UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
ARC WIRELESS SOLUTIONS, INC.
(Name of Registrant as Specified in its Charter)
---------------------------------
(Name of Person 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) and 0-11.
(1) Title of each class of securities to which the transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of the transaction: Total proposed
maximum aggregate value of the transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
ARC WIRELESS SOLUTIONS, INC.
10601 West 48th Avenue
I-70 Frontage Road North
Wheat Ridge, Colorado 80033-2660
(303) 421-4063
NOTICE OF RECONVENED DATE OF
ANNUAL MEETING OF SHAREHOLDERS AND AMENDMENT
TO PROXY STATEMENT MATERIALS
to be held December 16, 2008
The attached Amendment No. 1 to Proxy Statement on Schedule 14A amends the
Proxy Statement filed with the Securities and Exchange Commission on October 3,
2008 (the "October Proxy Statement") by ARC Wireless Solutions, Inc., a Utah
corporation (the "Company") in connection with its Annual Meeting of
Shareholders (the "Annual Meeting"), which was convened on November 5, 2008 (the
"November Meeting").
At the time of the November Meeting, the Company had received a sufficient
number of shareholder votes to approve all of the proposals presented in the
October Proxy Statement. However, shortly before that meeting, the Company was
informed that a majority of the nominees would be withdrawing from serving on
the Board of Directors (the "Board"). As a result, the Board recommended that
the November Meeting be adjourned until November 19, 2008 before any substantive
business was conducted. The Company's shareholders approved the motion to
reconvene the adjourned meeting until November 19, 2008. When the Annual Meeting
was reconvened on November 19, 2008, it was immediately adjourned until 10:00
a.m. (Denver time) on December 16, 2008.
On November 12, 2008, four of the incumbent directors (who also had been
nominees for election at the November Meeting) resigned from the Board, and the
Board appointed two new directors, leaving a total of three directors on the
Board, including the two newly appointed directors. The Board also has nominated
these three directors for election at the reconvened Annual Meeting. As a result
of these changes, the Company has decided to distribute this Amended Proxy
Statement to provide shareholders information regarding the background and
experience of the new nominees and also to provide the opportunity to vote for
or against their election to the Board. The Company filed this Amended Proxy
Statement with the SEC on November 19, 2008, and mailed it to the Company's
shareholders on or about November 26, 2008.
The reconvened Annual Meeting will be held at 10:00 a.m. (Denver time) on
December 16, 2008 at the Company's headquarters, located at 10601 West 48th
Avenue, I-70 Frontage Road North, Wheat Ridge, Colorado 80033-2660 for the
following purposes, as set forth in this Amended Proxy Statement:
1. To elect a Board of Directors consisting of three directors;
2. To consider and vote upon a proposal recommended by the Board of
Directors to ratify the selection of HEIN + Associates LLP to serve as
our certified independent accountants for the year ending December 31,
2008; and
3. To transact any other business that properly may come before the
Annual Meeting.
Only the shareholders of record as shown on the transfer books at the close
of business on September 29, 2008 are entitled to notice of, and to vote at, the
Annual Meeting.
All shareholders, regardless of whether they completed the form of proxy
distributed with the October Proxy Statement, and regardless of whether they
expect to attend the meeting in person, are requested to complete, date, sign
and return promptly the enclosed form of proxy in the accompanying envelope. The
person executing the proxy may revoke it by filing with the Chief Executive
Officer of the Company an instrument of revocation or a duly executed proxy
bearing a later date, or by electing to vote in person at the Annual Meeting.
ALL SHAREHOLDERS ARE EXTENDED A CORDIAL INVITATION TO ATTEND THE RECONVENED
ANNUAL MEETING.
By the Board of Directors:
Wheat Ridge, Colorado Jason Young
November 26, 2008 Chief Executive Officer
AMENDED
PROXY STATEMENT
ARC WIRELESS SOLUTIONS, INC.
10601 West 48th Avenue
I-70 Frontage Road North
Wheat Ridge, Colorado 80033-2660
(303) 421-4063
ANNUAL MEETING OF SHAREHOLDERS
to be held
December 16, 2008
SOLICITATION AND REVOCABILITY OF PROXIES
--------------------
AMENDMENT TO PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is provided in connection with the solicitation of
proxies by the Board of Directors of ARC Wireless Solutions, Inc., a Utah
corporation (the "Company"), to be voted at the reconvened Annual Meeting of
Shareholders (the "Annual Meeting") to be held at 10:00 a.m. (Denver, Colorado
time) on December 16, 2008 at the offices of the Company, or at any adjournment
or postponement of the meeting. We anticipate that this Proxy Statement and the
accompanying form of proxy will be first mailed or given to shareholders on or
about November 26, 2008.
The Annual Meeting was convened on November 5, 2008 (the "November
Meeting"). At the time of the November Meeting, the Company had received a
sufficient number of shareholder votes to approve all of the proposals presented
in the Proxy Statement originally distributed in connection with the November
Meeting. However, shortly before that meeting, the Company was informed that a
majority of the nominees would be withdrawing from serving on the Board of
Directors (the "Board"). As a result, the Board recommended that the November
Meeting be adjourned until November 19, 2008 before any substantive business was
conducted. The Company's shareholders approved the motion to reconvene the
adjourned meeting until November 19, 2008. When the Annual Meeting was
reconvened on November 19, 2008, it was immediately adjourned until 10:00 a.m.
(Denver time) on December 16, 2008.
On November 12, 2008, four of the incumbent directors (who also had been
nominees for election at the November Meeting) resigned from the Board, and the
Board appointed two new directors, leaving a total of three directors on the
Board, including the two newly appointed directors. The Board also has nominated
these three directors for election at the reconvened Annual Meeting. As a result
of these changes, the Company has decided to distribute this Amended Proxy
Statement to provide shareholders information regarding the background and
experience of the new nominees and also to provide the opportunity to vote for
or against their election to the Board.
1
The shares represented by all proxies that are properly executed and
submitted will be voted at the reconvened December 16, 2008 Annual Meeting in
accordance with the instructions indicated on the proxies. Unless otherwise
directed, the shares represented by proxies will be voted: (i) FOR each of the
three nominees for director whose names are set forth on the proxy card; (ii)
FOR the ratification of the selection of HEIN + Associates LLP as our
independent certified accountants for the year ending December 31, 2008; and
(iii) FOR any other business that properly may come before the Annual Meeting.
A shareholder giving a proxy may revoke it at any time before it is
exercised by delivering written notice of revocation to our Chief Executive
Officer, by substituting a new proxy executed at a later date, or by requesting,
in person at the Annual Meeting, that the proxy be returned. Shareholders do not
have dissenters' rights of appraisal for any action proposed to be taken at the
Annual Meeting.
The solicitation of proxies by the Company is to be made principally by
mail; however, following the initial solicitation, further solicitations may be
made by telephone or oral communication with shareholders. Our officers,
directors and employees may solicit proxies, but these persons will not receive
compensation for that solicitation other than their regular compensation.
Arrangements also will be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to beneficial owners
of the shares held of record by those persons. We may reimburse those persons
for reasonable out-of-pocket expenses incurred by them in so doing. We will pay
all expenses involved in preparing, assembling and mailing this Proxy Statement
and the enclosed material.
THE ANNUAL MEETING OF ARC WIRELESS SOLUTIONS, INC.
Time, Place and Date
The reconvened Annual Meeting will be held on December 16, 2008, starting
at 10:00 a.m. local time, at 10601 West 48th Avenue, I-70 Frontage Road North,
Wheat Ridge, Colorado 80033-2660.
Purpose
At the Annual Meeting, the shareholders of the Company will be asked to
consider and vote upon a proposal (i) to elect a Board of Directors consisting
of three directors; (ii) to ratify the selection of HEIN + Associates LLP to
serve as the Company's certified independent accountants for the year ending
December 31, 2008; and (iii) to transact any other business that properly may
come before the Annual Meeting.
VOTING SECURITIES
The close of business on September 29, 2008 was established as the record
date for the determination of holders of record of the Company's common stock,
$.0005 par value per share (the "Common Stock"), entitled to notice of and to
vote at the Annual Meeting. On the record date, 3,090,838 shares of Common Stock
2
were outstanding and eligible to be voted at the Annual Meeting. Each share,
unless otherwise set forth herein, is entitled to one vote. A majority of the
issued and outstanding shares of Common Stock entitled to vote, represented
either in person or by proxy, constitutes a quorum at any meeting of the
shareholders.
Pursuant to the Company's bylaws and Section 16-10a-725 of the Utah Revised
Business Corporation Act, the quorum that was established at the November
Meeting is deemed to exist for the reconvened December 16, 2008 portion of the
Annual Meeting.
Although the Company had obtained a sufficient number of shareholder votes
to approve all of the proposals presented in the Proxy Statement that the
Company filed with the SEC and mailed to stockholders in early October 2008,
because of the changes in the Board nominees to be voted upon, the Company is
soliciting shareholder votes for the proposals set forth in this Amended Proxy
Statement. If sufficient votes for approval of the matters to be considered at
the December 16, 2008 portion of the Annual Meeting have not been received prior
to December 16, 2008, we intend to postpone or adjourn the Annual Meeting in
order to solicit additional votes. The form of proxy we are soliciting requests
authority for the proxies, in their discretion, to vote the shareholders' shares
with respect to a postponement or adjournment of the Annual Meeting. At any
postponed or adjourned meeting, we will vote any proxies received in the same
manner described in this Amended Proxy Statement with respect to the December
16, 2008 portion of the Annual Meeting.
VOTING PROCEDURES
Votes at the Annual Meeting are counted by an inspector of election. Shares
of stock present in person or represented by proxy, including abstentions
(shares that do not vote with respect to one or more of the matters presented
for shareholder approval), and broker "non-votes," are counted as present and
entitled to vote for purposes of determining whether a quorum exists at the
Annual Meeting. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner. If your shares are held
in the name of a bank, broker or other nominee, you must obtain a proxy,
executed in your favor, from the holder of record, to be able to vote at the
Annual Meeting. At any postponed or adjourned meeting, we will vote any proxies
received in the same manner described in this Proxy Statement with respect to
the original Annual Meeting.
In the election for directors (the "Election of Directors Proposal"), the
three director candidates having the highest number of votes cast in favor of
their election will be elected to the Board of Directors. In addition, a
plurality of the votes present in person or represented by proxy at the Annual
Meeting is required for the ratification of the appointment of the Company's
independent auditors (the "Independent Auditor Proposal").
Only votes "FOR" or "AGAINST" the Election of Directors Proposal and the
Independent Auditor Proposal will affect the outcome. Abstentions are not
counted for purposes of the Election of Directors Proposal or the Independent
Auditor Proposal.
3
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The number of shares beneficially owned includes shares of Common Stock
with respect to which the persons named below have either investment or voting
power. A person is also deemed to be the beneficial owner of a security if that
person has the right to acquire beneficial ownership of that security within 60
days through the exercise of an option or through the conversion of another
security. Except as noted, each beneficial owner has sole investment and voting
power with respect to the Common Stock.
Common Stock not outstanding that is subject to options or other
convertible securities or rights is deemed to be outstanding for the purpose of
computing the percentage of Common Stock beneficially owned by the person
holding such options or other convertible securities or rights, but is not
deemed to be outstanding for the purpose of computing the percentage of Common
Stock beneficially owned by any other person.
The following table summarizes certain information as of November 26, 2008,
except as noted below, with respect to the beneficial ownership of our Common
Stock by each director, by all executive officers and directors as a group, and
by each other person known by us to be the beneficial owner of more than five
percent of our common stock. As of November 26, 2008, 3,090,838 shares of our
Common Stock were issued and outstanding.
Number of Shares Percent
Name and Address of Beneficial Owner Beneficially Owned (1) of Class
------------------------------------ ---------------------- --------
Viktor Nemeth 0
ARC Wireless Solutions, Inc. *
10601 West 48th Ave.
Wheat Ridge, CO 80033
Marco Vega 0
ARC Wireless Solutions, Inc. *
10601 West 48th Ave.
Wheat Ridge, CO 80033
Jason Young 849,369(2)(8) 27.48%
ARC Wireless Solutions, Inc.
10601 West 48th Ave.
Wheat Ridge, CO 80033
Steve C. Olson 9,751 (3) *
ARC Wireless Solutions, Inc.
10601 West 48th Ave.
Wheat Ridge, CO 80033
All officers and directors as a group 859,120 (2)(3)(8)(9) 27.48%
(four persons)
4
Number of Shares Percent
Name and Address of Beneficial Owner Beneficially Owned (1) of Class
------------------------------------ ---------------------- --------
Brean Murray Carret Group, Inc. 429,532 (4) (8) 13.9%
40 West 57th Street, 20th Floor
New York, NY 10019
Hassan Nemazee 419,837 (5) (9) 13.58%
40 West 57th Street, 20th Floor
New York, NY 10019
Randall P. Marx 167,165 (6) 5.4%
1207 St. Andrews Drive
Edmond, OK 73003
Paul J. Rini 358,841 (7) 11.62%
7376 Johnnycake Rd
Mentor, Ohio 44060
* Less than one percent.
(1) "Beneficial ownership" is defined in the regulations promulgated by the
U.S. Securities and Exchange Commission as having or sharing, directly or
indirectly (1) voting power, which includes the power to vote or to direct
the voting, or (2) investment power, which includes the power to dispose or
to direct the disposition, of shares of the common stock of an issuer. The
definition of beneficial ownership includes shares underlying options or
warrants to purchase common stock, or other securities convertible into
common stock, that currently are exercisable or convertible or that will
become exercisable or convertible within 60 days. Unless otherwise
indicated, the beneficial owner has sole voting and investment power.
(2) Consists of 429,532 shares beneficially owned by the Brean Murray Carret
Group, Inc., and 419,837 shares beneficially owned by Hassan Nemazee as
reported as of November 3, 2008. Mr. Young shares voting and investment
power over the shares beneficially owned by the Brean Murray Carret Group,
Inc. and Mr. Nemazee.
(3) Consists of 1,751 shares in Mr. Olson's ARC Wireless 401(k) account and
options to purchase 8,000 shares at $5.41 per share until September 21,
2017, granted under the 2007 Stock Incentive Plan which are currently
exercisable.
(4) Consists of 429,532 shares beneficially owned by the Brean Murray Carret
Group, Inc. ("Brean"). Mr. Young, the Company's Chief Executive Officer and
Chairman of the Board, serves as a representative of Brean and he holds
voting and investment power over these shares.
(5) Consists of 242,134 shares owned by Mr. Nemazee individually, 173,653
shares owned by NCC Limited, 2,950 shares held by Telnem Holdings LLC and
1,100 shares held by Nemazee Capital Corporation. Mr. Nemazee is the sole
shareholder, sole director and sole officer of each of NCC Limited and
Nemazee Capital Corporation, and the sole managing member of Telnem
Holdings LLC. Mr. Young, the Company's Chief Executive Officer and Chairman
of the Board, serves as a representative of Mr. Nemazee and he holds voting
and investment power over these shares.
(6) Includes 163,816 shares directly held by Randy Marx, the Company's former
Chief Executive Officer and Chairman of the Board, 1,980 shares in his ARC
Wireless 401(k) account, 800 shares held by his spouse's IRA and 570 shares
owned beneficially through a 50% ownership of an LLC. This does not include
2,170 shares owned by the Harold and Theora Marx Living Trust, of which Mr.
Marx's father is the trustee, as Mr. Marx disclaims beneficial ownership of
these shares. This also does not include 3,100 shares owned by Warren E.
Spencer Living Trust, of which Mr. Marx's mother-in-law is trustee, as Mr.
Marx disclaims beneficial ownership of these shares.
(7) Consists of shares owned by Mr. Paul J. Rini as reported on October 10,
2008.
(8) The shares owned by the Brean Murray Carret Group, Inc. ("Brean") are
included three times in the table. In addition to being shown as owned by
Brean, these shares are included as being beneficially owned by Jason Young
and by all officers and directors as a group.
(9) The shares owned by Hassan Nemazee are included three times in the table.
In addition to being shown as owned by Mr. Nemazee, these shares are
included as being beneficially owned by Jason Young and by all officers and
directors as a group.
5
PROPOSAL 1. ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect three directors to serve
as our Board of Directors. Each director will be elected to hold office until
the next annual meeting of shareholders. The affirmative vote of a plurality of
the shares represented at the meeting is required to elect each director.
Cumulative voting is not permitted in the election of directors. Each record
holder of stock shall be entitled to vote in the election of directors and shall
have as many votes for each of the shares owned by him or her as there are
directors to be elected and for whose election he or she has the right to vote.
As a result, a shareholder may vote all of his or her shares for each nominee,
but may not cumulate the votes to vote more than the total number of shares
owned for any one nominee. In the absence of instructions to the contrary, the
person named in the accompanying proxy shall vote the shares represented by that
proxy for the persons named below as the Board's nominees for directors. Each of
the nominees currently is a director of the Company.
Each of the nominees has consented to be named in this Proxy Statement and
to serve on the Board of Directors if elected. It is not anticipated that any of
the nominees will become unable or unwilling to accept his nomination or
election, but, if that should occur, the persons named in the proxy intend to
vote for the election of such other person as the Board of Directors may
recommend.
The following table sets forth, with respect to each nominee for director,
the nominee's age, his position(s) and office(s) with the Company, the
expiration of his term as a director, and the year in which he first became a
director. Individual background information concerning each of the nominees
follows the table. For additional information concerning the nominees, see
"Executive Compensation," "Security Ownership of Certain Beneficial Owners and
Management," and "Certain Transactions with Management and Principal
Shareholders."
Expiration of Initial Date
Name Age Position with the Company Term as Director as Director
---- --- ------------------------- ---------------- -----------
Viktor Nemeth 33 Director Next Annual Meeting Appointed to the
Audit Committee Member Board: November
Compensation Committee Member 2008
Marco Vega 39 Director Next Annual Meeting Appointed to the
Board: November
2008
Jason Young 30 Chief Executive Officer Next Annual Meeting Appointed to the
Chairman of the Board Board: October
2008
Viktor Nemeth. Mr. Nemeth became a Director in November 2008, and he
currently serves on the Company's Audit Committee and the Company's Compensation
Committee. Between January 2008 and October 2008, Mr. Nemeth served as the Chief
Revenue Officer of Bid4Spots.com, Inc., an entity that hosts weekly online
auctions of radio airtime to allow advertisers and broadcasters to transact
unsold airtime. From March 2000 through December 2007, Mr. Nemeth worked for
Yahoo Inc. and predecessor companies Overture Services and GoTo.com in a variety
of corporate development, business development, and sales & marketing roles. Mr.
Nemeth holds a BA in Business-Economics with a Minor in Accounting from UCLA.
6
Marco Vega. Mr. Vega became a Director in November 2008. Since March 2003,
Mr. Vega has been the Chief Operating Officer of Carret Asset Management, LLC,
where he is responsible for the accounting, operations and compliance functions
of the SEC registered investment advisor. Mr. Vega formerly served as the
President of Carret Securities LLC, and he now serves on the Board of Advisors
to Brean Murray Carret & Co., LLC, a boutique investment bank. Mr. Vega
frequently serves in active management-or director-level roles. Because of his
employment by Carret Asset Management, LLC, which is under common control with
the Brean Murray Carret Group, Inc., Mr. Vega is deemed to be under control of
the Brean Murray Carret Group, Inc. Mr. Vega holds a BS in accounting and an MBA
from St. John's University.
Jason Young. Mr. Young became a Director in October 2008, and he became
Chairman of the Board and Chief Executive Officer of the Company in November
2008. Since 2005, Mr. Young has been a Managing Director at Quadrant Management,
Inc., where he is responsible for making investments in US and emerging market
companies, where he frequently serves in active Management or Director level
roles. He has been an Investment Committee Member of the Carret Global India
Fund of Hedge Funds since 2005. In 2008 Mr. Young became a member of the
Investment Committee of the Vanterra Advantage Fund. From 2000 to 2005, Mr.
Young worked for Merrill Lynch in the Investment Banking Group and later in the
Global Principal Investment Group. In 1999, he was an Analyst at Helicon Capital
Management, a hedge fund and private equity investment firm. He holds a BA in
International Economics from UCLA. Because of his employment with Quadrant
Management, Inc., which is under common control with the Brean Murray Carret
Group, Inc., Mr. Young is deemed to be under control of the Brean Murray Carret
Group, Inc.
Required Vote
The three director candidates having the highest number of votes cast in
favor of their election will be elected to the Board of Directors.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ELECTION OF THE THREE NOMINEES NAMED ABOVE.
INFORMATION REGARDING OTHER EXECUTIVE OFFICERS
Other Executive Officers
The following table sets forth with respect to each other executive
officer, the officer's age, the officer's position(s) and office(s) with the
Company, the expiration of his term as an officer and the period during which he
has served.
Initial Date as
Name Age Position with the Company Officer
---- --- ------------------------- -------
Steven C. Olson 52 Chief Technology Officer 2001
7
Steven C. Olson. Mr. Olson serves as our Chief Technology Officer. Prior to
joining the Company in August 2001, Mr. Olson was employed at Ball Aerospace for
14 years, including the last five years as Director of Engineering for Ball's
Wireless Communications Solutions Division. In this capacity Mr. Olson led the
development of new technologies, resulting in industry leading antenna solutions
for the wireless communications market. Before the Ball Wireless Communications
unit was formed, Mr. Olson developed Ball's high performance, low cost
AirBASE(R) antenna technology, specifically for use in its future commercial
wireless business. He received his Bachelors and Masters of Science degrees in
Electrical Engineering from the University of Utah in 1984 and 1985,
respectively.
Mr. Olson serves at the pleasure of the Board of Directors. There are no
family relationships among our officers and directors.
Board Meetings
The Board of Directors met seven times during the fiscal year ended
December 31, 2007, and each director participated in at least 75% of the
meetings. The Board of Directors does not maintain a formal policy regarding the
manner in which shareholders may communicate with the Board.
The Company encourages each member of the Board of Directors to attend the
Annual Meeting Of Shareholders, but does not require any member to do so. All
four of the then-incumbent directors attended the Company's Annual Meeting of
Shareholders for the fiscal year ended December 31, 2007, held on September 17,
2007, and all five of the then-incumbent directors attended the initial
convening of this Annual Meeting of Shareholders on November 5, 2008.
Board Independence
Mr. Nemeth qualifies as an "independent director" as defined under NASDAQ
Marketplace Rule 4200. The NASDAQ independence definition includes a series of
objective tests. For example, an independent director may not be employed by us
and may not engage in certain types of business dealings with the Company. In
addition, as further required by NASDAQ rules, the Board has made a subjective
determination as to Mr. Nemeth that no relationship exists that, in the opinion
of the Board, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. In making this determination,
the Board reviewed and discussed information provided by Mr. Nemeth and by the
Company with regard to Mr. Nemeth's business and personal activities as they may
relate to us and our management. In addition, as required by NASDAQ rules, the
Board determined that Mr. Nemeth, as a member of the Audit Committee, qualifies
as "independent" under special standards established by NASDAQ and the SEC for
members of audit committees. Messrs. Young and Vega are not deemed to be
independent because each of them is employed by an entity that is under common
control with the Brean Murray Carret Group, Inc., which is a control person of
the Company.
8
Committees of the Board of Directors
The Company has standing audit and compensation committees of the Board of
Directors. The Company does not currently have a standing nominating committee
of the Board of Directors because it believes that the nominating functions
should be relegated to the full board.
Audit Committee
The Company's audit committee (the "Audit Committee") currently consists of
Viktor Nemeth, and the Company intends to appoint two additional independent
directors to the Board who will also serve on the Audit Committee in the near
future. The responsibilities of the Audit Committee include overseeing our
financial reporting process, reporting the results of its activities to the
Board of Directors, retaining and ensuring the independence of our auditors,
approving services to be provided by our auditors, reviewing our periodic
filings with the independent auditors prior to filing, and reviewing and
responding to any matters raised by the independent auditors in their management
letter. The Board of Directors intends to appoint one person to the Audit
Committee who qualifies as an "audit committee financial expert," as that term
is defined by the Securities and Exchange Commission, in the near future. The
Audit Committee that existed during the fiscal year ended December 31, 2007
consisted of three independent directors, and it met one time during the fiscal
year ended December 31, 2007. Our Board of Directors has adopted a written
charter for the Audit Committee and will review and assess the adequacy of the
audit committee charter annually.
Audit Committee Report
Management is responsible for the Company's internal controls and financial
reporting process. The independent auditors are responsible for performing an
independent audit of the Company's financial statements in accordance with
auditing standards generally accepted in the United States of America and to
issue a report thereon. The Audit Committee's responsibility is to monitor and
oversee these processes and to engage and discharge the Company's auditors. It
is not our duty or our responsibility to conduct auditing or accounting reviews
or procedures. We may not be, and we may not represent ourselves to be or to
serve as, accountants or auditors by profession or experts in the fields of
accounting or auditing. Therefore, we have relied, without independent
verification, on management's representation that the financial statements have
been prepared with integrity and objectivity and in conformity with accounting
principles generally accepted in the United States of America, and on the
representations of the independent auditors included in the report on the
Company's financial statements. Our oversight does not provide us with an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or policies, or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, our considerations
and discussions with management and the independent auditors do not assure that
the Company's financial statements are presented in accordance with generally
accepted accounting principles, that the audit of the Company's financial
statements has been carried out in accordance with generally accepted auditing
standards, or that the Company's independent accountants are in fact
"independent."
In this context, the Audit Committee has met and held discussions
separately with management and the independent accountants. Management
represented to the Audit Committee that the Company's financial statements were
prepared in accordance with accounting principles generally accepted in the
9
United States of America, and the Audit Committee has reviewed and discussed the
financial statements with management and the independent accountants. The Audit
Committee discussed with the independent accountants matters required to be
discussed by the Statement on Auditing Standards No. 61, Communications with
Audit Committees, as currently in effect.
The Company's independent accountants also provided to the Audit Committee
the written disclosure required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees. The Committee discussed with the
independent accountants that firm's independence and considered whether the
non-audit services provided by the independent accountants are compatible with
maintaining its independence.
Based on the Audit Committee's discussion with management and the
independent accountants, and the Audit Committee's review of the representations
of management and the report of the independent accounts to the Audit Committee,
the Audit Committee recommended that the Board of Directors include the audited
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2007 filed with the Securities and Exchange Commission.
Submitted by the Audit Committee of the Company's Board of Directors in
place at December 31, 2007:
Sigmund A. Balaban, Chairman
Robert E. Wade
Donald A. Huebner
December 31, 2007
Compensation Committee
The Compensation Committee (the "Compensation Committee") of the Board of
Directors currently consists of Viktor Nemeth, who is an independent director,
and the Company intends, in the near future, to add at least one additional
independent director to the Board who also will serve on the Compensation
Committee. During the fiscal year ended December 31, 2007, the Board had a
Compensation Committee consisting of three independent directors, and during the
fiscal year ended December 31, 2007, the Compensation Committee met three times.
The Compensation Committee is responsible for overseeing the Company's
compensation programs and policies, and the Compensation Committee's processes
and procedures for the consideration and determination of executive and director
compensation is more fully discussed below under "Compensation Discussion and
Analysis."
Nominating Committee: Nominating Policies and Procedures
The Company does not currently have a standing nominating committee of the
Board of Directors because it believes that the nominating functions should be
relegated to the full Board.
10
On June 30, 2008 the Board of Directors amended and restated its Policies
and Procedures for Nominations of Director Candidates (the "Nomination
Policies"), which are attached hereto as Appendix B, that must be followed
beginning on January 1, 2009. It is the policy of the Board of Directors that
each candidate recommended for nomination and election to the Board (each, a
"Nominee"), regardless of whether such Nominee is recommended by a shareholder
of the Company, the Board or any other person, shall be approved by a majority
of the independent directors of the Board.
In general, the Board believes that certain minimum qualifications must be
met by each Nominee for the Board, as well as meeting the applicable
independence standards required by the Securities Exchange Commission (the
"SEC") and federal securities laws. The Board believes that Nominees must
reflect a Board that is comprised of directors (i) a majority of whom are
independent (as determined under the aforementioned SEC director qualification
standards); (ii) who are of high integrity; (iii) who have qualifications that
will increase the overall effectiveness of the Board; and (iv) who meet other
requirements as may be required by applicable rules, such as financial literacy
or financial expertise with respect to Audit Committee members. In evaluating
the qualifications of the Nominees, the Board considers many factors, including
issues of leadership ability, career success, character, judgment, independence,
background, age, expertise, diversity and breadth of experience, length of
service, other commitments and the like. The Board evaluates such factors, among
others, and does not assign any particular weight or priority to any of these
factors. Also, the Board considers the suitability of each Nominee, including
the current members of the Board, in light of the current size and composition
of the Board.
Unless and until otherwise subsequently determined by the Board, the number
of directors of the Company at any time shall be the number of directors that
the Board nominated for election at the most recently-held annual meeting of
shareholders, increased by the number of directors, if any, that the Board
appointed subsequent to the most recently-held annual meeting of shareholders
and also increased by the number of directors, if any, whose term as a director
did not expire at the most recently-held annual meeting of shareholders.
The Board shall consider recommendations for Nominees to the Board from
shareholders (an "Eligible Shareholder") holding a minimum of $2,000 in market
value, or 1%, of the Company's voting common stock, which stock is held through
the date of the meeting electing directors, and which Eligible Shareholder
complies with the nomination notice procedures set forth in the Nomination
Policies. Nominees recommended by Eligible Shareholders (hereinafter referred to
as "Shareholder Candidates") will be evaluated by the Board on the same basis as
Nominees that may be identified by the Board, management or, if the Board
permits, a search firm.
For a Shareholder Candidate to be considered by the Board, the Eligible
Shareholder and the Shareholder Candidate must comply with the procedures set
forth in the Nomination Policies. Recommendations for Shareholder Candidate(s)
to the Board of Directors from an Eligible Shareholder must be directed in
writing to ARC Wireless Solutions, Inc., Attn: Executive Vice-President, at the
Company's principal offices at 10601 West 48th Avenue, I-70 Frontage Road North,
Wheat Ridge, Colorado 80033-2660. The specific recommendations should include
the information set forth in the Nomination Policies, which are attached hereto
as Appendix B and incorporated herein by reference.
11
For a Shareholder Candidate recommendation to be properly brought before
the Board by an Eligible Shareholder, regardless of whether the Eligible
Shareholder (i) is seeking to have the Shareholder Candidate included in the
Company's proxy statement, (ii) intends to prepare and distribute its own proxy
statement, or (iii) intends to nominate the Shareholder Candidate at a meeting,
the Eligible Shareholder must submit the information and documentation described
above for receipt by the Executive Vice-President of the Company in a timely
manner, with "timely" determined as set forth in the next succeeding sentence
herein. To be timely, an Eligible Shareholder's notice must be received at the
Company's principal office not less than 120 calendar days before the date that
the Company's proxy statement or notice thereof was first mailed to shareholders
in connection with the previous year's annual meeting; provided, however, that
in the event (i) the Company did not hold an annual meeting in the previous
year, (ii) the date of the annual meeting has been changed by more than 30 days
from the date of the previous year's meeting, or (iii) the meeting is a special
meeting called in the manner set forth in the Company's bylaws, then notice by
the Eligible Shareholder, to be timely, must be delivered to the Company not
later than the 10th day following the day on which a public announcement of the
date of such meeting is first made.
The Chief Executive Officer of the Company will provide a copy of the
Bylaws and/or the Nomination Policies upon a request in writing from the
Eligible Shareholder.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Act of 1934, as amended (the "Exchange
Act") requires our directors, executive officers and holders of more than 10% of
our common stock to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of ours. We believe that during the year ended December
31, 2007, our officers, directors and holders of more than 10% of our common
stock complied with all Section 16(a) filing requirements. In making these
statements, we have relied upon the written representation of our directors and
officers and our review of the monthly statements of changes filed with us by
our officers and directors.
Corporate Governance Documents
On the Company's Corporate Governance web page at
www.arcwireless.net/investor_relations, shareholders can see the Company's Audit
Committee Charter, Compensation Committee Charter and Amended and Restated Code
of Ethics for members of the Board of Directors, officers and employees. Copies
of these documents, as well as additional copies of our Annual Report on Form
10-K for the fiscal year ended December 31, 2007, are available to shareholders
without charge upon request to the Chief Executive Officer at the Company's
principal address.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis addresses the aspects of our
compensation programs as of December 31, 2007, and explains our compensation
philosophy, policies and practices with respect to our named executive officers,
including our chief executive officer, chief financial officer, executive
vice-president and chief technology officer, which we collectively refer to as
our named executive officers, or NEOs, as of December 31, 2007.
12
Oversight of Executive Compensation Program
The Compensation Committee of our Board of Directors oversees our executive
compensation programs. Each member of the Compensation Committee is an
"independent director" as defined by the federal securities laws and in Rule
4200(a)(14) of the Nasdaq Stock Market, Inc. The Compensation Committee met
three times during 2007, and works closely with executive management, primarily
our chief executive officer ("CEO"), in assessing compensation levels. The
Compensation Committee is empowered to advise management and make
recommendations to the Board of Directors with respect to the compensation and
other employment benefits of executive officers and key employees of the
Company. The Compensation Committee also administers the Company's compensation
plans for executive officers and employees.
The Compensation Committee regularly reviews the Company's compensation
programs to ensure that remuneration levels and incentive opportunities are
competitive and reflect performance. Factors taken into account in assessing the
compensation of individual officers include the officer's performance and
contribution to the Company, experience, strategic impact, external equity or
market value, internal equity or fairness, and retention priority. The various
components of the compensation programs for executive officers are discussed
below in Elements of Executive Compensation Program.
Objectives of Executive Compensation and What the Programs are Designed to
Reward
The Company's executive compensation program is designed to integrate
compensation with the achievement of our short-term and long-term business
objectives and to assist us in attracting, motivating and retaining the highest
quality executive officers and rewarding them for superior performance.
Different programs are geared to short-term and longer-term performance with the
goal of increasing stockholder value over the long term.
We believe that the compensation of our executive officers should reflect
their success in attaining key operating objectives, such as growth or
maintenance of market position, development of new products and marketplaces,
meeting established goals for operating earnings and earnings per share,
maintenance and development of customer relationships and long-term competitive
advantage. We also believe that executive compensation should reflect
achievement of individual goals established for specific executive officers, as
well as specific achievements by such individuals over the course of the year
such as development of specific products or customer relationships or agreements
or executing or integrating acquisitions and strategic arrangements. We believe
that the performance of the executives in managing our Company, considered in
light of general economic and specific Company, industry and competitive
conditions, should be the basis for determining their overall compensation. We
also believe that their compensation should not generally be based on the
short-term performance of our stock, whether favorable or unfavorable, but
rather that the price of our stock will, in the long-term, reflect our operating
performance, and ultimately, the management of the Company by our executives.
Compensation Consultants
In determining competitive levels of compensation, the Compensation
Committee considers publicly available information regarding the compensation of
executive officers of other comparable U.S. investor-owned companies and
13
information available from studies periodically performed by compensation
consultants engaged by the Company. The Compensation Committee also considers
recommendations made by the CEO regarding compensation for other NEOs and key
employees.
Elements of Executive Compensation Program
Compensation elements include:
o base salary;
o annual cash or equity incentive awards;
o long-term equity incentive compensation; and
o other health, welfare and pension benefits.
Base Salary
Base salary is designed to provide competitive levels of base compensation
to our executives based on their experience, duties and scope of
responsibilities. We pay base salaries because it provides a base compensation
that is required to recruit and retain executives of the quality that we must
employ to ensure the success of our Company. Our executive base salaries are
typically adjusted in accordance with the NEO's employment agreement on an
annual basis.
Annual Cash or Equity Incentive Awards
Annual incentive compensation is designed to provide competitive levels of
compensation based on experience, duties and scope of responsibilities.
Incentive awards are influenced by the Company's profitability and achievement
of planned profitability, as well as other factors. The Compensation Committee
uses the annual incentive compensation to motivate and reward the NEOs for the
achievement and over-performance of our critical financial and strategic goals.
Long-Term Equity Incentive Compensation
Long-term equity awards were granted to our executives from our 1997 Stock
Option and Compensation Plan (the "1997 Plan"), until September 2007, when the
shareholders of the Company approved the new 2007 Stock Incentive Plan (the
"2007 Plan"). The Compensation Committee granted awards under the 1997 Plan and
the 2007 Plan in order to align the interests of the NEOs with our stockholders,
and to motivate and reward the NEOs to increase the stockholder value of the
Company over the long-term. The Compensation Committee does not have a regular
schedule for awarding equity-based compensation, and the timing of such awards
is subject to the discretion of the Compensation Committee but generally is
awarded as part of entering into employment agreements. We do not backdate
options or grant options retroactively or stock options with a so-called
"reload" feature. In addition, we do not plan to coordinate grants of options so
that they are made before the announcement of favorable information, or after
the announcement of unfavorable information. Compensation paid to each executive
officer, including a stock bonus, was based on the Compensation Committee's
review and consideration of aggregate levels of compensation paid to executives
of comparable companies and the individual qualitative contributions and
performance of each executive officer. In 2007, the Compensation Committee
issued a stock option award of 40,000 shares to Steve C. Olson, our Chief
Technology Officer.
14
Other Health, Welfare and Retirement Benefits
Health and Welfare Benefits
All full-time employees, including our NEOs, may participate in our health
and welfare benefit programs, including medical, dental and vision care
coverage, disability insurance and life insurance. We provide these benefits to
meet the health and welfare needs of employees and their families.
Retirement Benefits
Our employees, including the NEOs, are eligible to participate in our
401(k) contributory defined contribution plan ("401(k) Plan"). Each employee may
make before-tax contributions of up to 25% of their base salary up to current
Internal Revenue Service limits. We provide this plan to help our employees save
some amount of their cash compensation for retirement in a tax efficient manner.
The Company may make discretionary matching contributions, however in 2006 the
Company did not provide participants with a matching contribution. Commencing
January 1, 2007, the Company amended its 401(k) Plan to make a Safe Harbor
Contribution of 3% of a participant's cash compensation.
Pension Benefits and Nonqualified Deferred Compensation
We do not currently provide pension arrangements or post-retirement health
coverage for our executives or employees, although we may consider such benefits
in the future. In addition, we do not provide any nonqualified defined
contribution or other deferred compensation plans, although we may consider such
benefits in the future.
Employment Agreements and Other Post-Employment Payments
As of December 31, 2007, all of our NEOs were parties to employment
agreements, which provided for salaries and certain bonus payments as well as
rights to certain payments upon termination without cause. These employment
agreements also have change of control provisions that would require payments in
the event of termination of employment, which are described in greater detail
below.
Tax Implications of Executive Compensation
We do not currently intend to award compensation that would result in a
limitation on the deductibility of a portion of such compensation pursuant to
Section 162(m) of the Internal Revenue Code of 1986, as amended, other than
awards that may be made under the 2007 Plan; however, we may in the future
decide to authorize other compensation in excess of the limits of Section 162(m)
if we determine that such compensation is in the best interests of the Company.
Although deductibility of compensation is preferred, tax deductibility is not a
primary objective of our compensation programs. We believe that achieving our
compensation objectives set forth above is more important than the benefit of
tax deductibility and we reserve the right to maintain flexibility in how we
compensate our executive officers that may result in limiting the deductibility
of amounts of compensation from time-to-time.
15
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis with management and, based on the review and
discussions, the Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2007.
Chairman Robert E. Wade
Sigmund A. Balaban
Donald A. Huebner
December 31, 2007
Summary Compensation Table for 2007
Change in
Pension Value
and
Nonqualified
Non-Equity Deferred
Stock Option Incentive Plan Compensation All Other
Name and Principal Salary Bonus Awards Awards Compensation Earnings Compensation Total
Position Year ($) ($) ($) (1) ($) (1) ($) ($) ($) ($)
------------------ ---- ------ ----- ------ ------ ------------ -------- ------------ -----
Randall P. Marx, 2007 250,000 25,000 - - - - 8,250 283,250
Former Chairman, Chief 2006 245,000 - - - - - - 245,000
Executive Officer,
Secretary (2)
Monty R. Lamirato, 2007 160,000 - - - - - 4,800 164,800
Chief Financial Officer, 2006 155,000 - - - - - - 155,000
Treasurer (3)
Steven C. Olson, 2007 200,000 7,500 - 6,000 - - 6,225 219,725
Chief Technology Officer 2006 175,000 - - - - - - 175,000
Richard L. Anderson, 2007 120,000 - - - - - 3,750 123,750
Executive Vice President (4)
----------
(1) The amounts in these columns reflect the dollar amounts recognized in each
of 2007 and 2006 for financial statement reporting purposes in accordance
with FAS 123R with respect to stock awards and stock options granted in
each such year, and the dollar amount required to be recognized in each
such year in accordance with FAS 123R. These options were granted pursuant
to the 2007 Stock Incentive Plan described above.
(2) Mr. Marx resigned from his position as Chairman of the Board on November
12, 2008, and from his positions as Chief Executive Officer and Secretary
on November 18, 2008. In connection with his resignation, Mr. Marx and the
Company executed a separation agreement pursuant to which Mr. Marx will be
paid $327,500 through December 31, 2009, and he will receive health
benefits from the Company through December 31, 2009, as payment for all
compensation and other benefits to which he otherwise would have been
entitled under his January 31, 2008 employment agreement. Mr. Marx also
agreed to provide telephonic consulting services to the Company.
16
(3) Mr. Lamirato resigned from his positions as Chief Financial Officer and
Treasurer of the Company on November 26, 2008. In connection with his
resignation, Mr. Lamirato and the Company executed a separation agreement
pursuant to which Mr. Lamirato will be paid $115,000 through May 26, 2009
for all compensation and benefits to which he otherwise would have been
entitled under his November 7, 2007 employment agreement. Under the terms
of this agreement, Mr. Lamirato agreed to provide reasonable consulting
services to the Company through October 31, 2009.
(4) Mr. Anderson resigned from his position as Executive Vice President on
November 26, 2008. In connection with his resignation, Mr. Anderson and the
Company executed a separation agreement pursuant to which Mr. Anderson will
be paid $120,000 through May 26, 2009, and he will receive health benefits
from the Company through June 30, 2009, as payment for all compensation and
other benefits to which he otherwise would have been entitled under his
November 7, 2007 employment agreement. Mr. Anderson also agreed to provide
reasonable consulting services to the Company through December 31, 2009.
Grants of Plan-Based Awards Table
All Other All Other
Stock Option
Awards: Awards: Exercise
Estimated Future Payouts Under Number of Number of or Base
Equity Incentive Plan Awards Shares of Securities Price of Grant Date
---------------------------------- Stock or Underlying Option Fair Value
Name and Principal Threshold Target Maximum Units Options Awards of Awards
Position Grant Date ($) ($) ($) (#) (#) ($/Sh) ($)
------------------ ---------- --------- ------ ------- ----- ------- ------ ---------
Randall P. Marx,
Former Chairman,
Chief Executive
Officer, Secretary (2) - - - - - - - -
Monty R. Lamirato,
Chief Financial
Officer, Treasurer (3) - - - - - - - -
Steven C. Olson,
Chief Technology
Officer 9/21/07 - - - - 40,000 (1) $5.40 $134,000
----------
(1) These options were granted pursuant to the 2007 Stock Incentive Plan.
(2) Mr. Marx resigned from his position as Chairman of the Board on November
12, 2008, and from his positions as Chief Executive Officer and Secretary
on November 18, 2008.
(3) Mr. Lamirato resigned from his positions as Chief Financial Officer and
Treasurer of the Company on November 26, 2008.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information on outstanding option and stock
awards held by the NEOs as of December 31, 2007, including the number of shares
underlying both exercisable and unexercisable portions of each stock option as
well as the exercise price and the expiration date of each outstanding option.
17
Option Awards Stock Awards
----------------------------------------------------------------------------- ----------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
---- ----------- ------------- ------- ----- ---------- ---------- ---------- ---------- ----------
Equity
Incentive
Equity Plan
Incentive Awards:
Equity Plan Market or
Incentive Awards: Payout
Plan Number of Value of
Awards: Market Unearned Unearned
Number of Value of Shares, Shares,
Number of Number of Securities Number of Shares or Units or Units or
Securities Securities Underlying Shares or Units of Other Other
Underlying Underlying Unexercised Option Units of Stock Rights Rights
Unexercised Unexercised Unearned Exercise Option Stock That Have That Have That Have
Options (#) Options (#) Options Price Expiration That Have Not Vested Not Not Vested
Name Exercisable Unexercisable (#) ($) Date Not Vested ($) Vested (#) ($)
---- ----------- ------------- ------- ----- ---------- ---------- ---------- ---------- ----------
Randall P.
Marx (b) - - - - - - - -
Monty R.
Lamirato (c) - - - - - - - -
Steven C.
Olson 8,000 (a) 32,000 (a) - $5.40 9/21/2017 - - -
----------
(a) These options were granted pursuant to the 2007 Stock Incentive Plan. The
options vests at a rate of 20% per year with vesting dates of 12/31/07,
12/31/08, 12/31/09, 12/31/10, 12/31/11. These total 40,000 options are
reported in the Summary Compensation and the Grants of Plan Based Awards
Tables.
(b) Mr. Marx resigned from his position as Chairman of the Board on November
12, 2008, and from his positions as Chief Executive Officer and Secretary
on November 18, 2008.
(c) Mr. Lamirato resigned from his positions as Chief Financial Officer and
Treasurer of the Company on November 26, 2008.
Director Compensation for the Year Ended December 31, 2007
The table below summarizes the compensation paid by the Company to
non-employee directors for the year ended December 31, 2007:
18
Director Compensation for the Year Ended December 31, 2007
Change in
Pension Value
and
Non-Equity Nonqualified
Fees Stock Option Incentive Plan Deferred All Other
Earned Cash Awards Awards Compensation Compensation Compensation Total
Name (4) ($) ($) (2) ($) (3) ($) Earnings ($) ($)
-------- ----------- ------ ------ ------------ ------------ ------------ -----
Randall P. Marx (1) - - - - - -
Sigmund A. Balaban 30,000 - 6,500 - - - 36,500
Robert E. Wade 4,500 15,000 6,500 - - - 26,000
Donald A. Huebner 7,750 - 4,900 - - - 12,650
----------
(1) Randall P. Marx was serving as the Company's Chairman of the Board, Chief
Executive Officer and Secretary as of the fiscal year ended December 31,
2007 and therefore did not receives any compensation for his services as a
director. The compensation received by Mr. Marx as an employee of the
Company is shown in the Summary Compensation Table.
(2) Reflects the dollar amount recognized and expensed for financial statement
reporting purposes for the year ended December 31, 2007 in accordance with
FAS 123R, and thus may include amounts from awards granted in and prior to
2007. For Mr. Wade, the amount represents the Director fees earned that
were paid by issuance of common stock at fair market value rather than
cash.
(3) Reflects the dollar amount recognized for financial statement reporting
purposes for the year ended December 31, 2007 in accordance with FAS 123R,
and thus includes amounts from options granted in and prior to 2007. In
2007, the fair value of the awards granted to each director was as follows:
Sigmund A. Balaban: $4,400; Robert E. Wade: $4,400; Donald A Huebner:
$6,500. For more information used in the calculations of these amounts, see
Note 1 to our audited consolidated financial statements for the year ended
December 31, 2007, included in our Form 10-K for the fiscal year ended
December 31, 2007. As of December 31, 2007, each director had the following
number of options outstanding: Sigmund A. Balaban: 4,500; Robert E. Wade:
4,500; and Donald A. Huebner: 2,000.
(4) Each of Messrs. Marx, Balaban, Wade and Huebner resigned from their
positions as directors on November 12, 2008.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was an officer or former officer of
the Company or had any material relationship or transactions with the Company
and no officer of the Company sits on the compensation committee or other body
that has the power to establish the compensation of any member of the
Compensation Committee.
2007 Stock Incentive Plan
The following paragraphs provide a summary of the principal features of the
2007 Plan and its operation.
Shares Available for Issuance
-----------------------------
The 2007 Plan provides that no more than 300,000 shares of our common stock
may be issued for awards. If there is any change in the Company's common stock
by reason of any stock exchange, merger, consolidation, reorganization,
19
recapitalization, stock dividend, reclassification, split-up, combination of
shares or otherwise, then the Board, or any Option Committee, shall make
proportionate adjustments to the maximum number and kind of securities (i)
available for issuance under the 2007 Plan; (ii) available for issuance as
incentive stock options or non-qualified stock options; (iii) that may be
subject to awards received by any participant; (iv) that may be subject to
different types of awards; (v) that are subject to any outstanding award; and
(vi) the price of each security.
The 2007 Plan provides that shares covered by an award will not count
against the shares available for issuance under the 2007 Plan until they are
actually issued and delivered to a participant. If an award granted under the
2007 Plan lapses, expires, terminates or is forfeited, surrendered or canceled
without having been fully exercised or without the issuance of all the shares
subject to the award, the shares covered by such award will again be available
for use under the 2007 Plan.
Eligibility
-----------
Awards may be made to any employee, officer, director of the Company and
its related companies or other persons who provide services to the Company and
its related companies.
Administration
--------------
The 2007 Plan will be administered by the Option Committee, which shall
consist of the Board or a committee of the Board as the Board may from time to
time designate.
Types of Awards
---------------
Stock Options. The Option Committee may grant either incentive stock
options, which comply with Section 422 of the Internal Revenue Code, or
nonqualified stock options. The Option Committee sets option exercise prices and
terms, except that the exercise price of an incentive stock option may be no
less than 100% of the fair market value of the shares on the date of grant. At
the time of grant, the Option Committee in its sole discretion will determine
when stock options are exercisable and when they expire, except that the term of
a stock option cannot exceed ten years.
Restricted Stock Awards. The Option Committee may grant awards of
restricted stock under the 2007 Plan. These shares may be subject to
restrictions on transferability, risk of forfeiture and other restrictions as
determined by the Option Committee. As a condition to a grant of an award of
restricted stock, the Option Committee may require or permit a participant to
elect that any cash dividends paid on a share of Restricted Stock be
automatically reinvested in additional shares of restricted stock or applied to
the purchase of additional awards under the 2007 Plan. Unless otherwise
determined by the Option Committee, stock distributed in connection with a stock
split or stock dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent as
restricted stock with respect to which such stock or other property has been
distributed.
Restricted Stock Unit Awards. The Option Committee may grant awards of
Restricted Stock Units under the 2007 Plan. A "Restricted Stock Unit" is a grant
valued in terms of common stock, but common stock is not issued at the time of
grant. After participants who receive awards of Restricted Stock Units satisfy
20
applicable vesting requirements, the Company will distribute shares or the cash
equivalent of the number of shares used to value the Unit. If the participant
does not meet the requirements prior to the end of the vesting period, the Units
will be forfeited to the Company. Vesting requirements may be met by the passage
of time or by either Company or individual performance. Restricted Stock Units
shall be subject to such restrictions (which may include a risk of forfeiture)
as determined by the Option Committee, which restrictions may lapse at the
expiration of the deferral period or at other times determined by the Option
Committee.
Amendment and Termination of the 2007 Plan
------------------------------------------
The Board of Directors or the Option Committee may amend, alter or
discontinue the 2007 Plan, except that if any applicable statute, rule or
regulation requires shareholder approval with respect to any amendment of the
2007 Plan, then to the extent so required, shareholder approval will be
obtained. No amendment may impair the right of a participant under an
outstanding agreement. As proposed, the 2007 Plan would terminate on August 2,
2017.
Federal Income Tax Consequences
-------------------------------
The following is a summary of the material United States federal income tax
consequences to us and to recipients of certain awards under the 2007 Plan. The
summary is based on the Internal Revenue Code and the U.S. Treasury regulations
promulgated thereunder in effect as of the date of this Proxy Statement, all of
which may change with retroactive effect. The summary is not intended to be a
complete analysis or discussion of all potential tax consequences that may be
important to recipients of awards under the 2007 Plan.
Nonqualified Stock Options. A recipient will not have any income at the
time a nonqualified stock option is granted, nor will the Company be entitled to
a deduction at that time. When a nonqualified stock option is exercised, the
recipient generally will recognize ordinary income (whether the option price is
paid in cash or by surrender of shares of Company stock), in an amount equal to
the excess of the fair market value of the shares to which the option exercise
pertains over the option price.
Incentive Stock Options. A recipient will not have any income at the time
an incentive stock option ("ISO") is granted. Furthermore, a recipient will not
have regular taxable income at the time the ISO is exercised. However, the
excess of the fair market value of the shares at the time of exercise over the
option price will be a preference item that could create an alternative minimum
tax liability for the recipient. If a recipient disposes of the shares acquired
on exercise of an ISO after the later of two years after the grant of the ISO or
one year after exercise of the ISO, the gain recognized by the recipient (i.e.,
the excess of the proceeds received over the option price), if any, will be
long-term capital gain eligible for favorable tax rates under the Internal
Revenue Code. Conversely, if the recipient disposes of the shares within two
years of the grant of the ISO or within one year of exercise of the ISO, the
disposition will generally be a "disqualifying disposition," and the recipient
will recognize ordinary income in the year of the disqualifying disposition
equal to the lesser of (i) the excess of the fair market value of the stock on
the date of exercise over the option price and (ii) the excess of the amount
received for the shares over the option price. The balance of the gain or loss,
if any, will be long-term or short-term capital gain, depending on how long the
shares were held.
21
Restricted Stock and Restricted Stock Units. With respect to a grant of
restricted stock or Restricted Stock Units, the participant will recognize
ordinary income at the time of vesting or payout equal to the fair market value
(on the vesting or payout date) of the shares or cash received minus any amount
paid. For restricted stock only, a participant instead may elect to be taxed at
the time of grant rather than upon lapse of restrictions on transferability or
the risk of forfeiture, but if the participant later forfeits such shares or
property he or she would not be entitled to any tax deduction, including as a
capital loss, for the value of the shares or property on which he or she
previously paid tax.
The Company generally will be entitled to a tax deduction in connection
with an award under the 2007 Plan in an amount equal to the ordinary income
realized by a participant at the time the participant recognizes such income,
provided that the deduction is not disallowed by Section 162(m) or otherwise
limited by the Internal Revenue Code.
In 2007, options to purchase a total of 40,000 shares were granted to an
officer at an exercise price of $5.40. No options were granted to directors in
2007 from this Plan.
1997 Stock Option and Compensation Plan
---------------------------------------
In November 1997, the Board of Directors approved our 1997 Stock Option and
Compensation Plan (the "Plan"). Pursuant to the Plan, options were authorized to
be granted to purchase an aggregate of 100,000 shares of our common stock to key
employees, directors and other persons who have or are contributing to our
success. On November 9, 2004, the shareholders approved amendments to the 1997
Stock Option and Compensation Plan to allow for an aggregate of 200,000 options
to be granted under "the Plan." The options granted pursuant to the Plan could
have been incentive options qualifying for beneficial tax treatment for the
recipient or they could have been non-qualified options. The Plan was
administered by an option committee that determined the terms of the options
subject to the requirements of the Plan, except that the option committee did
not administer the Plan with respect to automatic grants of options to our
directors who were not our employees. The option committee could have been the
entire Board or a committee of the Board. The 1997 Stock Option and Compensation
Plan expired in November 2007.
Through May 24, 2000, directors who were not also our employees ("Outside
Directors") automatically received options to purchase 5,000 shares pursuant to
the Plan at the time of their election as an Outside Director. These Outside
Director options were not exercisable at the time of grant. Options to purchase
1,000 shares became exercisable for each meeting of the Board of Directors
attended by each Outside Director on or after the date of grant of the options
to that Outside Director, but in no event earlier than six months following the
date of grant. The exercise price for options granted to Outside Directors was
equal to the closing price per share of our common stock on the date of grant.
All options granted to Outside Directors expired five years after the date of
grant. On the date that all of an Outside Director's options became exercisable,
options to purchase an additional 5,000 shares, which were exercisable no
earlier than six months from the date of grant, were automatically granted to
that Outside Director. On May 24, 2000, the Board of Directors voted to (1)
decrease the amount of options automatically granted to Outside Directors from
5,000 to 500 options, and (2) decrease the amount of exercisable options from
1,000 to 100 per meeting. The term of the Outside Director option granted in the
future was lowered from five years to two years. The other terms of the Outside
Director options did not change. On July 5, 2002, the Board of Directors voted
to (1) increase the amount of options automatically granted to Outside Directors
from 500 to 2,500 options, and (2) increase the amount of exercisable options
from 100 to 500 per meeting. The other terms of the Outside Director options did
not change.
22
The Company granted a total of 7,500 options to Outside Directors under the
Plan during 2007 at exercise prices ranging from $4.80 to $5.47 per share. The
Company granted a total of 5,000 options to Outside Directors under the Plan
during 2006 at an exercise price of $6.50 per share. The Company granted a total
of 5,000 options to Outside Directors under the Plan during 2005 at exercise
prices ranging from $5.50 to $7.50 per share.
As of December 31, 2007, there were 11,000 exercisable options outstanding
related to the grants to Outside Directors.
In addition to Outside Directors grants, the Board of Directors may grant
incentive options to our key employees pursuant to the Plan. In 2007 and 2006,
the Board did not grant any options to employees under the Plan. In 2005, the
Board granted a total of 2,000 options under the Plan to employees with an
exercise price of $7.50.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
------------------------------------------------------------------------
The Company entered into an employment agreement with Randall P. Marx, the
Company's Former Chief Executive Officer, effective as of January 31, 2008. Mr.
Marx had served as the Company's Chief Executive Officer from November 1991 to
July 2000 and from February 2001 to November 18, 2008. The employment agreement
was recommended to the Board by the Compensation Committee. The agreement
provided for annual compensation of $250,000 in 2007, $275,000 in 2008 and
$300,000 in 2009, with 5% annual increases if the agreement was extended. The
agreement could have been extended by mutual consent on an annual basis for
2010, 2011 and 2012. Mr. Marx received a bonus of $25,000 for 2007, and was
eligible to receive a bonus in 2008 and subsequent years, ranging from $50,000
to $300,000, if certain net income goals were achieved.
Effective November 1, 2007, the Company entered into a two-year employment
agreement with Mr. Monty R. Lamirato, the Company's Former Chief Financial
Officer. Mr. Lamirato served as the Company Chief Financial Officer from June
2001 to November 2008. The agreement provided for annual compensation of
$165,000 in the first year and $175,000 in the second year. We previously
entered into a written employment agreement with Mr. Lamirato, effective July 1,
2005 for the period July 1, 2005 through June 30, 2007, at an annual base salary
of $155,000. In addition, Mr. Lamirato was eligible to earn a bonus of $15,000
in 2005 and 2006 if certain net profit goals are achieved. Mr. Lamirato did not
earn a bonus for 2006 but earned a bonus of $15,000 for 2005.
Effective November 1, 2007, the Company entered into a five-year employment
agreement with Mr. Steven C. Olson, as President and Chief Technology Officer of
the Company's Wireless Communications Solutions Division. Mr. Olson has been
with the Company since 2001. The agreement provides for annual base compensation
of $200,000 in 2007, increasing annually to $245,000 in 2011. Mr. Olson shall
also be entitled to bonuses ranging from $5,000 to $100,000 annually contingent
upon the Wireless Communications Solutions Division achieving certain net income
targets. Mr. Olson earned a bonus of $7,500 for 2007. We previously entered into
a written employment agreement with Mr. Olson, effective August 22, 2004. The
employment agreement was for the period August 22, 2004 through August 22, 2007
23
at an annual base salary of $175,000. Mr. Olson also was eligible to earn
bonuses, upon achieving certain gross margin objectives, over the term of the
agreement. Mr. Olson did not receive a bonus in 2006, but earned a bonus of
$49,000 in 2005. Mr. Olson also received options to purchase 10,000 shares of
our common stock at a price of $6.00 per share from August 22, 2004 through
August 22, 2007. Mr. Olson also received options to purchase 40,000 shares of
our common stock on August 21, 2007. These options vest at a rate of 20% per
year with vesting dates of 12/31/07, 12/31/08, 12/31/09, 12/31/10 and 12/31/11.
Effective November 1, 2007, the Company entered into a three-year
employment agreement with Mr. Richard L. Anderson, the Company's Former
Executive Vice President. Mr. Anderson worked with Company between 1994 and
2008. The agreement provided for annual compensation of $120,000.
The following table shows the potential payments upon termination or a
change of control of the Company for each of the named executive officers as of
December 31, 2007.
Scenario Mr. Marx Mr. Lamirato Mr. Olson Mr. Anderson
-------- -------- ------------ --------- ------------
If early retirement occurred - - - -
If termination for cause occurred - - - -
If termination without cause occurred $492,000 $124,000 $200,000 $150,000
If "change in control" occurred $492,000 $248,000 $200,000 $120,000
If death or disability occurred - - - -
Except as set forth in the table above, we have no compensatory plan or
arrangement that results or will result from the resignation, retirement, or any
other termination of an executive officer's employment with us or from a
change-in-control or a change in an executive officer's responsibilities
following a change-in-control, except that the 2007 Stock Incentive Plan and
1997 Stock Option and Compensation Plan provides for vesting of all outstanding
options in the event of the occurrence of a change-in-control.
Certain Transactions with Management and Principal Shareholders
Except for the arrangements described elsewhere in this Proxy Statement,
during fiscal year 2007 and during the interim period since the end of fiscal
year 2007, there were no transactions between the Company and its directors,
executive officers or known holders of greater than five percent of the
Company's Common Stock in which the amount involved exceeded $120,000 and in
which any of the foregoing persons had or will have a direct or indirect
material interest.
PROPOSAL NO. 2: TO RATIFY THE SELECTION OF HEIN + ASSOCIATES LLP AS
THE COMPANY'S CERTIFIED INDEPENDENT ACCOUNTANTS
The Board of Directors and its Audit Committee recommends that the
shareholders vote in favor of ratifying the selection of the certified public
accounting firm of HEIN + Associates LLP of Denver, Colorado as the auditors who
will continue to audit financial statements, review tax returns, and perform
other accounting and consulting services for the year ending December 31, 2008
or until the Board of Directors, in its discretion, replaces them. HEIN +
Associates LLP also audited our financial statements for the fiscal years ended
December 31, 2001, 2002, 2003, 2004, 2005, 2006 and 2007.
24
An affirmative vote of the plurality of shares represented at the meeting
is necessary to ratify the selection of auditors. There is no legal requirement
for submitting this proposal to the shareholders; however, the Board of
Directors believes it is of sufficient importance to seek ratification. Whether
the proposal is ratified or defeated, the Board of Directors may reconsider, at
its discretion, its selection of HEIN + Associates LLP. We expect that one or
more representatives of HEIN + Associates LLP will be present at the Annual
Meeting and will be given an opportunity to make a statement if they desire to
do so and to respond to appropriate questions from shareholders.
Audit Fees
The Audit Committee reviews and determines whether specific projects or
expenditures with our independent registered public accounting firm (auditor),
HEIN + Associates LLP potentially affect their independence. The Audit
Committee's policy requires that all services the Company's independent
registered public accounting firm (auditor) may provide to the Company,
including audit services and permitted audit-related services, be pre-approved
in advance by the Audit Committee. In the event that an audit or non-audit
service requires approval prior to the next scheduled meeting of the Audit
Committee, the auditor must contact the Chairman of the Audit Committee to
obtain such approval. Any approval will be reported to the Audit Committee at
its next scheduled meeting.
The following table sets forth the aggregate fees billed to us by HEIN +
Associates LLP for the years ended December 31, 2007 and 2006:
2007 2006
---- ----
Audit fees $ 78,000 (1) $140,000 (1)
Audit-related fees -- (2) -- (2)
Tax fees $ 22,000 (3) 14,000 (3)
All other fees -- --
Total audit and non-audit fees $100,000 $154,000
----------
(1) Includes fees for professional services rendered for the audit of our
annual financial statements and review of our Annual Report on Form 10-K
for the year 2007 and 2006 and for reviews of the financial statements
included in our quarterly reports on Form 10-Q for the first three quarters
of fiscal 2007 and 2006 and related SEC registration statements.
(2) Includes fees billed for professional services rendered in fiscal 2007 and
2006, in connection with acquisition planning and due diligence.
(3) Includes fees billed for professional services rendered in fiscal 2007 and
2006, in connection with tax compliance (including U.S. federal and state
returns) and tax consulting.
Financial Information Systems Design and Implementation Fees
During fiscal year 2007, the aggregate fees billed for the professional
services described in paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X
rendered by HEIN + Associates LLP for fiscal year 2007 totaled $78,000.
25
All Other Fees
During fiscal year 2007, all other fees billed for services rendered by
HEIN + Associates LLP (other than the services described above) totaled $22,000.
The Board of Directors has considered whether the provision of the services
covered in this section is compatible with maintaining HEIN + Associates LLP's
independence and believes that it is.
Required Vote
Ratification of the appointment of the independent registered public
accounting firm requires the affirmative vote of a plurality of the votes cast
by the holders of the shares of common stock voting in person or by proxy at the
Annual Meeting. If the shareholders should not ratify the appointment of HEIN +
Associates LLP, the Board will reconsider the appointment.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR RATIFICATION OF THE APPOINTMENT OF HEIN + ASSOCIATES LLP AS THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31,
2008.
PROPOSAL 3: OTHER BUSINESS
The Board of Directors of the Company is not aware of any other matters
that are to be presented at the Annual Meeting, and it has not been advised that
any other person will present any other matters for consideration at the
meeting. Nevertheless, if other matters should properly come before the Annual
Meeting, the shareholders present, or the persons, if any, authorized by a valid
proxy to vote on their behalf, shall vote on such matters in accordance with
their judgment.
RESOLUTIONS PROPOSED BY INDIVIDUAL SHAREHOLDERS;
DISCRETIONARY AUTHORITY TO VOTE PROXIES
In order to be considered for inclusion in the proxy statement and form of
proxy relating to our next annual meeting of shareholders following the end of
our 2008 fiscal year, proposals by individual shareholders must be received by
us no later than June 10, 2009.
In addition, the proxy solicited by the Board of Directors for the next
annual meeting of shareholders will confer discretionary authority on any
shareholder proposal presented at that meeting unless we are provided with
notice of that proposal no later than July 24, 2009.
AVAILABILITY OF REPORTS ON FORM 10-K
A copy of the Annual Report on Form 10-K for the fiscal year ended December
31, 2007 has been sent to each shareholder in connection with this Proxy
Statement. Upon written request, we will provide, without charge, a copy of our
2007 Form 10-K or other SEC filings to any shareholder of record, or to any
26
shareholder who owns Common Stock listed in the name of a bank or broker as
nominee, at the close of business on September 29, 2008. Any request for a copy
of our 2007 Form 10-K or other SEC filings should be mailed to ARC Wireless
Solutions, Inc., 10601 West 48th Avenue, I-70 Frontage Road North, Wheat Ridge,
Colorado 80033-2660, Attention: Investor Relations.
FORWARD-LOOKING STATEMENTS
This proxy statement and materials delivered with this proxy statement
include "forward-looking" statements. All statements other than statements of
historical facts included in this proxy statement and materials delivered with
this proxy statement, including without limitation statements regarding our
financial position, business strategy, and plans and objectives of management
for future operations and capital expenditures, are forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements and the assumptions upon which the forward-looking statements are
based are reasonable, we can give no assurance that such expectations and
assumptions will prove to have been correct. Additional statements concerning
important factors that could cause actual results to differ materially from our
expectations ("Cautionary Statements") are disclosed in the "Forward-Looking
Statements--Cautionary Statements" section of our Annual Report on Form 10-K for
the year ended December 31, 2007. All written and oral forward-looking
statements attributable to us or persons acting on our behalf subsequent to the
date of this proxy statement are expressly qualified in their entirety by the
Cautionary Statements.
This notice and proxy statement are sent by order of the Board of
Directors.
Dated: November 26, 2008 Jason Young
Chief Executive Officer
* * * * *
27
APPENDIX A
----------
PROXY PROXY
ARC WIRELESS SOLUTIONS, INC.
For the Reconvened Annual Meeting of Shareholders on December 16, 2008
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Jason Young as proxy with full power of
substitution to vote all the shares of the undersigned with all of the powers
which the undersigned would possess if personally present at the Annual Meeting
of Shareholders of ARC Wireless Solutions, Inc. (the "Company") to be held at
10:00 a.m. (Denver, Colorado time) on December 16, 2008, at the offices of the
Company, or any adjournments thereof, on the following matters:
[X] Please mark votes as in this example.
1. To elect the following three directors:
Nominees: Viktor Nemeth, Marco Vega and Jason Young.
FOR ALL NOMINEES [ ]
WITHHELD AUTHORITY FOR ALL NOMINEES [ ]
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE [ ]
2. To consider and vote upon a proposal recommended by the Board of
Directors to ratify the selection of HEIN + Associates LLP to serve as
our certified independent accountants for the year ending December 31,
2008:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting:
[ ] YES [ ] NO [ ] ABSTAIN
(Continued and to be signed on the reverse side)
Unless contrary instructions are given, the shares represented by this
proxy will be voted in favor of Items 1, 2 and 3. This proxy is solicited on
behalf of the Board of Directors of ARC Wireless Solutions, Inc.
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THIS PROXY IN THE ACCOMPANYING ENVELOPE.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
Dated: ________________________________
Signature: ________________________________
Signature: ________________________________
Signature if held jointly
(Please sign exactly as shown on your stock certificate and
on the envelope in which this proxy was mailed. When signing
as partner, corporate officer, attorney, executor,
administrator, trustee, guardian, etc., give full title as
such and sign your own name as well. If stock is held
jointly, each joint owner must sign.)
APPENDIX B
----------
ARC WIRELESS SOLUTIONS, INC.
POLICIES AND PROCEDURES FOR NOMINATIONS
OF DIRECTOR CANDIDATES
Effective January 1, 2009
-------------------------
I. All Nominations
-- ---------------
It is the policy of the Board of Directors (the "Board") of ARC Wireless
Solutions, Inc. (the "Corporation") that each candidate recommended for
nomination and election to the Board (each, a "Nominee"), regardless of whether
such Nominee is recommended by a shareholder of the Corporation, the Board or
any other person, shall be approved by a majority of the independent directors
of the Board.
The Board believes that certain minimum qualifications must be met by each
Nominee for the Board, as well as meeting the applicable independence standards
required by the Securities Exchange Commission (the "SEC") and federal
securities laws. The Board believes that Nominees must reflect a Board that is
comprised of directors (i) a majority of whom are independent (as determined
under the aforementioned SEC director qualification standards); (ii) who are of
high integrity; (iii) who have qualifications that will increase the overall
effectiveness of the Board; and (iv) who meet other requirements as may be
required by applicable rules, such as financial literacy or financial expertise
with respect to audit Board members. In evaluating the qualifications of the
Nominees, the Board considers many factors, including issues of leadership
ability, career success, character, judgment, independence, background, age,
expertise, diversity and breadth of experience, length of service, other
commitments and the like. The Board evaluates such factors, among others, and
does not assign any particular weight or priority to any of these factors. Also,
the Board considers the suitability of each Nominee, including the current
members of the Board, in light of the current size and composition of the Board.
Unless and until otherwise subsequently determined by the Board, the number
of directors of the Corporation at any time shall be the number of directors
that the Board nominated for election at the most recently-held annual meeting
of shareholders, increased by the number of directors, if any, that the Board
appointed subsequent to the most recently-held annual meeting of shareholders
and also increased by the number of directors, if any, whose term as a director
did not expire at the most recently-held annual meeting of shareholders.
II. Shareholder Nominations
--- -----------------------
The Board shall consider recommendations for Nominees to the Board from
shareholders (an "Eligible Shareholder") holding a minimum of $2,000 in market
value, or 1%, of the Corporation's voting common stock, which stock is held
through the date of the meeting electing directors, and which Eligible
Shareholder complies with the nomination notice procedures set forth in these
policies and the Corporation's Bylaws.
Nominees recommended by Eligible Shareholders (hereinafter referred to as
"Shareholder Candidates") will be evaluated by the Board on the same basis as
Nominees that may be identified by the Board, management or, if the Board
permits, a search firm. Such evaluation may, in the Board's discretion, include
a review solely of information and documentation provided to the Board or may
also include discussions with persons familiar with the Shareholder Candidate,
an interview with the Shareholder Candidate or other actions that the Board
deems proper. In evaluating and identifying Nominees, the Board has the
authority to retain and terminate any third party search firm that is used to
identify director Nominees and has the authority to approve the fees and
retention terms of any such search firm.
Shareholder Candidates who are recommended by an Eligible Shareholder at a
time when there are no open positions on the Board and are considered qualified
Nominees by the Board may be placed on the rolling list of Nominees for open
Board positions maintained by the Board, generally for a period of up to 24
months from the date that the recommendation was received by the Secretary of
the Corporation.
III. Procedures for Shareholders Regarding Nomination of Director Candidates
----------------------------------------------------------------------------
For the Shareholder Candidate to be considered by the Board, regardless of
whether the Eligible Shareholder (i) is seeking to have the Shareholder
Candidate included in the Corporation's proxy statement, (ii) intends to prepare
and distribute its own proxy statement, or (iii) intends to nominate the
Shareholder Candidate at a meeting, the Eligible Shareholder and the Shareholder
Candidate must comply with the procedures set forth herein.
A. Recommendations for Shareholder Candidate(s) to the Board of Directors
from an Eligible Shareholder must be directed in writing to ARC Wireless
Solutions, Inc., Attn: Corporate Secretary, at the Corporation's principal
offices at 10601 West 48th Avenue, I-70 Frontage Road North, Wheat Ridge,
Colorado 80033-2660. Each such recommendation from an Eligible Shareholder shall
include and set forth the following information regarding the Shareholder
Candidate whom the Eligible Shareholder proposes to nominate for election as a
director:
1. the name, age, business address and residence address of such
Shareholder Candidate;
2. the principal occupation or employment of the Shareholder Candidate;
3. the class and number of shares of the Corporation's securities
beneficially owned by such Shareholder Candidate, if any;
4. detailed biographical data and qualifications and information
regarding any relationships between the Shareholder Candidate and the
Corporation within the last three years;
5. a statement signed by the Shareholder Candidate acknowledging that:
(a) the Shareholder Candidate consents to being named in the
Corporation's proxy materials, and, if elected, will serve as a
director of the Corporation and will represent all shareholders
of the Corporation in accordance with applicable laws and the
Corporation's articles of incorporation and by-laws, as may be
amended from time to time; and
(b) the Shareholder Candidate, if elected, will comply with the
Corporation's Amended and Restated Code of Ethics, any corporate
governance guidelines, and any other applicable rule, regulation,
policy or standard of conduct applicable to the Board of
Directors and its individual members.
6. a fully completed and signed Questionnaire for Directors and Officers
on the Corporation's standard form and provide any additional
information requested by the Board or the Corporation, including any
information that would be required to be included in a proxy statement
in which the Shareholder Candidate is named as a nominee for election
as a director and information showing that the Shareholder Candidate
meets the Board's qualifications for nomination as a director and for
service on the Committees of the Board; and
7. any other information relating to such Shareholder Candidate required
to be disclosed in solicitations for proxies for election of directors
pursuant to Regulation 14A under the Securities and Exchange Act of
1934, as amended (the "1934 Act"), and the rules thereunder.
B. The Eligible Shareholder submitting the recommendation must provide:
1. the name and record address of the Eligible Shareholder and the class
and number of shares of the Corporation's securities beneficially
owned by the Eligible Shareholder;
2. any material interest of the Eligible Shareholder in such nomination;
3. a description of all arrangements or understandings between the
Eligible Shareholder making such nomination and the Shareholder
Candidate and any other person or persons (naming such person or
persons) pursuant to which the nomination is made by the Eligible
Shareholder;
4. a statement from the recommending Eligible Shareholder in support of
the Shareholder Candidate and providing references for the Shareholder
Candidate;
5. a representation that such Eligible Shareholder intends to appear in
person or by proxy at the annual meeting to nominate the Shareholder
Candidate named in its recommendation; and
6. any other information that is required to be provided by the
shareholder pursuant to Regulation 14A under the 1934 Act, in his/her
capacity as a proponent to a shareholder proposal.
In addition to the required information detailed above, a Shareholder
Candidate must be available for interviews with members of the Board.
IV. Timing of Shareholder Candidate Recommendations
--- -----------------------------------------------
An Eligible Shareholder who wishes to recommend a Shareholder Candidate for
election as a director, regardless of whether the Eligible Shareholder (i) is
seeking to have the Shareholder Candidate included in the Corporation's proxy
statement, (ii) intends to prepare and distribute its own proxy statement, or
(iii) intends to nominate the Shareholder Candidate at a meeting, must submit
the information and documentation described above for receipt by the Secretary
of the Corporation in a timely manner, with "timely" determined as set forth in
the next succeeding sentence herein. To be timely, an Eligible Shareholder's
notice must be received at the Corporation's principal office not less than 120
calendar days before the date that the Corporation's proxy statement or notice
thereof was first mailed to shareholders in connection with the previous year's
annual meeting; provided, however, that in the event (i) the Corporation did not
hold an annual meeting in the previous year, (ii) the date of the annual meeting
has been changed by more than 30 days from the date of the previous year's
meeting, or (iii) the meeting is a special meeting called in the manner set
forth in the Corporation's bylaws, then notice by the Eligible Shareholder, to
be timely, must be delivered to the Corporation not later than the 10th day
following the day on which a Public Announcement (defined in Article II Section
5 of the bylaws) of the date of such meeting is first made. The Secretary of the
Corporation will provide a copy of the Bylaws and/or the Policies and Procedures
for Shareholder Nominations of Director Candidates upon a request in writing
from the Eligible Shareholder.
V. Decisions by the Independent Directors
-- --------------------------------------
The majority of the independent directors shall have final authority on
determining the selection of director Nominees for nomination to the Board.
VI. Modification of Policies and Procedures
--- ---------------------------------------
The policies and procedures set forth herein may be modified at any time as
may be determined by the Board and a majority of the independent directors.
* * * * *