Martin H. Singer Management Retention Agreement
PCTEL, INC.
XXXXXX X. XXXXXX MANAGEMENT RETENTION AGREEMENT
(amended and restated on September 5, 2007)
This Management Retention Agreement, as amended and restated on September 5, 2007 (the
“Agreement”), is made and entered into by and between Xxxxxx X. Xxxxxx (“Executive”) and PCTEL,
Inc. (the “Company”).
RECITALS
A. It is expected that the Company from time to time may consider a Change of Control (as
defined below). The Board of Directors of the Company (the “Board”) recognizes that such
consideration can be a distraction to Executive and can cause Executive to consider alternative
employment opportunities. The Board has determined that it is in the best interests of the Company
and its stockholders to assure that the Company will have the continued dedication and objectivity
of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the
Company.
B. The Board believes that it is in the best interests of the Company and its stockholders to
provide Executive with an incentive to continue his employment and to motivate Executive to
maximize the value of the Company upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide Executive with certain benefits upon a
Change of Control and severance benefits upon Executive’s termination of employment following a
Change of Control which provide Executive with enhanced financial security and incentive and
encouragement to remain with the Company notwithstanding the possibility of a Change of Control.
D. Certain capitalized terms used in this Agreement are defined in Section 4 below.
The parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date that all
obligations of the parties hereto with respect to this Agreement have been satisfied.
2. Employment Agreement. Executive and the Company have entered into an Employment
Agreement dated as of August ___, 2007. If Executive’s employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, Executive shall be
entitled to such payments, benefits, damages, awards and compensation as provided by this Agreement
and the Employment Agreement.
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3. Change of Control Severance Benefits.
(a) Change of Control. Upon the occurrence of a Change of Control, the unvested
portion of all Executive’s outstanding equity awards (including, but not limited to, stock options
and restricted stock grants) with a performance-based vesting schedule shall be automatically
amended to convert such equity awards to a time-based vesting schedule (the “Converted Awards”).
Each Converted Award shall vest as to one forty-eighth (1/48th) of the shares subject to
the award each month, subject to Executive’s continued service with the Company through each such
date. Executive shall be given vesting credit from the original date of grant as if each Converted
Award had been subject to a time-based vesting schedule from its grant date. For purposes of this
Section 3(a), the number of shares subject to the Converted Award shall be the amount of the award
that is targeted for achievement during the total performance period (whether measured in one or
more fiscal periods) in which the Change of Control occurs, regardless of any actual level of
achievement subsequently determined. Converted Awards shall be subject to the provisions of
Section 3(b)(iv) of this Agreement. In the event of a conflict between the terms and conditions of
the Company’s 1997 Stock Plan (the “Option Plan”), the agreements relating to Executive’s equity
awards, and this Section 3(a), the terms and conditions of this Section 3(a) shall prevail and any
subsequent documents that purport to modify this Agreement shall be without effect unless they
specifically refer to this Agreement.
(b) Involuntary Termination other than for Cause, Death or Disability or Voluntary
Termination for Good Reason Following a Change of Control. If, within twelve (12) months
following a Change of Control, Executive’s employment is terminated (i) involuntarily by the
Company other than for Cause, death or Disability or (ii) by Executive pursuant to a Voluntary
Termination for Good Reason, then, subject to Executive entering into a standard form of mutual
release or claims with the Company, the Company shall provide Executive with the following benefits
upon such termination:
(i) Severance Payment. Executive shall be entitled to receive a lump-sum cash payment
in an amount equal to two hundred percent (200%) of Executive’s Annual Compensation. Such
severance payment will be made within ten (10) days of the date of Executive’s termination of
employment, unless Section 7 of this Agreement requires otherwise.
(ii) Continued Executive Benefits. The Company will reimburse Executive for the cost
of Executive’s health, dental, vision, long-term disability and life insurance coverage at the same
level of coverage as was provided to Executive immediately prior to the Change of Control and at
the same ratio of Company premium payment to Executive premium payment as was in effect immediately
prior to the Change of Control (the “Company-Paid Coverage”). If such coverage included
Executive’s dependents immediately prior to the Change of Control, such dependents shall also be
covered at Company expense. Company-Paid Coverage shall continue until the earlier of (A) one (1)
year from the date of termination, or (B) the date upon which Executive and his dependents become
covered under another employer’s group health, dental, vision, long-term disability and life
insurance plans that provide Executive and his dependents with comparable benefits and levels of
coverage. For purposes of Title X of the Consolidated Budget Reconciliation Act of 1985 (“COBRA”),
the date of the “qualifying event” for Executive and his or her dependents shall be the date upon
which the Company-Paid Coverage commences, and each
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month of Company-Paid Coverage provided hereunder shall offset a month of continuation
coverage otherwise due under COBRA.
(iii) Pro-Rated Bonus Payment. Executive shall be entitled to receive a lump-sum cash
payment equal to one hundred percent (100%) of the higher of (A) Executive’s Target Bonus as in
effect for the fiscal year in which the Change of Control occurs or (B) Executive’s Target Bonus as
in effect for the fiscal year in which Executive’s termination occurs; such amount to be pro-rated
by multiplying such bonus amount in clause (A) or (B), as applicable, by a fraction, the numerator
of which shall be the number of days prior to Executive’s termination during such fiscal year, and
the denominator of which shall be three-hundred and sixty-five (365). Such severance payment will
be made within ten (10) days of the date of Executive’s termination of employment, unless Section 7
of this Agreement requires otherwise.
(iv) Equity Compensation Accelerated Vesting. One hundred percent (100%) of
Executive’s outstanding equity awards (including, but not limited to, stock options and restricted
stock grants) with a time-based vesting schedule (including the Converted Awards) shall immediately
accelerate and become fully vested.
(c) Voluntary Resignation. If Executive’s employment terminates by reason of
Executive’s voluntary resignation (other than a Voluntary Termination for Good Reason), then
Executive shall not be entitled to receive severance or other benefits except for those (if any) as
may then be established under the Company’s then existing severance and benefits plans or pursuant
to other written agreements with the Company.
(d) Disability; Death. If Executive’s employment with the Company terminates as a
result of Executive’s Disability, or if Executive’s employment is terminated due to the death of
Executive, then Executive shall not be entitled to receive severance or other benefits except for
those (if any) as may then be established under the Company’s then existing severance and benefits
plans or pursuant to other written agreements with the Company.
(e) Termination for Cause. If Executive is terminated for Cause, then Executive shall
not be entitled to receive severance or other benefits.
(f) Termination Apart from Change of Control. In the event Executive’s employment is
terminated for any reason, either prior to the occurrence of a Change of Control or after the
twelve (12) month period following a Change of Control, then Executive shall be entitled to receive
severance and any other benefits only as may then be established under the Employment Agreement and
the Company’s then existing severance and benefits plans or pursuant to other written agreements
with the Company.
4. Definition of Terms. The following terms referred to in this Agreement shall have
the following meanings:
(a) Annual Compensation. “Annual Compensation” shall mean an amount equal to
Executive’s annual base salary payable by the Company.
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(b) Target Bonus. “Target Bonus” shall mean Executive’s annual bonus under the
Company’s short term incentive plan for the officers and key managers of the Company, assuming one
hundred percent (100%) “on target” satisfaction of any performance milestones.
(c) Cause. “Cause” shall mean:
(i) An act of personal dishonesty taken by Executive in connection with his responsibilities
as an employee and intended to result in substantial personal enrichment of Executive;
(ii) Executive being convicted of, or a plea of nolo contendere to, a felony;
(iii) A willful act by Executive which constitutes gross misconduct and which is injurious to
the Company; or
(iv) Following delivery to Executive of a written demand for performance from the Company
which describes the basis for the Company’s reasonable belief that Executive has not substantially
performed his duties, continued violations by Executive of Executive’s obligations to the Company
which are demonstrably willful and deliberate on Executive’s part.
(d) Change of Control. “Change of Control” means the occurrence of any of the
following events:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said 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 who is not
already such as of the Effective Date of this Agreement; or
(ii) The consummation of the sale or disposition by the Company of all or substantially all
the Company’s assets (for these purposes, a substantial sale or disposition will in no event be
considered to occur unless at least forty percent (40%) of the total gross fair market value of all
of the assets of the Company are sold or disposed of); or
(iii) 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.
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(e) Disability. “Disability” shall mean that:
(i) Executive is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to result in death or can
be expected to last for a continuous period of not less than twelve (12) months;
(ii) Executive is, by reason of any medically determinable physical or mental impairment that
can be expected to result in death or can be expected to last for a continuous period of not less
than twelve (12) months, receiving income replacement benefits for at least three (3) months under
the Company’s accident and health plan; or
(iii) Executive is determined to be totally disabled by the Social Security Administration
(f) Voluntary Termination for Good Reason. “Voluntary Termination for Good Reason”
shall mean Executive voluntarily resigns after the occurrence of any of the following without
Executive’s express written consent:
(i) Any material reduction of Executive’s duties, authority or responsibilities (including any
change in title that would compromise Executive’s direct reporting responsibility to the board of
directors of the surviving or acquiring company), relative to Executive’s duties, authority or
responsibilities as in effect immediately prior to such reduction, or the assignment to Executive
of such reduced duties, authority or responsibilities;
(ii) A material reduction, without good business reasons, of the facilities and perquisites
(including office space and location) available to Executive immediately prior to such reduction;
(iii) A material reduction by the Company in the annual base salary of Executive as in effect
immediately prior to such reduction;
(iv) A material reduction by the Company in the aggregate level of employee benefits,
including bonuses, to which Executive was entitled immediately prior to such reduction with the
result that Executive’s aggregate benefits package is materially reduced (other than a reduction
that generally applies to Company employees);
(v) The failure of the Company to obtain the assumption of this Agreement by any successors
contemplated in Section 8(a) below; or
(vi) Any act or set of facts or circumstances which would, under Illinois case law or statute,
constitute a constructive termination of Executive.
Provided, however, that before Executive’s employment may be terminated by a Voluntary Termination
for Good Reason, (A) Executive must provide written notice to the Company, within ninety (90) days
of the initial existence of the Voluntary Termination for Good Reason condition, setting forth the
reasons for Executive’s intention to terminate his employment as a result of a Voluntary
Termination for Good Reason and (B) the Company must have an opportunity within
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thirty (30) days following delivery of such notice to cure the Voluntary Termination for Good
Reason condition.
5. Conditional Nature of Severance Payments.
(a) Noncompete. Executive acknowledges that the nature of the Company’s business is
such that if Executive were to become employed by, or substantially involved in, the business of a
competitor of the Company during the twenty-four (24) months following the termination of
Executive’s employment (the “Restricted Period”) with the Company for any reason (whether during
the Employment Term or subsequent to the end of such period), it would be very difficult for
Executive not to rely on or use the Company’s trade secrets and confidential information. Thus, to
avoid the inevitable disclosure of the Company’s trade secrets and confidential information,
Executive agrees and acknowledges that Executive’s right to receive the payments and benefits set
forth in Section 3 (to the extent Executive is otherwise entitled to such payments and benefits)
shall be conditioned upon Executive not directly or indirectly engaging in (whether as an employee,
consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or
otherwise), nor having any ownership interest in or participating in the financing, operation,
management or control of, any person, firm, corporation or business that competes in the markets
for the Restricted Business; provided, however, that nothing in this Section 5(a)
shall prevent Executive from owning as a passive investment less than one percent (1%) of the
outstanding shares of the capital stock of a publicly-held company if (A) such shares are actively
traded on the New York Stock Exchange or the Nasdaq Global Market and (B) Executive is not
otherwise associated with such company or any of its affiliates. The “Restricted Business” for
purposes of this Agreement is one which is engaged in the design, development, manufacture,
production, marketing, sale, licensing or servicing of any products, or the provision of any
services, that are the same as or similar to those of the Company during the Restricted Period.
Upon any breach of this section, all severance payments and benefits pursuant to this Agreement
shall immediately cease.
(b) Non-Solicitation. During the twenty-four (24) months following the termination of
Executive’s employment with the Company for any reason (whether during or after the Employment
Term), Executive agrees and acknowledges that Executive’s right to receive the payments and
benefits set forth in Section 3 (to the extent Executive is otherwise entitled to such payments and
benefits) shall be conditioned upon Executive not either directly or indirectly soliciting,
inducing, attempting to hire, recruiting, encouraging, taking away, hiring any employee of the
Company or causing an employee to leave his or her employment either for Executive or for any other
entity or person.
(c) Understanding of Covenants. Executive represents that he (i) is familiar with the
foregoing covenants not to compete and not to solicit, and (ii) is fully aware of his obligations
hereunder, including, without limitation, the reasonableness of the length of time, scope and
geographic coverage of these covenants.
6. Section 280G. In the event that the severance and other benefits provided for in
this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the
meaning of Section 280G of the Code and (ii) but for this Section, would be subject to the excise
tax
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imposed by Section 4999 of the Code, then Executive’s severance benefits under this Agreement
shall be payable either
(i) in full, or
(ii) as to such lesser amount which would result in no portion of such severance benefits
being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts,
taking into account the applicable federal, state and local income taxes and the excise tax imposed
by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount
of severance benefits under this Agreement, notwithstanding that all or some portion of such
severance benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive
otherwise agree in writing, any determination required under this Section shall be made in writing,
by the Company’s independent public accountants (the “Accountants”), whose determination shall be
conclusive and binding upon Executive and the Company for all purposes. For purposes of making the
calculations required by this Section, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code. The Company and Executive shall
furnish to the Accountants such information and documents as the Accountants may reasonably request
in order to make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations contemplated by this Section.
7. Section 409A.
(a) Distributions. Notwithstanding anything to the contrary in this Agreement, if
Executive is a “specified employee” within the meaning of Section 409A of the Code and the final
regulations and any other guidance promulgated thereunder (“Section 409A”) at the time of his
termination, and the severance payable to Executive, if any, pursuant to this Agreement, when
considered together with any other severance payments or separation benefits which may be
considered deferred compensation under Section 409A (together, the “Deferred Compensation
Separation Benefits”) will not and could not under any circumstances, regardless of when such
termination occurs, be paid in full by the fifteenth day of the third month of the Company’s fiscal
year following Executive’s termination, then only that portion of the Deferred Compensation
Separation Benefits which do not exceed the Section 409A Limit (as defined below) may be made
within the first six (6) months following Executive’s termination of employment in accordance with
the payment schedule applicable to each such payment or benefit. For these purposes, each
severance payment is hereby designated as a separate payment and will not collectively be treated
as a single payment. Any portion of the Deferred Compensation Separation Benefits in excess of the
Section 409A Limit shall accrue and, to the extent such portion of the Deferred Compensation
Separation Benefits would otherwise have been payable within the first six (6) months following
Executive’s termination of employment, will become payable on the first payroll date that occurs on
or after the date six (6) months and one (1) day following the date of Executive’s termination of
employment. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in
accordance with the payment schedule applicable to each payment or benefit.
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(b) Amendment. This provision is intended to comply with the requirements of Section
409A so that none of the severance payments and benefits to be provided hereunder will be subject
to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to
so comply. The Company and Executive agree to work together in good faith to consider amendments
to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable
to avoid imposition of any additional tax or income recognition prior to actual payment to
Executive under Section 409A.
(c) Section 409A Limit. For purposes of this Agreement, “Section 409A Limit” shall
mean the lesser of two (2) times: (i) Executive’s annualized compensation based upon the annual
rate of pay paid to Executive during the Company’s taxable year preceding the Company’s taxable
year of Executive’s termination of employment as determined under Treasury Regulation
1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or
(ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section
401(a)(17) of the Code for the year in which Executive’s employment is terminated.
8. Successors.
(a) Company’s Successor. Any successor to the Company (whether direct or indirect and
whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all
of the Company’s business and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a succession. For
all purposes under this Agreement, the term “Company” shall include any such successor to the
Company which executes and delivers the assumption agreement described in this Section 8(a) or
which becomes bound by the terms of this Agreement by operation of law.
(b) Executive’s Successors. The terms of this Agreement and all rights of Executive
hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
9. Notice.
(a) General. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally delivered or one
day following mailing via Federal Express or similar overnight courier service. In the case of
Executive, mailed notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be directed to the attention of its
Secretary.
(b) Notice of Termination. Any termination by the Company for Cause shall be
communicated by a notice of termination to Executive given in accordance with Section 9(a) of this
Agreement. Such notice shall indicate the specific termination provision in this Agreement relied
upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis
for termination under the provision so indicated, and shall specify the termination date (which
shall be
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not more than 30 days after the giving of such notice). A termination by Executive pursuant
to a Voluntary Termination for Good Reason shall be communicated by a notice of termination to the
Company in accordance with Section 4(f) and Section 9(a) of this Agreement.
10. Miscellaneous Provisions.
(a) No Duty to Mitigate. Executive shall not be required to mitigate the value of any
benefits contemplated by this Agreement, nor shall any such benefits be reduced by any earnings or
benefits that Executive may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by
two authorized officers of the Company (other than Executive). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same condition or
provision at another time.
(c) Integration. This Agreement, together with the Employment Agreement, the Option
Plan, the agreements relating to Executive’s equity awards, the Company’s Deferred Compensation
Plans (as defined in Executive’s Employment Agreement), and the Confidential Information Agreement,
represents the entire agreement and understanding between the parties as to the subject matter
herein and supersedes all prior or contemporaneous agreements whether written or oral. No waiver,
alteration, or modification of any of the provisions of this Agreement will be binding unless in
writing and signed by duly authorized representatives of the parties hereto (except that the Option
Plan and the Deferred Compensation Plans may be revised or modified in accordance with their terms)
and any subsequent documents that purport to modify this Agreement shall be without effect unless
they specifically refer to this Agreement.
(d) Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws or the State of Illinois.
(e) Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.
(f) Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year set forth below.
PCTEL, INC.
By:
|
/s/ XXXXXXX X. XXXXXXXXX | Date: September 5, 2007 | ||||
Name:
|
Xxxxxxx X. Xxxxxxxxx | |||||
| Title: | Chair of the Compensation Committee of the Board of Directors | |||||
| EXECUTIVE: | ||||||
| /s/ XXXXXX X. XXXXXX | Date: September 5, 2007 | |||||
| Xxxxxx X. Xxxxxx | ||||||
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