shares shall
lapse on February 11 of each year beginning on February 11, 2006 such that
our repurchase right shall lapse with respect to all such shares on
February 11, 2010. Based on the $8.76 closing sales price of our common
stock as reported by The Nasdaq Stock Market on December 30, 2005, the
value of the executive's shares on such date was $350,400.
(8) Other compensation for fiscal 2005 consisted of (i) $688 in premiums paid
for term life insurance, (ii) $11,580 in premiums for health insurance, and
(iii) $8,200 in matching contributions under our 401(k) plan.
(9) The executive was awarded 30,000 shares of restricted common stock on
February 11, 2004. The closing sales price of our common stock on February
11, 2004 as reported by The Nasdaq Stock Market was $12.38. Our repurchase
right with respect to 20% of the shares shall lapse on February 11 of each
year beginning on February 11, 2005 such that our repurchase right shall
lapse with respect to all such shares on February 11, 2009. Based on the
$8.76 closing sales price of our common stock as reported by The Nasdaq
Stock Market on December 30, 2005, the value of the executive's shares on
such date was $262,800.
(10) For fiscal 2005, the executive was awarded a bonus that consisted of 16,870
shares of common stock. The closing sales price of our common stock on
February 27, 2006, the day immediately prior to the date of the award, as
reported by The Nasdaq Stock Market was $7.56.
(11) The executive was awarded 18,300 shares of restricted common stock on
January 1, 2005. The closing sales price of our common stock on December
31, 2004 as reported by The Nasdaq Stock Market was $7.93. Our repurchase
right with respect to 20% of the shares shall lapse on November 1 of each
year beginning on November 1, 2005 such that our repurchase right shall
lapse with respect to all such shares on November 1, 2009. Based on the
$8.76 closing sales price of our common stock as reported by The Nasdaq
Stock Market on December 30, 2005, the value of the executive's shares on
such date was $160,308. In addition, the executive was awarded 22,000
shares of restricted common stock on March 7, 2005. The closing sales price
of our common stock on March 7, 2005 as reported by The Nasdaq Stock Market
was $7.36. Our repurchase right with respect to 20% of the shares shall
lapse on February 11 of each year beginning on February 11, 2006 such that
our repurchase right shall lapse with respect to all such shares on
February 11, 2010. Based on the $8.76 closing sales price of our common
stock as
27
reported by The Nasdaq Stock Market on December 30, 2005, the value of the
executive's shares on such date was $192,720.
(12) The executive was awarded 25,000 shares of restricted common stock on
February 11, 2004. The closing sales price of our common stock on February
11, 2004 as reported by The Nasdaq Stock Market was $12.38. Our repurchase
right with respect to 20% of the shares shall lapse on February 11 of each
year beginning on February 11, 2005 such that our repurchase right shall
lapse with respect to all such shares on February 11, 2009. Based on the
$8.76 closing sales price of our common stock as reported by The Nasdaq
Stock Market on December 30, 2005, the value of the executive's shares on
such date was $219,000.
(13) For fiscal 2005, the executive was awarded a bonus that consisted of 14,821
shares of common stock. The closing sales price of our common stock on
February 27, 2006, the day immediately prior to the date of the award, as
reported by The Nasdaq Stock Market was $7.56.
(14) Other compensation for fiscal 2005 consisted of (i) $688 in premiums paid
for term life insurance, (ii) $11,580 in premiums for health insurance,
(iii) $8,000 in matching contributions under our 401(k) plan, and (iv) $400
in matching contributions under our executive deferred compensation plan.
(15) Mr. Deppe joined the company in January 2004 as a result of the acquisition
of MAXRAD.
(16) For fiscal 2005, the executive was awarded a bonus that consisted of 22,427
shares of common stock. The closing sales price of our common stock on
February 27, 2006, the day immediately prior to the date of the award, as
reported by The Nasdaq Stock Market was $7.56.
(17) The executive was awarded 26,000 shares of restricted common stock on March
7, 2005. The closing sales price of our common stock on March 7, 2005 as
reported by The Nasdaq Stock Market was $7.36. Our repurchase right with
respect to 20% of the shares shall lapse on February 11 of each year
beginning on February 11, 2006 such that our repurchase right shall lapse
with respect to all such shares on February 11, 2010. Based on the $8.76
closing sales price of our common stock as reported by The Nasdaq Stock
Market on December 30, 2005, the value of the executive's shares on such
date was $227,760.
(18) Other compensation for fiscal 2005 consisted of (i) $471 in premiums paid
for term life insurance, (ii) $10,555 in premiums for health insurance,
(iii) $8,200 in matching contributions under our 401(k) plan, and (iv) a
$9,000 car allowance.
(19) The executive was awarded 25,000 shares of restricted common stock on
January 2, 2004. The closing sales price of our common stock on January 2,
2004 as reported by The Nasdaq Stock Market was $10.70. Our repurchase
right with respect to 100% of the shares shall lapse on January 2, 2006.
Based on the $8.76 closing sales price of our common stock as reported by
The Nasdaq Stock Market on December 30, 2005, the value of the executive's
shares on such date was $219,000.
OPTION GRANTS DURING LAST FISCAL YEAR
The following table shows information regarding stock options granted to
the named executive officers during fiscal year 2005. Potential realizable
values with respect to such options are computed by:
- Multiplying the number of shares of common stock underlying each option
by the exercise price,
- Assuming that the total stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table for the entire
ten-year term of the option, and
- Subtracting from that result the total option exercise price.
The 5% and 10% annual return rate is based on the rules of the SEC and do
not reflect projections or estimates of future stock price growth. Actual gains,
if any, on stock option exercises will be dependent on the future performance of
our common stock.
The percentage of total options is based on an aggregate of 538,850 options
granted by us to our employees, directors and consultants, including the named
executive officers, during fiscal 2005. We did not
28
grant any options under our 2001 Nonstatutory Stock Option Plan in fiscal 2005.
The 538,850 shares of common stock subject to options granted in fiscal 2005
does not include 667,436 shares of common stock awarded to our employees and
directors, including the named executive officers, pursuant to restricted stock
grants made in fiscal 2005. See the summary compensation table on page 26 for a
discussion of the restricted stock awards that were made to our named executive
officers.
The per share exercise price of stock option grants is equal to the closing
sales price of our common stock as reported by The Nasdaq National Market on the
date of grant.
POTENTIAL REALIZABLE
PERCENT OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM ($)
OPTIONS DURING PERIOD PRICE PER EXPIRATION -----------------------
NAME GRANTED (#) (%) SHARE($) DATE 5% 10%
---- ----------- ---------------- --------- ---------- --------- -----------
Martin H. Singer.......... 100,000 18.56 9.09 8/1/2015 571,665 1,448,712
John W. Schoen............ -- -- -- -- -- --
Jeffrey A. Miller......... -- -- -- -- -- --
Biju Nair................. -- -- -- -- -- --
Steven L. Deppe........... -- -- -- -- -- --
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 2005 and exercisable and
unexercisable options held by such individuals as of December 31, 2005. 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, 2005" is based on a price of
$8.76, the closing sales price of our common stock on December 30, 2005 as
reported by The Nasdaq National Market, minus the weighted average per share
exercise price of options with an exercise price less than $8.76 per share held
by such named executive officer, multiplied by the aggregate number of shares
underlying the unexercised options held by such officer. The option exercise
information in the table does not include the 284,700 shares of common stock
awarded to our named executive officers in fiscal 2005. Please see the summary
compensation table on page 26 for more information regarding the restricted
stock awards made to named executive officers in fiscal 2005.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2005 DECEMBER 31, 2005
ACQUIRED ON VALUE ----------------------------------- -----------------------------------
EXERCISE (#) REALIZED ($) EXERCISABLE (#) UNEXERCISABLE (#) EXERCISABLE ($) UNEXERCISABLE ($)
------------ ------------ --------------- ----------------- --------------- -----------------
Martin H. Singer..... -- -- 510,183 127,917 502,759 54,051
John W. Schoen....... -- -- 169,917 19,583 112,217 35,549
Jeffrey A. Miller.... -- -- 200,333 16,667 156,149 29,251
Biju Nair............ -- -- 176,167 17,500 55,125 27,226
Steven L. Deppe...... -- -- 150,000 -- -- --
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2005 about our
common stock that may be issued upon the exercise of options and rights under
all of our existing equity compensation plans, including
29
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
NUMBER OF SECURITIES WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
TO BE ISSUED EXERCISE PRICE OF EQUITY COMPENSATION
UPON EXERCISE OF OUTSTANDING OPTIONS, PLANS (EXCLUDING
OUTSTANDING OPTIONS WARRANTS AND RIGHTS SECURITIES REFLECTED IN
PLAN CATEGORY AND RIGHTS (#) ($) THE FIRST COLUMN) (#)
------------- -------------------- -------------------- ------------------------
Equity compensation plans approved
by security holders(1)............ 3,693,654(3) $9.68(3) 3,373,279(4)
Equity compensation plans not
approved by security holders(2)... 419,227 $8.28 268,534(5)
--------- ----- ---------
TOTAL............................... 4,112,881 $9.86 3,641,813
========= ===== =========
---------------
(1) Comprised of our 1997 Stock Plan, 1998 Director Stock Option Plan and 1998
Employee Stock Purchase Plan.
(2) Comprised of our 2001 Nonstatutory Stock Option Plan and options to purchase
150,000 shares of our common stock granted outside of a formalized plan to
each of John W. 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. A description of the material terms of
our 2001 Nonstatutory Stock Option Plan is provided below.
(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 1,461,992 shares available for future issuance under
our 1997 Stock Plan, 130,000 shares available for future issuance under our
1998 Director Stock Option Plan and 1,781,287 shares available for future
issuance under our 1998 Employee Stock Purchase Plan as of December 31,
2005. In addition, the 1997 Stock Plan provides that the number of
securities available for issuance under such plan shall automatically
increase on the first day of each fiscal year by 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 of directors. The 1998 Employee Stock
Purchase Plan provides that the number of securities available for issuance
under such plan shall automatically increase on the first day of each fiscal
year by the lesser of (i) 350,000 shares, (ii) 2% of the outstanding shares
on such date or (iii) a lesser amount determined by the board of directors.
(5) All such shares are available for future issuance under our 2001
Nonstatutory Stock Option Plan.
2001 NONSTATUTORY STOCK OPTION PLAN
In August 2001, our board of directors approved the 2001 Nonstatutory Stock
Option Plan. The 2001 Nonstatutory Stock Option Plan has not been submitted to
our stockholders for approval.
The material terms of the Nonstatutory Stock Option Plan are summarized as
follows:
PURPOSE
The purposes of the 2001 Nonstatutory Stock Option Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to employees and consultants and to promote the
success of our business.
30
ELIGIBILITY TO PARTICIPATE IN THE 2001 NONSTATUTORY STOCK OPTION PLAN
Nonstatutory stock options may be granted to our consultants and our
employees who are not officers or directors.
NUMBER OF SHARES COVERED BY THE 2001 NONSTATUTORY STOCK OPTION PLAN
Our board of directors reserved 750,000 shares of our common stock for
issuance under the 2001 Nonstatutory Stock Option Plan. As of December 31, 2005,
options to acquire 419,227 shares were outstanding under the 2001 Nonstatutory
Stock Option Plan, out of the 750,000 shares reserved for issuance, and 268,534
shares remained available for future issuance. Pursuant to the rules of The
Nasdaq Stock Market, the board of directors will not make further amendments to
the 2001 Nonstatutory Stock Option Plan to increase the aggregate number of
shares of common stock authorized for issuance without stockholder approval.
AWARDS PERMITTED UNDER THE 2001 NONSTATUTORY STOCK OPTION PLAN
The 2001 Nonstatutory Stock Option Plan authorizes the granting of
nonstatutory stock options only.
TERMS OF OPTIONS
The exercise price and term of an option will be determined by the
administrator of the plan, which is the board of directors or its appointed
committee. Payment of the exercise price may be made by cash, check, promissory
note, other shares of our common stock, cashless exercise, a reduction in the
amount of any company liability to the optionee, any other form of consideration
permitted by applicable law or any combination of the foregoing methods of
payment. Options may be made exercisable only according to the terms of the plan
and under the conditions the board of directors or its appointed committee may
establish. If an optionee's employment terminates for any reason, the option
remains exercisable for a fixed period of three months or such longer period as
may be fixed by the board of directors or its appointed committee up to the
remainder of the option's term.
CAPITAL CHANGES
The number of shares available for future grant and previously granted but
unexercised options are subject to adjustment for any future stock dividends,
splits, mergers, combinations or other changes in capitalization as described in
the 2001 Nonstatutory Stock Option Plan.
MERGER OR CHANGE OF CONTROL
In the event of a merger of our company with or into another corporation or
the sale of substantially all of our assets, each outstanding option under the
2001 Nonstatutory Stock Option Plan must be assumed or an equivalent option or
right substituted by the successor corporation. If the successor corporation
refuses to assume or substitute for the option, the optionee will fully vest in
and have the right to exercise the option as to all of the optioned stock,
including shares as to which it would not otherwise be vested or exercisable.
TERMINATION AND AMENDMENT
The 2001 Nonstatutory Stock Option Plan provides that the board of
directors may at any time amend or terminate the 2001 Nonstatutory Stock Option
Plan, but no amendment or termination of the 2001 Nonstatutory Stock Option Plan
may impair the rights of any optionee under the 2001 Nonstatutory Stock Option
Plan without the written consent of the optionee. Notwithstanding the foregoing,
the rules of The Nasdaq Stock Market require stockholder approval of all
material amendments to the 2001 Nonstatutory Stock Option Plan.
31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 2005, we have not entered into any transactions or series
of similar transactions 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 in control arrangements and employment agreements with the named
executive officers that are described under "Employment Agreements and Change in
Control Arrangements" on page 33.
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, except as noted below, we
believe that during fiscal 2005 all of our executive officers, directors and
greater than ten percent stockholders complied with all applicable filing
requirements.
Richard C. Alberding, Richard D. Gitlin, Brian J. Jackman, John R. Sheehan,
Carl A. Thomsen and Giacomo Marini were each delinquent in the filing of a Form
4 relating to the acquisition of an option to purchase shares of our common
stock under our 1998 Director Option Plan.
32
EMPLOYMENT AGREEMENTS AND CHANGE OF 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 as a merger or
sale of our company or the sale of all or substantially all of the company's
assets, 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 employment agreements with the following named
executive officers:
Martin H. Singer. Martin H. Singer is our Chief Executive Officer and
Chairman of the Board and we entered into an original employment agreement with
Dr. Singer in October 2001, which was subsequently amended. In January 2006, we
entered into an amended and restated employment agreement with Dr. Singer that
supersedes the original agreement, as amended. The principal purposes of the
amendment and restatement of the employment agreement in January 2006 were (i)
to delay the payment of any severance benefits for six months and a day, if
required in accordance with recently published Treasury Regulations under
Section 409A of the Code, and (ii) to eliminate the post-retirement healthcare
benefits for Dr. Singer and his family that were previously included in his
agreement. In addition, in March 2006, we eliminated one of the bonus plans that
was previously included in his agreement. Our current amended and restated
employment agreement with Dr. Singer provides for a term of employment through
2008 and annual base compensation that is reviewed and adjusted annually by our
compensation committee and board of directors. Under the terms of the agreement,
Dr. Singer is entitled to receive an annual bonus equal to an amount up to 100%
of his then-current base salary, based on individual performance and the
attainment of specified corporate objectives.
The agreement further provides that in the event Dr. Singer's employment is
involuntarily terminated by PCTEL (other than for cause, death or disability) or
voluntarily by Dr. Singer for good reason (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 24
months continued salary, 100% of targeted bonus compensation for the fiscal year
in which such termination occurs, up to 18 months continued health benefits and
accelerated vesting with respect to his equity awards for the number of shares
that would have vested, or been released from our repurchase right, had Dr.
Singer continued his employment with us for an additional 12 months following
his termination date.
John W. Schoen. In November 2001, John W. Schoen joined us initially as
our Chief Financial Officer, Chief Operating Officer and Corporate 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
33
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 initially
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.
Biju Nair. In August 2005, we entered into a letter agreement with Biju
Nair, our Vice President and General Manager, Mobility Solutions Group, that
sets forth severance benefits for Mr. Nair. Our letter agreement with Mr. Nair
provides that in the event Mr. Nair's employment is (i) involuntarily terminated
by PCTEL other than for cause, death or disability, or (ii) voluntarily
terminated by Mr. Nair for good reason (in both cases other than within 12
months following a change of control where the benefits to be received under
such scenario are governed by the management retention agreements referenced
above), Mr. Nair will receive 12 months continued salary, up to 12 months
continued health benefits, and accelerated vesting with respect to the number of
unvested shares that would have become vested if Mr. Nair's employment with
PCTEL had continued for an additional 12 months following his termination.
Steven L. Deppe. The board of directors has approved severance benefits
for Steven L. Deppe, our Vice President and General Manager, Antenna Products
Group, which are substantially similar to those of Mr. Nair, but we have not yet
entered into a formal written agreement with Mr. Deppe to memorialize this
arrangement.
34
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 Mr. Thomsen, Mr. Alberding and Mr. Marini, each of whom meets the
Nasdaq independence and experience requirements. The audit committee operates
under a written charter. Upon the recommendation of the audit committee, the
board of directors adopted the original charter for the audit committee in
August 1999, and last amended the charter for the audit committee in November
2004.
The audit committee reviews the procedures of management for the design,
implementation and maintenance of a comprehensive system of disclosure controls
and procedures focused on the accuracy of our financial statements and the
integrity of our financial reporting systems and disclosure contained in our
periodic reports. As part of this review, the audit committee discusses with
management and our independent auditors their evaluation of the effectiveness of
our internal control over financial reporting, including improvements to our
internal control that may be warranted. 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 their report on our financial statements and on
the effectiveness of our internal control over financial reporting. 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.
The audit committee reviews reports and provides guidance to our
independent registered public accounting firm with respect to their annual audit
and approves in advance all audit and non-audit services provided by our
independent registered public accounting firm in accordance with applicable
regulatory requirements. The audit committee also considers, in advance of the
provision of any non-audit services by our independent registered public
accounting firm, 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, 2005 and the process designed to achieve compliance with
Section 404 of the Sarbanes-Oxley Act of 2002. 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.
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, 2005 be included in our Annual Report on Form 10-K.
Respectfully submitted by:
THE AUDIT COMMITTEE
Carl A. Thomsen (Chair)
Richard C. Alberding
Giacomo Marini
35
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 Mr. Alberding, Mr. Sheehan and Mr. Jackman, each
of whom is an independent, non-management director of the company. Members of
management, including the Company's Chief Executive Officer, Vice President of
Finance and Vice President of Human Resources, are invited by the committee to
observe and participate in committee meetings from time to time.
The original charter of the compensation committee was adopted by the board
of directors in August 1999 and has been modified from time to time, most
recently in March 2005, to clarify the responsibilities of the committee in
recognition of our corporate governance needs as well as current industry
requirements and practices. The charter of our committee is located on the
company's website (www.PCTEL.com) in the "Corporate Governance" section under
"Investor Relations."
The committee maintains minutes of its meetings, and reports to the board
of directors on at least a quarterly basis to make the board aware of
significant matters that require the board's attention.
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, taking into
consideration the performance evaluations conducted through our
nominating and governance committee with the other members of the board;
- Reviewing the performance of our 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;
- Providing guidance with respect to the compensation philosophies and
goals for all of our employees, including the chief executive officer and
other executive officers;
- 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; and
- Reviewing and recommending to the board of directors general equity and
cash compensation incentives for the outside directors on the board.
COMPENSATION PHILOSOPHY
Our philosophy in setting compensation policies for executive and corporate
officers is to maximize stockholder value over time. The primary goals of our
executive compensation program are, therefore:
- To closely align the interests of the executive and corporate officers
with those of our stockholders.
- To maintain a significant portion of each executive's total compensation
at risk and tied to our achievement of financial, organizational and
management performance goals.
- To offer competitive 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.
- To provide rewards for superior individual and corporate performance, and
negative incentives for inadequate performance.
36
To achieve these goals, the compensation committee has established an
executive compensation program primarily consisting of cash compensation, stock
options, restricted stock grants and other compensation and benefit programs
generally available to other employees.
It is our committee's practice to review at least annually all components
of compensation for our executive officers to ensure that the amount and
structure of total compensation for each officer is consistent with our
compensation philosophies and objectives. This review also enables our committee
to compare the relationship that exists between the total compensation we pay to
our chief executive officer to compensation levels with our other executive
officers and other managers within the company.
Our committee has considered from time to time the adoption of stock
ownership guidelines for the executive officers, recognizing the importance of
aligning the interests of the senior management with the company's stockholders.
We have not adopted guidelines at this time, however, due to a number of
factors, including the current practice that we have adopted of paying out
management bonuses in the form of common stock. We believe this practice,
combined with our traditional grants of equity incentives under our stock plans,
has augmented the equity positions of our executives in the company.
Our committee relies significantly upon the services of independent
compensation consultants in exercising our business judgment as to appropriate
levels and components of compensation for the executive officers and key
management in our company. In 2005, we renewed the annual engagement of The
Delves Group, an independent, Chicago-based compensation consulting firm, to
assist our committee in establishing our compensation goals and objectives, to
provide relevant survey data on the compensation practices of other companies,
and to advise on industry trends in executive compensation. Our independent
consultant has reporting responsibility directly to the compensation committee.
Our committee's practice is to invite a representative of our compensation
consulting firm to attend all committee meetings.
In addition, management of the company has engaged the services of Franks &
Associates, also a compensation consulting firm, as a source of additional
information and guidance in establishing compensation for the senior management
of the company. Management shares this information with our committee when it is
helpful to our responsibilities.
EXECUTIVE OFFICER COMPENSATION
The named executive officers of the company in 2005 consisted of Martin H.
Singer, Chief Executive Officer; John W. Schoen, Chief Financial Officer;
Jeffrey A. Miller, Vice President, Global Sales; Biju Nair, Vice President and
General Manager, Mobility Solutions Group; and Steven L. Deppe, Vice President
and General Manager, Antenna Products Group. We also have within our management
a number of other vice presidents and key managers that report to Dr. Singer or
our other executive officers.
The salary and bonus components of total compensation are designed to
compensate our management at a level that equates to a range between the median
and the 75th percentile of cash compensation among a peer group of companies
that are considered by the committee to be comparable in industry sector,
revenue level, size of operations and financial operating results. 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 and key managers.
2005 Salary. The salary compensation of our executive management is
established by the compensation committee. Consistent with our compensation
philosophy generally, our annual review of officer salaries does not presume
automatic or lock-step increases. Our committee sets compensation based upon
factors that normally are specific both to the individual and to our business as
a whole.
- At the individual level, the committee considers each officer's scope of
job responsibilities, level of experience, past performance, contribution
to our business, and data on prevailing compensation levels in relevant
markets for comparable officer positions. Regarding the latter measure,
certain companies included in the peer group index of the stock
performance graph under the caption "Company Performance" (page 42 of
this proxy statement) are also included in surveys reviewed by the
37
compensation committee in reviewing salary levels for our chief executive
officer and other executive officers.
- At the corporate level, the committee in 2005 took into account the
company's overall operating performance and the amount of our overall
operating expenses, including the cash components of management
compensation.
Because our operating performance and expense management goals did not meet
internal expectations, at the recommendation of management, our committee agreed
to reduce 2005 salary for our named executive officers by an average of 5% (not
inclusive of the salary reduction for Dr. Singer as the Chief Executive Officer)
and to eliminate car allowance and other company perquisites for almost all of
our corporate officers. In connection with these cost reduction measures, our
committee determined to provide the approximate value of the reduction in
restricted shares of our common stock, subject to vesting in annual increments
over five years.
2005 Short Term Incentive Bonus Plan. We pay annual bonuses to our
executive officers and key managers under our Short Term Incentive Bonus Plan.
These annual bonuses are designed to:
- provide a direct link between management compensation and the achievement
of corporate and individual objectives; and
- to promote coordination among managers and to unify the operating
activities of our three business units.
The amount of bonus for 2005 performance was determined based upon the
achievement by the executive and our company of identified goals, which were
approved in March 2005. These goals are comprised of both corporate goals and/or
goals corresponding to the business unit of the participating employee.
Corporate goals are defined in terms of planned consolidated revenue and
earnings targets for 2005, and business unit goals are generally defined in
terms of targeted operational goals of the participating employee within the
particular unit.
When approving these 2005 goals under our 2005 Short Term Incentive Bonus
Plan, our committee and our board of directors determined to create a more
direct alignment of management incentives with the long term financial interests
of our stockholders by requiring that all bonuses under the plan be paid in
shares of immediately vested common stock. Our committee convened in February
2006 to determine bonus payments (payable in common stock) based on actual
financial results for 2005. These payments (not inclusive of payments made to
Dr. Singer as Chief Executive Officer) equaled $112,047 for Mr. Nair (equal to
73% of the possible maximum bonus), $193,498 for Mr. Schoen (equal to 100% of
the possible maximum bonus), $127,537 for Mr. Miller (equal to 83% of the
possible maximum bonus), and $169,548 for Mr. Deppe (equal to 93% of the
possible maximum bonus).
2005 Long Term Incentive Grants. 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 grants and stock
options directly motivate an executive to maximize long-term stockholder value.
The committee takes into consideration survey information of comparable
companies provided by its independent compensation consultant and other
information from management to establish competitive levels of equity
compensation and to align the long-term incentive interests of our management
with the financial interests of our stockholders.
Our use of stock grants and stock options typically include time-based
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. Because the value of
a stock option to an executive officer 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.
38
In 2005, our compensation committee determined to use time-based stock
grants instead of stock options as the principal form of equity incentive award
for the company's executives and key managers, principally to reduce the
dilution to the company's stockholders resulting from grants of equity
incentives to employees. Because stock grants do not require the payment of an
exercise price by the recipient, substantially fewer shares are required for a
stock grant to achieve the equivalent economic incentive of a stock option. We
currently expect to continue this practice in 2006.
When determining the number of shares of stock or the number of stock
options to be awarded on an annual basis to an executive officer, the
compensation committee considers aggregate stock and stock option levels for the
executive at the beginning of each fiscal year in light of long-term strategic
and performance objectives, the executive's current and anticipated
contributions to our future performance, the retention value associated with the
executive's existing or proposed equity incentive position, and comparisons to
formal and informal surveys of executive stock and option grants made by other
peer companies.
In 2005, our committee approved the grant of restricted shares under our
1997 Stock Plan to the company's named executive officers (not inclusive of
shares granted to Dr. Singer as the Chief Executive Officer) as follows: 40,000
shares to Mr. Schoen; 22,000 shares to Mr. Miller; 26,000 shares to Mr. Deppe;
and 22,000 shares to Mr. Nair. These grants will vest in equal annual increments
over five years, with the first annual vesting date on February 1, 2006, subject
to the continued employment of each officer with the company.
Other Compensation. The other elements of compensation that we pay to our
named executive officers include company-paid life insurance and healthcare
benefits (which are made available to all company employees), a contribution
from the company equal to 4% of any salary, bonus or commission deferred by an
officer in connection with his participation in our Executive Deferred
Compensation Plan, and a limited contribution from the company for payroll
amounts invested in our 401(k) Plan. One named executive officer, Mr. Deppe,
receives a car allowance that will terminate at the end of 2006.
2005 CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation committee reviews the chief executive officer's
compensation using substantially the same criteria and policies as are employed
for our other executive officers. The principal components of Dr. Singer's
compensation are the same as for our other named executive officers, with the
exception that in 2005, Dr. Singer was eligible for a "stretch" bonus under our
2004/2005 CEO Stretch Bonus Plan, as set forth in the five-year employment
agreement that we entered into with Dr. Singer in 2003.
In December 2005, our committee reviewed and approved a request by Dr.
Singer to eliminate the post-retirement health care benefits to Dr. Singer and
his family contained in his existing employment arrangement with the company.
His agreement reflecting this arrangement was amended in January 2006 consistent
with this request. This amendment was made for reasons related to future
corporate expenses, our company's commitment to defined contribution plans
rather than defined benefit plans, and parity of benefits with other executives
of our company.
Our committee based its compensation recommendations for Dr. Singer's 2005
salary, bonus under the Short Term Incentive Bonus Plan for 2005, stock option
grants and grants of restricted stock, and "stretch" bonus under the 2004/2005
CEO Stretch Bonus Plan on a variety of factors, including Dr. Singer's
performance in attaining identified corporate and individual goals, the scope
and nature of his responsibilities as the chief executive officer, and
comparisons of chief executive officer compensation levels for peer companies.
2005 Salary. In 2005, our committee determined to reduce Dr. Singer's
salary from $385,000 to $350,000, a 9% reduction, consistent with the policy
that we applied to the other executive officers of the company, based on
considerations relating to the company's operating performance and expense
management goals. In connection with this reduction as well as the elimination
of a car allowance and other company perquisites, upon our committee's
recommendation, our board of directors approved the grant to Dr. Singer of
53,200 shares of restricted stock. These shares will vest over a period of five
years.
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2005 Short Term Incentive Bonus Plan. Based on the corporate-level and
individual performance goals established for Dr. Singer in 2005, our committee
determined that Dr. Singer had earned a bonus for the year in the amount of
$350,000, representing 100% of his targeted bonus. As with the conversion of
cash bonus payments to common stock for the other executive officers of the
company, Dr. Singer received 46,296 shares of immediately vested common stock in
February 2006, having a market value equal to the amount of the awarded bonus.
2004/2005 CEO Stretch Bonus Plan. Beginning in 2003, in addition to the
incentives available to our chief executive officer under our Short Term
Incentive Bonus Plan, we established a CEO Stretch Bonus Plan to create a
particular set of incentives for this office. This plan was designed to reward
the chief executive officer for substantial overachievement of planned revenue
and earnings goals. The specific goals set forth in the plan are measured each
year over a rolling two-year period, and if achieved in full, provide for a
maximum payment of $200,000 each year.
In March 2005, upon our committee's recommendation, our board approved the
2004/2005 CEO Stretch Bonus Plan. The performance goals incorporated into this
plan were weighted to recognize substantial overachievement of planned revenue
and earnings goals resulting from growth of the company's currently existing
operations (i.e., "organic growth") in 2005 as distinguished from growth in
revenue resulting from acquisitions of businesses or companies (i.e., "acquired
growth") completed in 2005. Consistent with our committee's determination to
convert all bonus payments under the Short Term Incentive Bonus Plan to shares
of immediately vested common stock, the 2004/2005 CEO Stretch Bonus Plan
provides for a similar conversion.
Based on the performance goals established for Dr. Singer under the
2004/2005 CEO Stretch Bonus Plan, our committee determined that Dr. Singer had
earned a bonus for the year in the amount of $160,000, equal to 80% of the
maximum amount possible under the plan. This amount was converted into a grant
for 21,164 shares of immediately vested common stock in February 2006, having a
market value equal to the amount of the awarded bonus.
2005 Long Term Incentive Grants. In June 2005, as part of our annual
review of the long term incentives of our chief executive officer, our committee
considered both the level and structure of Dr. Singer's equity incentives based
on our common stock in connection with a range of competitive benchmarks derived
from industry and market information provided by our independent compensation
consultant.
Upon our committee's recommendation, in July 2005, our board of directors
approved the grant to Dr. Singer of stock options for the purchase of 100,000
shares and an award of 65,000 shares of restricted stock under our 1997 Stock
Plan. Subject to Dr. Singer's continued employment with the company, the option
grant will vest over a period of four years commencing July 1, 2005, and the
restricted stock award will vest in its entirety on July 1, 2010, subject to
earlier acceleration if the company achieves identified corporate-level revenue
and earnings goals during earlier periods.
These long term incentive awards to Dr. Singer, which reflect a combination
of both time-based and performance-based incentives, are intended to:
- reinforce the alignment of Dr. Singer's long term perspective with the
interests of our stockholders,
- enhance the retention value of these awards for a valued manager,
- balance the perceived value of the awards from the perspective of Dr.
Singer with their financial cost to our company, and
- provide Dr. Singer with an opportunity to accumulate a meaningful
financial interest that is tied to the long term financial and market
performance of the company.
QUALIFYING COMPENSATION
In general, it is our policy to qualify, to the maximum extent possible,
our executives' compensation for deductibility under Section 162(m) of the
Internal Revenue Code. This federal tax provision enables the
40
company to deduct compensation paid to our chief executive officer and our four
other named executive officers only if the compensation for an officer is less
than $1 million during the fiscal year or is "performance-based" under Section
162(m).
Although total compensation paid to Dr. Singer in 2005 slightly exceeded
the $1 million threshold under Section 162(m), the loss of deductibility as to
this excess did not affect the company's financial results for the fiscal year.
Our committee is currently evaluating the impact of Section 162(m) with respect
to our compensation goals going forward to ensure that our financial results are
not materially affected in future periods.
Respectfully submitted by:
THE COMPENSATION COMMITTEE
Richard C. Alberding (Chair)
John R. Sheehan
Brian J. Jackman
41
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, 2005. 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 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG PCTEL, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX,
AND THE S&P TECHNOLOGY INDEX
(COMPARISON CHART)
- $100 invested on 12/31/00 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
Copyright(C) 2006, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved. www.researchdatagroup.com/S&P.htm
OTHER MATTERS
We know of no further 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 27, 2006
42
APPENDIX A
AMENDED AND RESTATED 1997 STOCK PLAN
PCTEL, INC.
1997 STOCK PLAN
(AS AMENDED AND RESTATED MARCH 16, 2006)
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.
Awards granted under the Plan may be Incentive Stock Options, Nonstatutory
Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock
Units, Performance Units, Performance Shares, Dividend Equivalents and other
stock or cash awards as the Administrator may determine.
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 equity-based awards 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 Awards are, or
will be, granted under the Plan.
(c) "Award" means, individually or collectively, a grant under the
Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted
Stock Units, Performance Units, Performance Shares, Dividend Equivalents
and other stock or cash awards as the Administrator may determine.
(d) "Award Agreement" means the written agreement setting forth the
terms and provisions applicable to each Award granted under the Plan. The
Award Agreement is subject to the terms and conditions of the Plan.
(e) "Awarded Stock" means the Common Stock subject to an Award.
(f) "Board" means the Board of Directors of the Company.
(g) "Change in Control" means the consummation of any of the
following transactions:
(i) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting
power represented by the Company's then outstanding voting securities;
or
(ii) The consummation of the sale or disposition by the Company of
all or substantially all of the Company's assets; or
(iii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" means directors
who either (A) are Directors as of the effective date of the Plan, or
(B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors at
the time of such election or nomination (but will not include an
individual whose election or nomination is in connection with an actual
or threatened proxy contest relating to the election of directors to the
Company); or
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(iv) The consummation of a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or its parent) at least fifty percent (50%) of the
total voting power represented by the voting securities of the Company
or such surviving entity or its parent outstanding immediately after
such merger or consolidation.
(h) "Code" means the Internal Revenue Code of 1986, as amended. Any
reference to a section of the Code herein will be a reference to any
successor or amended section of the Code.
(i) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(j) "Common Stock" means the common stock of the Company.
(k) "Company" means PCTEL, Inc., a Delaware corporation.
(l) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
(m) "Determination Date" means the latest possible date that will not
jeopardize the qualification of an Award granted under the Plan as
"performance-based compensation" under Section 162(m) of the Code.
(n) "Director" means a member of the Board.
(o) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(p) "Dividend Equivalent" means a credit, payable in cash, made at
the discretion of the Administrator, to the account of a Participant in an
amount equal to the cash dividends paid on one Share for each Share
represented by an Award held by such Participant. The Dividend Equivalent
for each Share subject to an Award shall only be paid to a Participant on
the vesting date for such Share.
(q) "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 Participant 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.
(r) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(s) "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 on the last market trading day
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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.
(t) "Fiscal Year" means the fiscal year of the Company.
(u) "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.
(v) "Inside Director" means a Director who is an Employee.
(w) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(x) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Award. The Notice of Grant is
part of the Award Agreement.
(y) "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.
(z) "Option" means a stock option granted pursuant to the Plan.
(aa) "Option Agreement" means an agreement between the Company and a
Participant evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(bb) "Outside Director" means a Director who is not an Employee.
(cc) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(dd) "Participant" means the holder of an outstanding Award granted
under the Plan.
(ee) "Performance Goals" will have the meaning set forth in Section
11 of the Plan.
(ff) "Performance Period" means any Fiscal Year of the Company or
such other period as determined by the Administrator in its sole
discretion.
(gg) "Performance Share" means an Award denominated in Shares which
may be earned in whole or in part upon attainment of Performance Goals or
other vesting criteria as the Administrator may determine pursuant to
Section 10.
(hh) "Performance Unit" means a bookkeeping entry representing an
amount equal to the Fair Market Value of one Share, which may be earned in
whole or in part upon attainment of Performance Goals or other vesting
criteria as the Administrator may determine and which may be settled for
cash, Shares or other securities or a combination of the foregoing pursuant
to Section 10.
(ii) "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock are subject to restrictions and
therefore, the Shares are subject to a substantial risk of forfeiture. Such
restrictions may be based on the passage of time, the achievement of target
levels of performance, or the occurrence of other events as determined by
the Administrator.
(jj) "Plan" means this 1997 Stock Plan, as amended and restated.
(kk) "Restricted Stock" means Shares issued pursuant to a Restricted
Stock award under Section 8 of the Plan, or issued pursuant to the early
exercise of an Option.
(ll) "Restricted Stock Unit" means a bookkeeping entry representing
an amount equal to the Fair Market Value of one Share, granted pursuant to
Section 9 of the Plan. Each Restricted Stock Unit represents an unfunded
and unsecured obligation of the Company.
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(mm) "Restricted Stock Unit Agreement" means a written or electronic
agreement between the Company and the Participant evidencing the terms and
restrictions applying to an award of Restricted Stock Units. The Restricted
Stock Unit Agreement is subject to the terms and conditions of the Plan and
the Notice of Grant.
(nn) "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.
(oo) "Section 16(b)" means Section 16(b) of the Exchange Act.
(pp) "Service Provider" means an Employee, Director or Consultant.
(qq) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 15 of the Plan.
(rr) "Stock Appreciation Right" or "SAR" means an Award granted
pursuant to Section 7 hereof.
(ss) "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.
(a) Stock Subject to the Plan. Subject to the provisions of Section 15 of
the Plan, the maximum aggregate number of Shares with respect to which Awards
may be made under the Plan after the effective date of this amendment and
restatement is the sum of (a) 2,300,000 Shares, plus (b) any Shares returned (or
that would have otherwise returned) to the Plan on or after the date of Board
approval of the amendment and restatement of the Plan as a result of termination
of options or repurchase of Shares issued under such plan prior to the date of
Board approval of the amendment and restatement of the Plan, plus (c) any Shares
returned (or that would have otherwise returned) to the Company's 1998 Director
Option Plan on or after the date of Board approval of the amendment and
restatement of the Plan as a result of termination of options or repurchase of
Shares issued under such plan. The Shares may be authorized, but unissued, or
reacquired Common Stock.
(b) Lapsed Awards. If an Award expires or becomes unexercisable without
having been exercised in full, or, with respect to Restricted Stock, Restricted
Stock Units, Performance Shares or Performance Units, is forfeited to or
repurchased by the Company, the unpurchased Shares (or for Awards other than
Options and Stock Appreciation Rights, the forfeited or repurchased Shares)
which were subject thereto will become available for future grant or sale under
the Plan (unless the Plan has terminated). With respect to SARs, only shares
actually issued pursuant to a SAR shall cease to be available under the Plan;
all remaining shares under SARs shall remain available for future grant or sale
under the Plan (unless the Plan has terminated). However, Shares that have
actually been issued under the Plan under any Award shall not be returned to the
Plan and shall not become available for future distribution under the Plan,
except that if unvested Shares of Restricted Stock, Restricted Stock Units,
Performance Shares or Performance Units are repurchased by the Company or are
forfeited to the Company, such Shares will become available for future grant
under the Plan. Shares used to pay the tax and exercise price of an Award will
not become available for future grant or sale under the Plan. To the extent an
Award under the Plan is paid out in cash rather than Shares, such cash payment
will not result in reducing the number of Shares available for issuance 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 Awards 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.
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(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 Awards may be granted
hereunder;
(iii) to determine the number of shares of Common Stock to be covered
by each Award 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 Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Awards 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 Award or the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine; provided, however,
that unless otherwise determined by the Administrator, any extension of the
term or exercise period of an Award shall comply with Section 409A of the
Code and any temporary, proposed or final Treasury Regulations and guidance
promulgated thereunder;
(vi) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan;
(vii) 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;
(viii) to modify or amend each Award (subject to Section 20(c) of the
Plan), including the discretionary authority to extend the post-termination
exercisability period of Options and SARs longer than is otherwise provided
for in the Plan. Notwithstanding the previous sentence, the Administrator
may not modify or amend an Option or Stock Appreciation Right to reduce the
exercise price of such Option or Stock Appreciation Right after it has been
granted (except for adjustments made pursuant to Section 15 of the Plan)
nor may the Administrator cancel any outstanding Option or Stock
Appreciation Right and replace it with a new Option or Stock Appreciation
Right with a lower exercise price, unless, in either case, such action is
approved by the Company's stockholders;
(ix) to determine whether Dividend Equivalents will be granted in
connection with an Award;
(x) to allow Participants to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon
exercise of an Award 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 a Participant 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;
(xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously granted by
the Administrator;
(xii) to make all other determinations deemed necessary or advisable
for administering the Plan.
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(c) Section 409A. Unless otherwise determined by the Administrator, the
Administrator shall comply with Section 409A of the Code and any temporary,
proposed or final Treasury Regulations and guidance promulgated thereunder in
taking or permitting any actions under the Plan that would result in a deferral
of compensation subject to Section 409A of the Code.
(d) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all
Participants and any other holders of Awards.
5. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares,
Dividend Equivalents and such other stock or cash awards as the Administrator
determines may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees.
6. Options.
(a) Limitations.
(i) 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 Participant 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) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any Fiscal Year, Options
to purchase more than 300,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 150,000
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 15 of the Plan.
(iv) If an Option is canceled in the same Fiscal Year in which it was
granted (other than in connection with a transaction described in Section
15 of the Plan), the canceled Option will be counted against the limits set
forth in subsections (i) and (ii) above.
(v) The exercise price for an Option may not be reduced. This will
include, without limitation, a repricing of the Option as well as an Option
exchange program whereby the Participant agrees to cancel an existing
Option in exchange for an Option, Stock Appreciation Right or other Award.
(c) 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
a Participant 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.
(d) Option Exercise Price and Consideration.
(i) 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, but will be no less than 100% of the Fair Market Value per
Share on the date of grant. In addition, in the case of an Incentive Stock
Option granted to an Employee who, at the time the Incentive Stock Option
is granted, owns stock representing more than ten
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percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price will be no less than
110% of the Fair Market Value per Share on the date of grant.
Notwithstanding the foregoing provisions of this Section 6(d), 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 transaction
described in, and in a manner consistent with, Section 424(a) of the Code.
(e) 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.
(f) 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 Administrator shall
determine the acceptable form of consideration at the time of grant. To the
extent consistent with Applicable Laws, 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 Participant 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
Participant, including any liability attributable to the Participant'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.
(g) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. 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)
notice of exercise (in such form as the Administrator may specify from time
to time) 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
Participant or, if requested by the Participant, in the name of the
Participant 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 stockholder 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 15 of the Plan.
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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.
(ii) Termination of Relationship as a Service Provider. If a
Participant ceases to be a Service Provider, other than upon the
Participant's death or Disability, the Participant 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 Participant's termination. If, on the date of termination,
the Participant 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 Participant 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.
(iii) Disability of Participant. If a Participant ceases to be a
Service Provider as a result of the Participant's Disability, the
Participant 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 Participant's termination. If, on the
date of termination, the Participant 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 Participant 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.
(iv) Death of Participant. If a Participant 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 Participant'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 Participant's termination. If, at the time
of death, the Participant 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 Participant's estate or, if none, by the person(s)
entitled to exercise the Option under the Participant'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.
(v) 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 Participant at the time that such offer is made.
7. Stock Appreciation Rights.
(a) Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Administrator, in its sole discretion.
(b) Number of Shares. The Administrator will have complete discretion to
determine the number of Stock Appreciation Rights granted to any Participant,
provided that during any Fiscal Year, no Participant will be granted Stock
Appreciation Rights covering more than 300,000 Shares. Notwithstanding the
foregoing limitation, in connection with a Participant's initial service as an
Employee, an Employee may be granted Stock Appreciation Rights covering up to an
additional 150,000 Shares.
(c) Exercise Price and other Terms. The Administrator, subject to the
provisions of the Plan, shall have complete discretion to determine the terms
and conditions of SARs granted under the Plan; provided,
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however, that no SAR may have a term of more than ten (10) years from the date
of grant. In addition, the per Share exercise price of a SAR shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(d) Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(i) The difference between the Fair Market Value of a Share on the
date of exercise over the exercise price; times
(ii) the number of Shares with respect to which the SAR is exercised.
(e) Payment upon Exercise of SAR. At the discretion of the Administrator,
payment for a SAR may be in cash, Shares or a combination thereof.
(f) SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, shall determine.
(g) Expiration of SARs. A SAR granted under the Plan shall expire upon
the date determined by the Administrator, in its sole discretion, and set forth
in the Award Agreement.
(h) Termination of Relationship as a Service Provider. If a Participant
ceases to be a Service Provider, other than upon the Participant's death or
Disability, the Participant may exercise his or her SAR within such period of
time as is specified in the SAR Agreement to the extent that the SAR is vested
on the date of termination (but in no event later than the expiration of the
term of such SAR as set forth in the SAR Agreement). In the absence of a
specified time in the SAR Agreement, the SAR shall remain exercisable for three
(3) months following the Participant's termination. If, on the date of
termination, the Participant is not vested as to his or her entire SAR, the
Shares covered by the unvested portion of the SAR shall revert to the Plan. If,
after termination, the Participant does not exercise his or her SAR within the
time specified by the Administrator, the SAR shall terminate, and the Shares
covered by such SAR shall revert to the Plan.
(i) Disability of Participant. If a Participant ceases to be a Service
Provider as a result of the Participant's Disability, the Participant may
exercise his or her SAR within such period of time as is specified in the SAR
Agreement to the extent the SAR is vested on the date of termination (but in no
event later than the expiration of the term of such SAR as set forth in the SAR
Agreement). In the absence of a specified time in the SAR Agreement, the SAR
shall remain exercisable for twelve (12) months following the Participant's
termination. If, on the date of termination, the Participant is not vested as to
his or her entire SAR, the Shares covered by the unvested portion of the SAR
shall revert to the Plan. If, after termination, the Participant does not
exercise his or her SAR within the time specified herein, the SAR shall
terminate, and the Shares covered by such SAR shall revert to the Plan.
(j) Death of Participant. If a Participant dies while a Service Provider,
the SAR may be exercised within such period of time as is specified in the SAR
Agreement (but in no event later than the expiration of the term of such SAR as
set forth in the Notice of Grant), by the Participant's estate or by a person
who acquires the right to exercise the SAR by bequest or inheritance, but only
to the extent that the SAR is vested on the date of death. In the absence of a
specified time in the SAR Agreement, the SAR shall remain exercisable for twelve
(12) months following the Participant's termination. If, at the time of death,
the Participant is not vested as to his or her entire SAR, the Shares covered by
the unvested portion of the SAR shall immediately revert to the Plan. The SAR
may be exercised by the executor or administrator of the Participant's estate
or, if none, by the person(s) entitled to exercise the SAR under the
Participant's will or the laws of descent or distribution. If the SAR is not so
exercised within the time specified herein, the SAR shall terminate, and the
Shares covered by such SAR shall revert to the Plan.
(k) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares an SAR previously granted based on such terms
and conditions as the Administrator shall establish and communicate to the
Participant at the time that such offer is made.
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8. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Administrator, at any time and from time to time, may grant Shares of
Restricted Stock to Service Providers in such amounts as the Administrator, in
its sole discretion, will determine.
(b) Restricted Stock Agreement. Each Award of Restricted Stock will be
evidenced by an Award Agreement that will specify the Period of Restriction, the
number of Shares granted, and such other terms and conditions as the
Administrator, in its sole discretion, will determine. Notwithstanding the
foregoing sentence, during any Fiscal Year no Participant will receive more than
an aggregate of 150,000 Shares of Restricted Stock; provided, however, that in
connection with a Participant's initial service as an Employee, an Employee may
be granted an aggregate of up to an additional 75,000 Shares of Restricted
Stock. Unless the Administrator determines otherwise, Shares of Restricted Stock
will be held by the Company as escrow agent until the restrictions on such
Shares have lapsed.
(c) Transferability. Except as provided in this Section 8, Shares of
Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable Period of Restriction.
(d) Other Restrictions. The Administrator, in its sole discretion, may
impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate.
(e) Removal of Restrictions. Except as otherwise provided in this Section
8, Shares of Restricted Stock covered by each Restricted Stock grant made under
the Plan will be released from escrow as soon as practicable after the last day
of the Period of Restriction. The Administrator, in its discretion, may
accelerate the time at which any restrictions will lapse or be removed.
(f) Voting Rights. During the Period of Restriction, Service Providers
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares, unless the Administrator determines
otherwise.
(g) Dividends and Other Distributions. During the Period of Restriction,
Service Providers holding Shares of Restricted Stock will be entitled to receive
all dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares will be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
(h) Return of Restricted Stock to Company. On the date set forth in the
Award Agreement, the Restricted Stock for which restrictions have not lapsed
will revert to the Company and again will become available for grant under the
Plan.
9. Restricted Stock Units.
(a) Grant. Restricted Stock Units may be granted at any time and from
time to time as determined by the Administrator. Each Restricted Stock Unit
grant will be evidenced by an Award Agreement that will specify such other terms
and conditions as the Administrator, in its sole discretion, will determine,
including all terms, conditions, and restrictions related to the grant, the
number of Restricted Stock Units and the form of payout, which, subject to
Section 9(d), may be left to the discretion of the Administrator.
Notwithstanding anything to the contrary in this subsection (a), during any
Fiscal Year, no Participant will receive more than an aggregate of 150,000
Restricted Stock Units; provided, however, that in connection with a
Participant's initial service as an Employee, an Employee may be granted an
aggregate of up to an additional 75,000 Restricted Stock Units.
(b) Vesting Criteria and Other Terms. The Administrator will set vesting
criteria in its discretion, which, depending on the extent to which the criteria
are met, will determine the number of Restricted Stock Units that will be paid
out to the Participant. After the grant of Restricted Stock Units, the
Administrator, in its sole discretion, may reduce or waive any restrictions for
such Restricted Stock Units. Each Award of
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Restricted Stock Units will be evidenced by an Award Agreement that will specify
the vesting criteria, and such other terms and conditions as the Administrator,
in its sole discretion, will determine.
(c) Earning Restricted Stock Units. Upon meeting the applicable vesting
criteria, the Participant will be entitled to receive a payout as specified in
the Award Agreement. Notwithstanding the foregoing, at any time after the grant
of Restricted Stock Units, the Administrator, in its sole discretion, may reduce
or waive any vesting criteria that must be met to receive a payout.
(d) Form and Timing of Payment. Payment of earned Restricted Stock Units
will be made as soon as practicable after the date(s) set forth in the Award
Agreement. The Administrator, in its sole discretion, may pay earned Restricted
Stock Units in cash, Shares, or a combination thereof. Shares represented by
Restricted Stock Units that are fully paid in cash again will be available for
grant under the Plan.
(e) Cancellation. On the date set forth in the Award Agreement, all
unearned Restricted Stock Units will be forfeited to the Company.
10. Performance Units and Performance Shares.
(a) Grant of Performance Units/Shares. Performance Units and Performance
Shares may be granted to Service Providers at any time and from time to time, as
will be determined by the Administrator, in its sole discretion. The
Administrator will have complete discretion in determining the number of
Performance Units/ Shares granted to each Participant provided that during any
Fiscal Year, (a) no Participant will receive Performance Units having an initial
value greater than $500,000, and (b) no Participant will receive more than
150,000 Performance Shares. Notwithstanding the foregoing limitation, in
connection with a Participant's initial service as an Employee, an Employee may
be granted up to an additional 75,000 Performance Shares.
(b) Value of Performance Units/Shares. Each Performance Unit will have an
initial value that is established by the Administrator on or before the date of
grant. Each Performance Share will have an initial value equal to the Fair
Market Value of a Share on the date of grant.
(c) Performance Objectives and Other Terms. The Administrator will set
performance objectives or other vesting provisions (including, without
limitation, continued status as a Service Provider) in its discretion which,
depending on the extent to which they are met, will determine the number or
value of Performance Units/Shares that will be paid out to the Participant. The
Administrator may set performance objectives based upon the achievement of
Company-wide, divisional, or individual goals, or any other basis determined by
the Administrator in its discretion. Each Award of Performance Units/Shares will
be evidenced by an Award Agreement that will specify the Performance Period, and
such other terms and conditions as the Administrator, in its sole discretion,
will determine.
(d) Earning of Performance Units/Shares. After the applicable Performance
Period has ended, the holder of Performance Units/Shares will be entitled to
receive a payout of the number of Performance Units/ Shares earned by the
Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance objectives or other vesting
provisions have been achieved. After the grant of a Performance Unit/Share, the
Administrator, in its sole discretion, may reduce or waive any performance
objectives or other vesting provisions for such Performance Unit/Share.
(e) Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares will be made as soon as practicable after the
expiration of the applicable Performance Period. The Administrator, in its sole
discretion, may pay earned Performance Units/Shares in the form of cash, in
Shares (which have an aggregate Fair Market Value equal to the value of the
earned Performance Units/ Shares at the close of the applicable Performance
Period) or in a combination thereof.
(f) Cancellation of Performance Units/Shares. On the date set forth in
the Award Agreement, all unearned or unvested Performance Units/Shares will be
forfeited to the Company, and again will be available for grant under the Plan.
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11. Performance Goals. Awards of Restricted Stock, Restricted Stock
Units, Performance Shares and Performance Units and other incentives under the
Plan may be made subject to the attainment of performance goals relating to one
or more business criteria within the meaning of Section 162(m) of the Code and
may provide for a targeted level or levels of achievement ("Performance Goals")
including
(a) cash flow;
(b) cash position;
(c) earnings before interest and taxes;
(d) earnings before interest, taxes, depreciation and amortization;
(e) earnings per Share;
(f) economic profit;
(g) economic value added;
(h) equity or stockholder's equity;
(i) market share;
(j) net income;
(k) net profit;
(l) net sales;
(m) operating earnings;
(n) operating income;
(o) profit before tax;
(p) ratio of debt to debt plus equity;
(q) ratio of operating earnings to capital spending;
(r) return on equity;
(s) return on net assets;
(t) return on sales, revenue, sales growth; or
(u) total return to stockholders.
Any Performance Goals may be used to measure the performance of the Company
as a whole or a business unit of the Company and may be measured relative to a
peer group or index. The Performance Goals may differ from Participant to
Participant and from Award to Award. Prior to the Determination Date, the
Administrator will determine whether any significant element(s) will be included
in or excluded from the calculation of any Performance Goal with respect to any
Participant. In all other respects, Performance Goals will be calculated in
accordance with the Company's financial statements, generally accepted
accounting principles, or under a methodology established by the Administrator
prior to the issuance of an Award, which is consistently applied and identified
in the financial statements, including footnotes, the management discussion and
analysis section of the Company's annual report, or the minutes of the Board.
12. Automatic Awards to Outside Directors.
(a) Procedure for Grants. All grants of Options to Outside Directors
under this Section 12 shall be automatic and non-discretionary and shall be made
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.
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(ii) Each Outside Director shall be automatically granted an Option
to purchase 15,000 Shares (the "First Option") upon the date on which such
person first becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board of Directors 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 1 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) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in
Sections 12 and 15 of the Plan.
(C) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the First Option.
(D) subject to Section 15 of the Plan, the First Option shall
become exercisable as to thirty-three and one-third percent (33 1/3%) of
the Shares subject to the First Option on each anniversary of its date
of grant, provided that the Participant continues to serve as a Director
on such dates.
(v) The terms of a Subsequent Option granted hereunder shall be as
follows:
(A) the term of the Subsequent Option shall be ten (10) years.
(B) the Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth
in Sections 12 and 15 of the Plan.
(C) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 15 of the Plan, the Subsequent Option shall
become exercisable as to 100% of the Shares subject to the Subsequent
Option on each anniversary of its date of grant, provided that the
Participant continues to serve as a Director on such dates.
(vi) 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 stockholders to
increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.
(b) Consideration for Exercising Outside Director Stock Options. The
consideration to be paid for the Shares to be issued upon exercise of an
automatic Outside Director Option 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 Participant 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.
(c) Post-Service Exercisability.
(i) Termination of Relationship as a Service Provider. If a
Participant ceases to be a Service Provider, other than upon the
Participant's death or Disability, the Participant 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
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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 Participant's termination. If, on the date of
termination, the Participant 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 Participant 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.
(ii) Disability of Outside Director. If a Participant ceases to be a
Service Provider as a result of the Participant's Disability, the
Participant 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 Participant's termination. If, on the
date of termination, the Participant 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 Participant 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.
(iii) Death of Outside Director. If a Participant 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 Participant'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 Participant's termination. If, at the time
of death, the Participant 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 Participant's estate or, if none, by the person(s)
entitled to exercise the Option under the Participant'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.
13. Leaves of Absence. Unless the Administrator provides otherwise,
vesting of Awards granted hereunder will be suspended during any unpaid leave of
absence. A Service Provider will 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 and its Affiliates. For purposes of
Incentive Stock Options, no such leave may exceed ninety (90) 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, then three (3) months following the ninety-first (91st) day
of such leave any Incentive Stock Option held by the Participant will cease to
be treated as an Incentive Stock Option and will be treated for tax purposes as
a Nonstatutory Stock Option.
14. Non-Transferability of Awards. Unless determined otherwise by the
Administrator, an Award 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
recipient, only by the recipient. If the Administrator makes an Award
transferable, such Award shall contain such additional terms and conditions as
the Administrator deems appropriate.
15. Adjustments Upon Changes in Capitalization, Dissolution, or Change in
Control.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Award, the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Awards have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Award, the price per share (if any) of Common Stock covered by each such
outstanding Award, the numerical Share limits set forth in Sections 3, 6, 7, 8,
9 and 10 of the Plan, and the number of Shares automatically awarded to Outside
Directors under Section 12 of the Plan, shall be proportionately adjusted for
any change in or increase or
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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 change or 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 Award.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each Participant
as soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for a Participant to have the
right to exercise his or her Award until ten (10) days prior to such transaction
as to all of the Awarded Stock covered thereby, including Shares as to which the
Award would not otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase option or forfeiture rights shall lapse
100%, and that any Award vesting shall accelerate 100%, 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 (with respect
to Options, and SARs) or vested (with respect to Restricted Stock), an Award
will terminate immediately prior to the consummation of such proposed action.
(c) Change in Control.
(i) Assumption.
(A) In the event of a Change in Control, each outstanding Award
(including any related Dividend Equivalent), other than an Award that
vests, is earned or paid-out upon the satisfaction of one or more
Performance Goals, shall be assumed or an equivalent Award substituted by
the successor corporation or a Parent or Subsidiary of the successor
corporation (the "Successor Corporation").
(B) For the purposes of this subsection, an Award shall be considered
assumed if, following the Change in Control, the Award confers the right to
purchase or receive, for each Share of Awarded Stock subject to the Award
immediately prior to the Change in Control, the consideration (whether
stock, cash, or other securities or property) received in the Change in
Control 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 Change in Control is not solely common stock
of the Successor Corporation, the Administrator may, with the consent of
the Successor Corporation, provide for the consideration to be received
upon the exercise of an Option or Stock Appreciation Right, for each Share
subject to such Award, to be solely common stock of the Successor
Corporation equal in fair market value to the per share consideration
received by holders of Common Stock in the Change in Control.
(ii) Non-Assumption.
(A) Non-Performance Based Awards. In the event that the Successor
Corporation refuses to assume or substitute for the Award, the Participant
shall fully vest in and have the right to exercise the Award as to all of
the Awarded Stock, including Shares as to which such Awards would not
otherwise be vested or exercisable. Additionally, all restrictions on
Restricted Stock will lapse. Note that this subsection (A) does not apply
to any Award that vests, is earned or paid-out upon the satisfaction of one
or more Performance Goals.
(B) Performance-Based Awards. With respect to any Restricted Stock,
Restricted Stock Unit, Performance Share, Performance Unit, or other Award
that vests, is earned or paid-out upon the satisfaction of one or more
Performance Goals all Performance Goals or other vesting criteria will be
deemed achieved at target levels and all other terms and conditions met
(see subsection (D) below for discussion of payment for performance-based
awards).
A-15
(C) Notice. If an Award becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a Change in Control, the
Administrator shall notify the Participant in writing or electronically
that the Award shall be fully vested and exercisable for a period of
fifteen (15) days from the date of such notice, and the Award shall
terminate upon the expiration of such period.
(D) Pro-Ration. If the Change in Control occurs during a Performance
Period while the Participant (other than an Outside Director) is a Service
Provider, the Participant will receive payment of a pro-rated amount of the
performance-based Award that would have actually been earned had the
Participant remained a Service Provider through the end of the Performance
Period based on the amount of time the Participant was a Service Provider
during the Performance Period before the Change in Control. Such payment
pro-rated amount shall be paid within thirty (30) days of the consummation
of the Change in Control.
(iii) Outside Directors. With respect to Awards granted to Outside
Directors, in the event of a Change of Control, the Participant shall fully
vest in and have the right to exercise the Award as to all of the Awarded
Stock, including Shares as to which such Awards would not otherwise be
vested or exercisable, all restrictions on Restricted Stock will lapse,
and, with respect to Restricted Stock Units, Performance Shares and
Performance Units, all Performance Goals or other vesting criteria will be
deemed achieved at target levels and all other terms and conditions met.
The Outside Director will receive payment of a pro-rated amount of the
Performance Shares, Performance Units, or other performance-based Award
that would have actually been earned had the Outside Director remained a
Service Provider through the end of the Performance Period based on the
amount of time the Outside Director was a Service Provider during the
Performance Period before the Change in Control.
16. Tax Withholding.
(a) Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company will have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, local, foreign or other
taxes (including the Participant's FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).
(b) Withholding Arrangements. The Administrator, in its sole discretion
and pursuant to such procedures as it may specify from time to time, may require
a Participant to satisfy such tax withholding obligation, in whole or in part
(without limitation) by (i) paying cash, (ii) electing to have the Company
withhold otherwise deliverable cash or Shares having a Fair Market Value equal
to the amount required to be withheld, (iii) delivering to the Company
already-owned Shares having a Fair Market Value equal to the amount required to
be withheld, or (iv) selling a sufficient number of Shares otherwise deliverable
to the Participant through such means as the Administrator may determine in its
sole discretion (whether through a broker or otherwise) equal to the amount
required to be withheld. The amount of the withholding requirement will be
deemed to include any amount which the Administrator agrees may be withheld at
the time the election is made, not to exceed the amount determined by using the
maximum federal, state or local marginal income tax rates applicable to the
Participant with respect to the Award on the date that the amount of tax to be
withheld is to be determined. The Fair Market Value of the Shares to be withheld
or delivered will be determined as of the date that the taxes are required to be
withheld.
17. No Effect on Employment or Service. Neither the Plan nor any Award
will confer upon a Participant any right with respect to continuing the
Participant's relationship as a Service Provider with the Company, nor will they
interfere in any way with the Participant's right or the Company's right to
terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.
18. Date of Grant. The date of grant of an Award shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Participant within a
reasonable time after the date of such grant.
A-16
19. Term of Plan. The Plan shall become effective upon its approval by
the Company's stockholders. It shall continue in effect for 10 years thereafter
unless terminated earlier under Section 20 of the Plan.
20. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder 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
Participant, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing and signed by the Participant
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 Awards
granted under the Plan prior to the date of such termination.
21. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise
of an Award unless the exercise of such Award 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 or receipt
of an Award, the Company may require the person exercising or receiving such
Award to represent and warrant at the time of any such exercise or receipt that
the Shares are being purchased or received 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.
22. 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.
23. 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.
24. Stockholder Approval. The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval will be obtained in the manner and to the
degree required under Applicable Laws.
A-17
PCTEL, INC.
ANNUAL MEETING OF STOCKHOLDERS
MONDAY, JUNE 5, 2006
10:00 A.M. LOCAL TIME
PCTEL, INC.
8725 WEST HIGGINS ROAD
SUITE 400
CHICAGO, ILLINOIS 60631
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This proxy is solicited on behalf of the board of directors for use at
the annual meeting of stockholders on June 5, 2006.
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 27, 2006, and hereby appoints Martin H. Singer
and John W. 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 2006 Annual Meeting of Stockholders of PCTEL,
Inc. to be held on June 5, 2006 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; FOR THE
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM; FOR THE AMENDMENT AND RESTATEMENT OF THE 1997
STOCK PLAN, INCLUDING AN INCREASE IN THE RESERVE OF SHARES UNDER THE PLAN; 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 # --------------
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 -- 1-800-560-1965 -- QUICK***EASY***IMMEDIATE
- Use any touch-tone telephone to vote your proxy 24 hours a day, 7
days a week, until 12:00 noon (CT) on June 4, 2006.
- Please have your proxy card and the last four digits or your Social
Security Number available. 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 noon (CT) on June 4, 2006.
- Please have your proxy card and the last four digits of your Social
Security Number or Tax Identification Number available. Follow the
simple instructions to obtain your records and create an electronic
ballot.
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 55164-0873.
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 Class I 01 Brian J. 02 John R. [ ] Vote FOR all [ ] Vote WITHHELD
directors to serve Jackman Sheehan nominees (except as from all nominees
until 2008 marked)
(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.) ----------------------------------------------------
2. Ratification of the appointment of PricewaterhouseCoopers LLP as the [ ] FOR [ ] AGAINST [ ] ABSTAIN
independent registered public accounting firm of PCTEL, Inc. for the
fiscal year ending December 31, 2006
3. Approval of the amendment and restatement of the 1997 Stock Plan, [ ] FOR [ ] AGAINST [ ] ABSTAIN
including an increase in the reserve of shares under the Plan
IN THEIR DISCRETION, the proxyholders are authorized to vote upon such
other business as may properly come before the meeting or any adjournments or
postponement 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.