As filed with the Securities and Exchange Commission on August 6, 1999 Registration No. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- PC-Tel, Inc. (Exact Name of Registrant as Specified in Its Charter) --------------- Delaware 3661 77-0364943 (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Classification Identification incorporation or Code Number) Number) organization) 70 Rio Robles San Jose, California 95134 (408) 965-2100 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) PETER CHEN Chief Executive Officer PC-Tel, Inc. 70 Rio Robles San Jose, California 95134 (408) 965-2100 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------- Copies to: DOUGLAS H. COLLOM, ESQ. SCOTT D. LESTER, ESQ. ROGER E. GEORGE, ESQ. MICHAEL S. DORF, ESQ. DEBORAH M. CHANG, ESQ. TORREY MILLER, ESQ. SHELDON J. QUAN, ESQ. Brobeck Phleger & Harrison, LLP Wilson Sonsini Goodrich & Rosati Spear Street Tower Professional Corporation One Market 650 Page Mill Road San Francisco, California 94105 Palo Alto, California 94304 (415) 442-0900 (650) 493-9300 --------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement --------------- If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] --------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Proposed Proposed Title of Each Class of Amount Maximum Maximum Amount of Securities to be to be Offering Price Aggregate Registration Registered Registered Per Share Offering Price Fee(1) - ------------------------------------------------------------------------------------- Common Stock, $0.001 par value................. 5,290,000 shares $16.00 $84,640,000 $23,530 - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- (1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a) promulgated under the Securities Act of 1933, as amended. --------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed without + +notice. PC-Tel, Inc. may not sell these securities until the registration + +statement filed with the Securities and Exchange Commission is effective. + +This prospectus is not an offer to sell these securities, and PC-Tel, Inc. is + +not soliciting offers to buy these securities, in any jurisdiction where the + +offer or sale of these securities is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PROSPECTUS (Not Complete) Issued , 1999 4,600,000 Shares [PCtel LOGO APPEARS HERE} PC-Tel, Inc. Common Stock ------------ PC-Tel, Inc. is offering shares of its common stock in an initial public offering. We estimate that the initial public offering price for our shares will be between $15.00 and $17.00. ------------ We will apply to have our common stock quoted on the Nasdaq National Market under the symbol "PCTI." ------------ Investing in the common stock involves a high degree of risk. See "Risk Factors" beginning on page 8. ------------ Per Share Total --------- ----- Public Offering Price........................................... $ $ Discounts and Commissions to Underwriters....................... $ $ Proceeds to PC-Tel, Inc......................................... $ $ Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. PC-Tel, Inc. has granted the underwriters the right to purchase up to an additional 690,000 shares of common stock to cover any over-allotments. The underwriters can exercise this right at any time within thirty days after the offering. Banc of America Securities LLC expects to deliver the shares of common stock to investors on , 1999. Banc of America Securities LLC Warburg Dillon Read LLC Needham & Company, Inc. ------------ The date of this prospectus is , 1999

Inside front cover Background of space shot photograph of planet earth and graphic images of telephone, laptop computer, desktop computer, wireless modem, personal digital assistant and set-top box. Text caption "High-Speed Personal Connecting Communications Solutions."

You should only rely on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. TABLE OF CONTENTS Page ---- Prospectus Summary....................................................... 4 Risk Factors............................................................. 8 Special Note Regarding Forward Looking Statements........................ 20 Use of Proceeds.......................................................... 21 Dividend Policy.......................................................... 21 Capitalization........................................................... 22 Dilution................................................................. 23 Selected Consolidated Financial Data..................................... 24 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 25 Business................................................................. 37 Management............................................................... 50 Certain Transactions..................................................... 60 Principal Stockholders................................................... 62 Description of Capital Stock............................................. 64 Shares Eligible for Future Sale.......................................... 66 Underwriting............................................................. 68 Legal Matters............................................................ 70 Experts.................................................................. 70 Where You Can Find Additional Information................................ 70 Index to Financial Statements............................................ F-1 ---------------- PC-Tel, the PC-Tel logo, HSP Modem, MicroModem, HIDRA and LiteSpeed are trademarks of PC-Tel. Other service marks, trademarks and trade names referred to in this prospectus are the property of their respective owners. 3

PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary is not complete and may not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully before making an investment decision. This prospectus contains forward-looking statements, which involve risks and uncertainties. PC-Tel's actual results could differ materially from those anticipated in these forward-looking statements as a result of the factors described under "Risk Factors" and elsewhere in this prospectus. PC-Tel We are a leading developer and supplier of cost-effective software-based connectivity solutions. Our solutions enable Internet access and other communications applications through existing analog and emerging broadband networks. We have developed a proprietary software architecture that substantially reduces the hardware, space and power requirements of conventional hardware-based connectivity devices. Our software architecture is easily upgradeable, minimizing the risk of technological obsolescence. Our communications products are designed to enable widespread Internet access and other communication applications through desktop PCs, notebook computers, Internet appliances such as set-top boxes and webphones, video game consoles and remote monitoring devices. We are a pioneer in developing host signal processing technology, a proprietary set of algorithms that enables cost-effective software-based digital signal processing solutions. Host signal processing technology utilizes the computational and processing resources of a host central processing unit rather than requiring additional special-purpose hardware. The reduction of hardware components in our architecture reduces space requirements by 50% and power requirements by 70% compared to conventional solutions. The first implementation of our host signal processing technology was in a software modem, or soft modem, in 1995. Through June 1999, we have shipped 11.3 million soft modems. Based on our 1998 unit shipments, we believe we are the largest worldwide producer of soft modems, representing 68% of all soft modems sold that year, as estimated by Vision Quest 2000. We also believe that in 1998 we sold 6% of all analog modems, estimated by Dataquest to have been 59.1 million units. Various OEMs, including Acer, Dell, emachines, Fujitsu and Sharp, have integrated our soft modems into their products. In recent years, dramatic increases in business and consumer demand for multimedia information, entertainment and voice and data communication have resulted in a corresponding increase in demand for high-speed remote access. The accelerated growth of content-rich applications, which demand high bandwidth, has changed the nature of information networks. High-speed connectivity is now an ordinary requirement for business, government, academic and home environments. These market trends have resulted in a significant increase in the demand for connectivity devices. International Data Corporation estimates that by 2003, the number of Internet connectivity devices in use will grow to over 722 million. Our host signal processing architecture allows us to quickly and cost- effectively capitalize on this rapid growth in demand for connectivity devices. We believe that we can use our intellectual property portfolio to readily adapt to the speed and design requirements of additional emerging connectivity technologies. For example, we have developed LiteSpeed, a host signal processing architecture solution, in response to growing market acceptance of G.Lite, a digital subscriber line, or DSL, technology that enables downstream data transmission speeds of up to 1.5 Mbps and upstream data transmission speeds of 512 Kbps over existing copper telephone lines. Our G.Lite technology is completely compatible with analog transmission networks, offering the user complete flexibility in choosing access technology and transmission speed. By providing connectivity solutions that can be easily adapted to new standards and protocols, we reduce interoperability obstacles, which simplifies purchasing decisions and accelerates deployment times for OEMs. 4

To extend our position as the leading provider of cost-effective software- based connectivity solutions, our strategy includes the following key elements: . identify emerging high-growth communications technologies and develop innovative software-based connectivity solutions to capitalize on these new market opportunities as they gain acceptance, . enhance the scope of our host signal processing technology to further reduce the number of hardware components in our software-based solutions, . develop innovative products based on our host signal processing architecture that enable migration to emerging broadband communications technologies for next generation devices, . extend our intellectual property leadership position and establish industry standards through rapid internal product development, strategic acquisitions and licensing of innovative communications technology, and . license our proprietary digital signal processing communications applications in non-PC devices to provide enhanced performance and cost savings. ---------------- Our principal executive offices are located at 70 Rio Robles, San Jose, California 95134. Our telephone number is (408) 965-2100. 5

The Offering Common stock offered by PC-Tel....... 4,600,000 shares Common stock to be outstanding after 15,602,078 shares this offering....................... Use of proceeds...................... $15.7 million of the proceeds from this offering will be used to repay bank debt. The remaining proceeds will be used for general corporate purposes, including working capital, and for potential investments in and acquisitions of complementary products, technologies or businesses. Proposed Nasdaq National Market PCTI symbol.............................. In addition to the shares of common stock to be outstanding after this offering, we are obligated to issue shares of our common stock upon exercise of outstanding options and warrants. As of June 30, 1999 these additional shares included: . a total of 3,815,710 shares of common stock issuable upon exercise of outstanding stock options under our 1995 stock plan and 1997 stock plan at a weighted average exercise price per share of $5.72, and . a total of 202,417 shares of common stock issuable upon exercise of outstanding warrants at an exercise price of $8.00 per share. In addition, during the period between July 1 and August 3, 1999, we granted additional stock options under our 1997 stock plan for the purchase of 565,390 shares. This includes options to purchase 400,000 shares of common stock granted to William F. Roach, our President and Chief Operating Officer, who began employment with PC-Tel in August 1999. ---------------- Please also note that, except where otherwise indicated: . the information in this prospectus relating to our outstanding shares of common stock or options or warrants to purchase our common stock is based upon information as of June 30, 1999, . the information in this prospectus reflects the conversion of all of our outstanding shares of preferred stock into 8,510,748 shares of common stock upon the closing of this offering, . the information in this prospectus assumes no exercise of the underwriters' over-allotment option, and . in this prospectus, "PC-Tel," "we," "us" and "our" refer to PC-Tel, Inc. and its subsidiaries. . all shares referred to in this prospectus reflect a 3 for 2 reverse stock split that we effected on October 4, 1995. 6

Summary Consolidated Financial Information You should read the following summary consolidated financial data together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and notes thereto included elsewhere in this prospectus. The adjusted balance sheet data as of June 30, 1999 reflects the application of the net proceeds from the sale of the 4,600,000 shares of common stock offered by PC-Tel at an assumed offering price of $16.00 per share, after deducting estimated offering expenses and underwriting discounts and commissions. Had this offering closed on June 30, 1999, $16.0 million of the proceeds would have been used to repay bank debt. The adjusted balance sheet data as of June 30, 1999 also reflects the write-off of deferred debt issuance costs and the expense of the prepayment penalty related to the bank debt. Period From February 10, 1994 Six Months Ended (inception) to Year Ended December 31, June 30, December 31, ------------------------------- ----------------- 1994 1995 1996 1997 1998 1998 1999 -------------- ------ ------- ------- ------- -------- -------- (in thousands, except per share data) Statement of Operations Data: Revenues................ $ -- $ 191 $16,573 $24,009 $33,004 $ 12,343 $ 33,046 Gross profit............ -- 85 7,391 11,085 19,126 6,395 16,049 Income (loss) from operations............. (283) (1,127) 3,882 2,957 228 732 4,454 Net income (loss)....... (280) (1,093) 3,004 2,301 495 683 2,704 Basic earnings per share.................. $ -- $ -- $ 4.79 $ 1.13 $ 0.21 $ 0.29 $ 1.10 Diluted earnings per share.................. $ -- $ -- $ 0.29 $ 0.20 $ 0.04 $ 0.06 $ 0.21 Shares used in computing basic earnings per share.................. -- -- 627 2,032 2,355 2,320 2,461 Shares used in computing diluted earnings per share.................. -- -- 10,280 11,645 12,325 12,400 12,638 June 30, 1999 -------------------- Adjusted for Actual the offering ------- ------------ (in thousands) Balance Sheet Data: Cash and short-term investments............................ $23,534 $74,182 Total assets............................................... 50,483 99,661 Long-term debt, net of current portion..................... 13,630 -- Total stockholders' equity................................. 17,861 83,113 ---------------- See Note 2 of Notes to the Consolidated Financial Statements for an explanation of the shares used in computing basic earnings per share and shares used in computing diluted earnings per share in the above table. 7

RISK FACTORS Before you invest in our common stock, you should carefully consider the various risks, including those described below, together with all of the other information included in this prospectus. Additional risks and uncertainties not presently known to us or that we currently consider to be immaterial may also impair our business operations. If any of these risks actually occur, our business, financial condition or operating results could be adversely affected. In that case, the trading price of our common stock could decline and you could lose all or part of your investment. Risks Related to Our Business Our sales are concentrated among a limited number of customers and the loss of one or more of these customers could negatively affect our operating results. Our sales are concentrated among a limited number of customers. If we were to lose one or more of these customers, or if one or more of these customers were to delay or reduce purchases of our products, our financial performance could be adversely affected. For the six months ended June 30, 1999, approximately 81% of our revenues were generated by five of our customers, and revenues derived from sales to Talent Trade Asia, TriGem and Silicon Application Corporation accounted for 42%, 20% and 10%, respectively, of our product sales. For the year ended December 31, 1998, approximately 60% of our revenues were generated by five of our customers, and revenues derived from sales to Silicon Application Corporation, BTC, Askey Computer and Zoltrix accounted for 15%, 13%, 12% and 12%, respectively, of our product sales. These customers may in the future decide not to purchase our products at all, purchase fewer products than they did in the past or alter their purchasing patterns, because: . we do not have any long term purchase arrangements or contracts with these or any of our other customers, . our product sales to date have been made primarily on a purchase order basis, which permit our customers to cancel, change or delay product purchase commitments with little or no notice and without penalty, and . many of our customers also have pre-existing relationships with current or potential competitors which may affect our customers' purchasing decisions. We expect that a small number of customers will continue to account for a substantial portion of our revenues for the foreseeable future and that a significant portion of our sales will continue to be made on the basis of purchase orders. We have been sued by Motorola for patent infringement. If this litigation resolves unfavorably to us, our business is likely to be harmed. In September 1998, Motorola, Inc. filed a patent infringement lawsuit against PC-Tel and another modem manufacturer in the U.S. District Court for the District of Massachusetts. Motorola's complaint alleges that we are, and have been, infringing seven Motorola patents by making, using, offering to sell, selling and/or importing products that embody or use the inventions claimed in its patents. In addition to alleging direct infringement, Motorola's complaint includes allegations of inducing infringement and contributory infringement. Motorola's complaint seeks damages and also asks the court to award a preliminary and permanent injunction to prevent us from continuing acts of direct infringement, inducing infringement and contributory infringement. Motorola's complaint contains a demand for Motorola's costs, expenses and reasonable attorney's fees and treble damages for willful infringement. Six of the seven patents asserted by Motorola relate to communications standards accepted by the International Telecommunications Union, or ITU. Any patents incorporating communications standards accepted by the ITU are required to be made available for licensing by the holder of the patent on terms that are fair, reasonable and non-discriminatory. The seventh 8

Motorola patent, entitled "Processor Modem," allegedly relates to software modem technology. Motorola subsequently dismissed its Massachusetts lawsuit without prejudice and re-filed its complaint in the U.S. District Court for the District of Delaware. We answered Motorola's complaint denying infringement of Motorola's seven patents and alleging the patents are invalid and unenforceable. We also asserted counter-claims asserting tort and breach of contract claims and violations of the antitrust and unfair competition laws. Our counter-claims and defenses are based in part on Motorola's refusal to license its ITU-related patents to us at fair, reasonable and non-discriminatory rates, as required by the ITU. Our counter-claims also allege that Motorola intentionally interfered with our actual and potential customer relationships. In response to Motorola's lawsuit, we filed a patent infringement suit against Motorola in the U.S. District Court for the District of Delaware. We have since amended our first complaint against Motorola to include allegations that Motorola is, and has been, infringing, inducing infringement and contributorily infringing ten of our patents. In our complaint, we have asked the court to award similar relief to that requested by Motorola in its lawsuit, including a preliminary and permanent injunction, damages, costs, expenses, reasonable attorneys' fees and treble damages for willful infringement. Our ten patents asserted against Motorola include patents related to ITU standards, software and other modem technology. Discovery is underway and trial is set for early 2001 in both Motorola's lawsuit against us and our lawsuit against Motorola. Due to the nature of litigation generally and because the lawsuit brought by Motorola is at an early stage, we cannot ascertain the outcome of the lawsuit, the availability of injunctive relief or other equitable remedies, or estimate the total expenses, possible damages or settlement value, if any, that we may ultimately incur in connection with our litigation with Motorola. However, we believe, based on our knowledge of the industry, our review of Motorola's six ITU-related patents and our products, our involvement in the ITU standards setting process and our awareness of Motorola's participation in that process, and the advice of our patent counsel, Knobbe, Martens, Olson & Bear, LLP, that Motorola's six ITU-related patents asserted in its lawsuit are not enforceable against us. We also believe, based on our knowledge of the industry, our review of Motorola's patent related to software modem technology and our products, and the advice of our patent counsel, Knobbe, Martens, Olson & Bear, LLP, that Motorola's patent allegedly related to software modem technology asserted by Motorola in its patent lawsuit against us is not infringed by us and is invalid. We are vigorously contesting, and intend to continue to vigorously contest, all of Motorola's claims. Nonetheless, this litigation could be time consuming and costly, and we will not necessarily prevail given the inherent uncertainties of litigation. Substantially all of our revenues to date are attributable to products which Motorola claims as the basis for its infringement suit against us. Further, we anticipate that a substantial proportion of our revenues for the foreseeable future is expected to be dependent upon sales of these and future products incorporating technology that Motorola has alleged infringes its patents. In the event that we do not prevail in litigation, we could be prevented from selling our products or be required to enter into royalty or licensing agreements. We could also be required to pay substantial monetary damages to Motorola, which are subject to trebling in the event of a finding by the court of willful infringement. The grant of a preliminary or permanent injunction could have an adverse effect on our business, including a substantial reduction in our revenues and income, losses for an extended period of time and a substantial depletion of our financial resources. In the event of an injunction, we could attempt to obtain a license from Motorola to enable us to continue to sell products incorporating the technology. However, we may not be able to enter into any royalty or licensing agreements on terms acceptable to us or at all. We could also attempt to develop a different technology and modify the design of our products in an effort to avoid infringement of Motorola's patents. However, we are not currently engaged in any development efforts in this regard, and we cannot be sure that any efforts would be successful. Even if successful, these efforts would require a substantial period of time to complete and we cannot be sure that these efforts would result in competitive products. 9

In connection with the Motorola litigation, we have incurred and expect to continue to incur substantial legal and other expenses. In addition, the Motorola litigation has diverted and is expected to continue to divert the efforts and attention of our management and technical personnel. Accordingly, whether or not we are ultimately successful on the merits, the expenses and diversion of resources associated with the Motorola litigation could have a material adverse effect on our business and operating results. If the Motorola lawsuit were to be resolved by a settlement, we might be required to make substantial payments to Motorola or to grant a cross-license to Motorola to utilize our technology, which could also hurt our business and operating results. Our business is exposed to additional risks because we have significant international sales and operations. Our sales to customers located in Asia accounted for 74%, 77% and 76% of our total revenues in the years ended December 31, 1996, 1997 and 1998, respectively, and 77% and 99% of total revenues in the six months ended June 30, 1998 and 1999, respectively. The predominance of our sales are in Asia, mostly in Taiwan and China, because our customers are primarily motherboard or modem manufacturers that are located there. In many cases, our indirect OEM customers specify that our products be included on the modem boards or motherboards that they purchase from board manufacturers, and we sell our products directly to the board manufacturers for resale to our indirect OEM customers. Industry statistics indicate that approximately two thirds of modems manufactured in Asia are sold back to OEMs located in the United States. Due to the industry-wide concentration of modem manufacturers in Asia, we believe that a high percentage of our future sales will continue to be concentrated with Asian customers. As a result, our future operating results could be uniquely affected by a variety of factors outside of our control, including: . political and economic instability, . changes in tariffs, quotas, import restrictions and other trade barriers, . difficulty in meeting export license requirements, . delays in collecting accounts receivable, . adverse tax consequences, . changes in legislative or regulatory requirements, and . fluctuations in the value of Asian currencies relative to the U.S. dollar. To successfully expand our international sales, we must strengthen foreign operations, hire additional personnel and recruit additional international distributors and resellers. This will require significant management attention and financial resources. To the extent that we are unable to effect these additions in a timely manner, we may not be able to maintain or increase international market demand for our products, and our operating results could be adversely affected. Continuing decreases in the average selling prices of our products could materially adversely affect our operating results. Product sales in the connectivity industry have been characterized by continuing erosion of average selling prices. Price erosion experienced by any company can cause revenues and gross margins to decline, and negatively affect operating results. The average selling price of our products has decreased by approximately 40% from October 1995 to June 30, 1999. We expect this trend to continue. This erosion is due to a number of factors, including: . competitive pricing pressures from other sellers of connectivity solutions, . rapid technological change resulting in rapid introductions of new products, . continuing price performance enhancements by our competitors, and . customers of PC-Tel who negotiate price reductions in exchange for longer term purchase commitments. In addition, we believe that the widespread adoption of industry standards in the soft modem industry is likely to further erode average selling prices, particularly for analog modems. Decreasing average selling prices 10

in our products could result in decreased revenue even if the number of units that we sell increases. Therefore, we must continue to develop and introduce next-generation products with enhanced functionalities that can be sold at higher gross margins. Our failure to do this could cause our revenues and gross margin to decline. Our gross margins may vary based on the mix of sales of our products and services, and these variations will directly affect our quarterly operating results. We derive a significant portion of our sales from our software-based connectivity products. We expect margins on newly-introduced products generally to be higher than our existing products. However, due in part to the competitive pricing pressures that affect our products and in part to increasing component and manufacturing costs, we expect margins from both existing and future products to decrease over time. In addition, licensing revenues from our products historically have provided higher margins than of our product sales. Changes in the mix of products sold and the percentage of our sales in any quarter attributable to products as compared to licensing revenues will cause our quarterly results to vary and could adversely affect our operating results. Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall. Our quarterly and annual operating results have varied in the past and are expected to vary in the future depending upon a number of factors. As a result, we believe that quarter-to-quarter comparisons of our financial results are not necessarily meaningful, and you should not rely on them as an indication of future performance. The operating results of companies in our industry have in the past experienced significant quarter-to-quarter fluctuations. If our revenues for a quarter fall below our expectations and we are not able to quickly reduce our operating expenses in response, our operating results for that quarter would be negatively affected. In addition, it is likely that in some future quarter our operating results may be below the expectations of public market analysts and investors and, as a result, our stock price may fall. Seasonal trends in sales of our software-based connectivity products may affect our quarterly operating results. We have experienced and expect to continue to experience seasonality in sales of our connectivity products. These seasonal trends materially affect our quarter-to-quarter operating results. Our revenues are higher during the back- to-school and holiday seasons which fall in the third and fourth calendar quarters. Revenue and operating results in our third and fourth quarters are typically higher relative to other quarters because many purchasers of PCs make purchase decisions based on their calendar year-end budgeting requirements. As a result, we generally expect revenue levels and operating results for the first quarter to be less than those for the preceding quarter. We are currently expanding our sales in international markets, particularly in Asia, Europe and South America. We expect our third quarter to reflect the effects of summer slowing of international business activity and spending activity generally associated with that time of year, particularly in Europe. To the extent that our revenue in Asia, Europe or other parts of the world increase in future periods, we expect our period-to-period revenues to reflect seasonal buying patterns in these markets. We expect that our operating expenses will increase substantially in the future and these increased expenses may adversely affect our ability to remain profitable. Although we have been profitable in recent years, we may not remain profitable on a quarterly or annual basis in the future. We anticipate that our expenses will increase substantially in the foreseeable future as we: . further develop and introduce new applications and functionality for our host signal processing technology, . explore emerging product opportunities in digital technologies and wireless and cable communications, 11

. expand our distribution channels, both domestically and in our international markets, and . pursue strategic relationships and acquisitions. In order to maintain profitability we will be required to increase our revenue to meet these additional expenses. Any failure to significantly increase our revenue as we implement our product, service, distribution and strategic relationship strategies would have a negative effect on our operating results. We must accurately forecast our customer demand for our modem products. If there is an unexpected fluctuation in demand for our products, we may incur excessive operating costs or lose product revenues. We must forecast and place purchase orders for specialized semiconductor chips, the ASIC, CODEC and discrete access array, or DAA, components of our modem products, several months before we receive purchase orders from our own customers. This forecasting and order lead time requirement limits our ability to react to unexpected fluctuations in demand for our products. These fluctuations can be unexpected and may cause us to have excess inventory, or a shortage, of a particular product. In the event that our forecasts are inaccurate, we may need to write down excess inventory. For example, we were required to write down inventory in the second quarter of 1996 in connection with a product transition within our 14.4 Kbps product family. Similarly, if we fail to purchase sufficient supplies on a timely basis, we may incur additional rush charges or we may lose product revenues if we are not able to meet a purchase order. These failures could also adversely affect our customer relations. Significant write-downs of excess inventory or declines in inventory value in the future could adversely affect our financial results. Any delays in our normally lengthy sales cycles could result in significant fluctuations in our quarterly operating results. Sales cycles for our products with major customers are lengthy, often lasting six months or longer. In addition, it can take an additional six months or more before a customer commences volume production of equipment that incorporates our products. Sales cycles with our major customers are lengthy for a number of reasons: . our OEM customers usually complete a lengthy technical evaluation of our products, over which we have no control, before placing a purchase order, . the commercial integration of our products by an OEM is typically limited during the initial release to evaluate product performance, and . the development and commercial introduction of products incorporating new technologies frequently are delayed. A significant portion of our operating expenses is relatively fixed and is based in large part on our forecasts of volume and timing of orders. The lengthy sales cycles make forecasting the volume and timing of product orders difficult. In addition, the delays inherent in lengthy sales cycles raise additional risks of customer decisions to cancel or change product phases. If customer cancellations or product changes were to occur, this could result in the loss of anticipated sales without sufficient time for us to reduce our operating expenses. If this were to occur, our operating results for the quarter would be adversely affected. Other third parties may also assert that our products infringe their intellectual property rights. In addition to our ongoing patent litigation with Motorola, we have received, and may receive in the future, communications from third parties asserting that our products infringe on their intellectual property rights. These claims could affect our relationships with existing customers and may prevent potential future customers from purchasing our products or licensing our technology. Because we depend upon a limited number of products, any claims of this kind, whether they are with or without merit, could be time consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. In the event that we do not prevail in litigation, we could be prevented from selling our products or be required to 12

enter into royalty or licensing agreements on terms which may not be acceptable to us. We could also be prevented from selling our products or be required to pay substantial monetary damages. We have received communications from third parties, including Motorola, Lucent and Dr. Brent Townshend, claiming to own patent rights in technologies that are part of communications standards adopted by the ITU, such as v.90, v.34, v.42bis and v.32bis, and other common communications standards. These third parties claim that our products utilize such patented technologies and have requested that we enter into license agreements with them. At various times we have engaged in negotiations with, and are continuing to negotiate with, Lucent to obtain licenses under its patents. Motorola has refused to conduct further negotiations with us to license its patents and we are in litigation with Motorola in connection with its patent infringement claims. To date, we have not obtained any licenses from Lucent, Motorola or Dr. Townshend, because we believe that Lucent, Motorola and Dr. Townshend have requested license fees or cross licenses of our portfolio of intellectual property on terms that are not fair, reasonable and nondiscriminatory as required by the ITU. Should we cross license our intellectual property in order to obtain licenses, we may no longer be able to offer a unique product. In addition, new patent applications may be currently pending or filed in the future by third parties covering technology that we use currently or may use in the future. Pending U.S. patent applications are confidential until patents are issued, and thus it is impossible to ascertain all possible patent infringement claims against us. We believe that several of our competitors, including Motorola, Lucent and ESS Technology, may have a strategy of protecting their market share by filing intellectual property claims against their competitors and may assert claims against us in the future. The legal and other expenses and diversion of resources associated with any such litigation could materially and adversely affect our business, financial condition and results of operations. In addition, some of our customer agreements include an indemnity clause that obligates us to defend and pay all damages and costs finally awarded by a court should third parties assert patent and/or copyright claims against our customers. As a result, we may be held responsible for infringement claims asserted against our customers. We have established and recorded on a monthly basis a financial per-unit reserve for payment of future license fees based upon our estimate as to the likely amount of the licensing fees that we may be required to pay in the event that licenses are obtained. We believe that it is typical for participants in the modem industry to obtain licenses in exchange for grants of cross licenses rather than for payment of fees and we have based our estimates on our understanding of the license fee practices of other segments of our industry. Our reserves may not be adequate because of factors outside of our control and because these license fee practices in the modern industry may not be applicable to our experience. If we cannot retain our executive officers and our key personnel our business may be adversely affected. Our past performance has been and our future performance is substantially dependent on the performance of our current executive officers and certain key engineering, managerial, sales, marketing, financial, technical and customer support personnel. If we lost the services of one or more of our executives or key employees, a replacement could be difficult to recruit and our business could be adversely affected. In August 1999, we hired William F. Roach as our new President and Chief Operating Officer. If for any reason Mr. Roach is not successful, our business may be adversely affected. We maintain "key person" life insurance policies on Peter Chen, our Chairman and Chief Executive Officer, William Wen-Liang Hsu, our Vice President, Engineering, and Han-Chung Yeh, our Vice President, Technology, in the face amount of $1 million for each individual. However, these insurance policies may not adequately compensate for the loss of services of any of these individuals. 13

Our success depends on our ability to attract and retain qualified technical, sales, support and other administrative personnel. We intend to hire a significant number of additional engineering, sales, support, marketing and finance personnel in the future. Competition for personnel, especially engineers and marketing and sales personnel in Silicon Valley, is intense. We expect competition for qualified personnel to remain intense, and we may not succeed in attracting or retaining personnel. If we do not attract qualified personnel, this could adversely affect our business. We are particularly dependent on our ability to identify, attract, motivate and retain qualified engineers with the requisite education, backgrounds and industry experience. As of June 30, 1999, we employed a total of 58 people in our engineering department, over half of whom have advanced degrees. In the past we have experienced difficulty in recruiting qualified engineering personnel, especially developers, on a timely basis. If we are not able to hire at the levels that we plan, our ability to continue to develop products and technologies responsive to our markets will be impaired. Technical and customer support is also critical to our future success because our products and the related technologies are rapidly evolving and many customers require technical support in implementing our products. If we are unable to provide comprehensive technical support services satisfactory to our existing and prospective customers, our ability to establish and expand our presence in the connectivity markets may be adversely affected. As we continue to develop new products for the emerging broadband and Internet markets, our expanded business focus has also placed greater emphasis on our need for additional sales and marketing personnel. Hiring additional personnel in this area will be important for us to effectively achieve customer acceptance in our targeted markets. We have experienced significant growth in our business in recent periods and failure to manage our growth could strain our management and other resources. Our ability to successfully sell our products and implement our business plan in rapidly evolving markets requires an effective management planning process. Future expansion efforts could be expensive and put a strain on our management and resources. We have increased, and plan to continue to increase, the scope of our operations at a rapid rate. Our headcount has grown and will continue to grow substantially. At December 31, 1998, we had a total of 95 employees and at June 30, 1999, we had a total of 125 employees. In addition, we expect to continue to hire a significant number of new employees. To effectively manage our growth, we must maintain and enhance our financial and accounting systems and controls, integrate new personnel and manage expanded operations. If we are unable to expand our customer base, our ability to sustain our revenue growth rates may be adversely affected. To date, we have principally relied upon our direct sales organization for product sales to smaller accounts. Our direct sales efforts have focused principally on board manufacturers and smaller PC OEMs. To increase penetration of our target customer base, including large, tier-one, OEMs, we must significantly increase the size of our direct sales force and organize and deploy sales teams targeted at specific domestic tier-one OEM accounts. If we are unable to expand our sales to additional OEMs, our revenue growth rates may be adversely affected. We are subject to additional risks because we rely on independent companies to manufacture, assemble and test our products. If these companies do not meet their commitments to us, our ability to sell products to our customers would be impaired. We do not have our own manufacturing, assembling or testing operations. Instead, we rely on independent companies to manufacture, assemble and test the semiconductor chips which are integral components of our 14

products. Most of these companies are located outside of the United States. There are many risks associated with our relationships with these independent companies, including reduced control over: . delivery schedules, . quality assurance, . manufacturing costs, . capacity during periods of excess demand, and . availability of access to process technologies. In addition, the location of these independent parties outside of the United States creates additional risks resulting from the foreign regulatory, political and economic environments in which each of these companies exists. While to date we have not experienced any material problems, failures or delays by our manufacturers to provide the semiconductor chips that we require for our products, or any material change in the financial arrangements we have with these companies, could have an adverse impact on our ability to meet our customer product requirements. We are a fabless company and the majority of our products and related components are manufactured by five principal companies: Taiwan Semiconductor Manufacturing Corporation, ST Microelectronics, Kawasaki/LSI, Silicon Labs and Delta Integration. We expect to continue to rely upon these third parties for these services. Currently, the DAA chips used in our soft modem products are provided by a sole source, Silicon Labs, on a purchase order basis, and we have only a limited guaranteed supply arrangement under a contract with our supplier. We are currently in the process of qualifying a second source for our DAA chips. Although we believe that we would be able to qualify an alternative manufacturing source for DAA chips within a relatively short period of time, such a transition, if necessary, could result in loss of purchase orders or customer relationships, which could adversely affect our operating results. We rely heavily on our intellectual property rights which offer only limited protection against potential infringers. If we cannot protect these rights, this could adversely affect our business. Our success is heavily dependent upon our proprietary technology. We rely primarily on a combination of patent, copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights. These means of protecting our proprietary rights may not be adequate. We hold a total of 32 patents, a number of which cover technology that is considered essential for ITU standard communications solutions, and also have 26 additional patent applications pending or filed. These patents may never be issued. These patents, both issued and pending, may not provide sufficiently broad protection against third party infringement lawsuits or they may not prove enforceable in actions against alleged infringers. Despite precautions that we take, it may be possible for unauthorized third parties to copy aspects of our current or future products or to obtain and use information that we regard as proprietary. We may provide our licensees with access to our data model and other proprietary information underlying our licensed applications. Additionally, our competitors may independently develop similar or superior technology. Finally, policing unauthorized use of software is difficult and some foreign laws, including those of various countries in Asia, do not protect our proprietary rights to the same extent as United States laws. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Litigation could result in substantial costs and diversion of resources and could have a negative effect on our financial results. Undetected software errors or failures found in new products may result in loss of customers or delay in market acceptance of our products. Our products may contain undetected software errors or failures when first introduced or as new versions are released. Despite testing by us and by current and potential customers, errors may be found in new products after commencement of commercial shipments, resulting in loss of customers or delay in market acceptance. 15

Potential Year 2000 issues could adversely affect our business or operating results. The Year 2000 issue refers to computer programs which use two digits rather than four to define a given year and which might read a date using "00" as the year 1900 rather than the Year 2000. As a result, many companies' systems and software may need to be upgraded or replaced in order to function correctly after December 31, 1999. Our Software. In the ordinary course of our business, we test and evaluate our software modems. We believe that our current products are Year 2000 compliant, meaning that the use or occurrence of dates on or after January 1, 2000 will not materially affect the performance of our software products or the ability of our products to transmit data involving dates. However, our connectivity products are incorporated into computer products of our customers which may not be Year 2000 compliant, or which may be perceived by their markets as not meeting Year 2000 compliance requirements. As a result, it is likely that any failure of the computer products into which our products may be incorporated to be Year 2000 compliant, or any slowdown in the connectivity markets as a result of Year 2000 compliance concerns, will hurt our product sales. In addition, we believe that the purchasing patterns of customers and potential customers may be affected by Year 2000 issues as companies expend significant resources to correct or upgrade their current software systems for Year 2000 compliance. These expenditures may result in reduced funds available to purchase our products. To the extent Year 2000 issues cause a significant delay in, or cancellation of, decisions to purchase our products or services, our business would suffer. Third Party Equipment And Software. We use third party equipment and software that may not be Year 2000 compliant. This equipment and software includes our key internal systems such as for our internal accounting systems or controls. If this equipment or software does not operate properly with regard to the Year 2000, we may incur unexpected expenses to remedy any problems. These costs may materially adversely affect our business. In addition, if our key internal systems fail as a result of Year 2000 problems, we could incur substantial costs and disruption of our business. Compliance. To date, we have not incurred any material costs directly associated with Year 2000 compliance efforts, except for compensation expense associated with salaried employees who have devoted some of their time to Year 2000 assessment and remediation efforts. We do not expect the total cost of Year 2000 problems to be material to our business, financial condition or operating results. However, during the months prior to the century change, we will continue to evaluate new versions of our products, new software and information systems provided by third parties and any new infrastructure systems that we acquire, to determine whether they are Year 2000 compliant. Despite our current assessment, we may not identify and correct all significant Year 2000 problems on a timely basis. Year 2000 compliance efforts may involve significant time and expense and unremediated problems could harm our business, financial condition and operating results. We currently do not have any estimate of potential costs related to potential Year 2000 problems. We currently have no contingency plans to address the risks associated with unremediated Year 2000 problems. Risks Related to Our Industry If the market for applications using our host signal processing technology does not grow as we anticipate, or if our products are not accepted in this market, our business will be adversely affected. Our success depends on the growth of the market for applications using our host signal processing technology. This market has only recently begun to develop and may not develop at the growth rates that have been suggested by industry estimates. Market demand for host signal processing technology depends primarily upon the cost and performance benefits relative to other competing solutions. For example, soft modems have only recently begun to gain acceptance in the modem market. Although we have shipped a significant number of soft modems since we began commercial sales of these products in October 1995, the current level of demand for soft modems may not be sustained or may not grow. If customers do not accept soft modems or the market for soft modems does not grow, our business will be adversely affected. 16

Further, we are in the process of developing next generation products and applications which improve and extend upon our host signal processing technology, such as a G.Lite modem solution, an external modem product and a remote access solution. If these products are not accepted in our markets when they are introduced, our revenues and profitability will be adversely affected. Our business, operating results and financial condition will be adversely impacted if we fail to compete successfully in our connectivity product market, which is highly competitive. The connectivity device market is intensely competitive. We may not be able to compete successfully against current or potential competitors, and our failure to do so will adversely affect our business, operating results and financial condition. Our current competitors include 3Com, Conexant, ESS Technology, Lucent Technologies and Motorola. Motorola introduced soft modems in the third quarter of 1998 and Conexant introduced soft modems in the fourth quarter of 1998. We expect competition to increase in the future as current competitors enhance their product offerings, new suppliers enter the connectivity device market, new communication technologies are introduced and additional networks are deployed. We may in the future also face competition from other suppliers of products based on host signal processing technology or on new or emerging communication technologies, which may render our existing or future products obsolete or otherwise unmarketable. We believe that these competitors may include Alcatel, Analog Devices, Aware, Broadcom, Com21, Efficient Networks, Orckit, Terayon Communications and Texas Instruments. Compared to us, many of our competitors, including some of those described above, have: . longer operating histories than we do with more experience in designing and selling connectivity products and services, . greater presence in our connectivity product markets, which can provide an immediate advantage in connection with new product introductions, . greater name recognition, which can facilitate customer acceptance of new products and technologies, . access to larger customer bases, . significantly greater financial resources, which could enable a competitor to significantly reduce the price of new products below prevailing market rates to capture market share, . significantly greater research and development and other technical resources, which may enable a competitor to respond more quickly than we can to new or emerging technologies and changes in customer requirements, or to introduce new products that are superior to our products or bundle modem solutions with its other products, and . significantly greater sales and marketing resources to devote to the promotion, sale and support of competitive products. We believe that the principal competitive factors required by users and customers in the connectivity product market include compatibility with industry standards, price, functionality, ease of use and customer service and support. Although we believe that our products currently compete favorably with respect to these factors, we may not be able to maintain our competitive position against current and potential competitors. Our industry is characterized by rapidly changing technologies and our future success will depend on our ability to adapt to these technologies. The connectivity product market is characterized by rapidly changing technologies, limited product life cycles and frequent new product introductions. To remain competitive in this market, we have been required to introduce many products over a limited period of time. For example, we introduced a 14.4 Kbps product in 1995, a 28.8 Kbps product in 1996, a 33.6 Kbps product in late 1996, a non-ITU standard 56 Kbps modem in the second half of 1997 and a v.90 ITU standard 56 Kbps modem in early 1998. The market for high speed 17

data transmission is also characterized by several competing technologies that offer alternative broadband solutions which allow for higher modem speeds and faster Internet access. These competing broadband technologies include xDSL, wireless and cable. However, substantially all of our current product revenue is derived from sales of analog modems, which use a more conventional technology. We must continue to develop and introduce technologically advanced products that support one or more of these competing broadband technologies. If we are not successful in our response, we will not be able to compete effectively and our financial results will be adversely affected. If we are unable to adapt our products to evolving industry standards, we will not be able to meet the requirements of our customers. The emergence of new industry standards may render our products unmarketable or obsolete and may require us to incur substantial unanticipated costs to develop products that comply with new standards. The emphasis on communications standards in the connectivity product market may cause OEMs and end users to delay purchasing activities on a market-wide basis until vendors redesign and redevelop connectivity products to suit new industry communications standards. For example, we believe that the commercial introduction in 1997 of 56 Kbps modems based on incompatible standards created uncertainty in the modem industry generally, which adversely affected our operating results in the first two quarters of 1998. Because we intend to introduce products and applications to support broadband communications, our financial performance will depend on the announcement and acceptance of industry standards as they relate to different broadband technologies such as G.Lite and ADSL, and our ability to design and develop products based on those standards. If we do not meet or anticipate these standards, we will not be able to compete effectively and our financial results will be adversely affected. The success of our future products designed for the emerging broadband and Internet markets will depend on the supporting infrastructure for these markets. If this infrastructure fails to keep pace, our products will not be accepted by customers. The success of our future products for the broadband and Internet markets will depend on the commercial availability and cost of other products and systems, including switches, routers, multimedia and Internet servers, code/decode equipment within telephony networks, and customer premises equipment for the telephone company customers. If this infrastructure of products and systems is not fully integrated into our markets, the functionality and utility of our products, such as our G.Lite product designed to increase the speed of Internet access and other interactive services, will be impaired and will not be accepted by our markets. Many of the products and systems necessary to support our connectivity products are still in the implementation and testing stages of their development. We cannot assure you that the suppliers of these products and systems will complete this development and market these complementary products and components effectively. In addition, we cannot predict that these products and systems, when combined with our broadband products, will be a cost-effective means of delivering high speed data transmission, for Internet and other interactive services. Our products and those of our customers are subject to government regulations. Changes in laws or regulations that negatively impact our products and technologies could harm our business. The jurisdiction of the Federal Communications Commission extends to the entire communications industry, including our customers and their products and services that incorporate our products. Future FCC regulations affecting the broadband access services industry, our customers or our products may harm our business. For example, FCC regulatory policies that affect the availability of data and Internet services may impede our customers' penetration into their markets or affect the prices that they are able to charge. In addition, international regulatory bodies are beginning to adopt standards for the communications industry. Delays caused by our compliance with regulatory requirements may result in order cancellations or postponements of product purchases by our customers, which would harm our business and adversely affect our operating results and financial condition. 18

Risks Related to this Offering Shares eligible for sale in the near future may adversely affect the market price for our common stock. Sales of a substantial number of shares of our common stock in the public market following this offering could adversely affect the market price for our common stock. The number of shares of common stock available for sale in the public market is limited by restrictions under federal securities law and under agreements that our stockholders have entered into with the underwriters. Those agreements restrict our stockholders from selling, pledging or otherwise disposing of their shares for a period of 180 days after the date of this prospectus without the prior written consent of Banc of America Securities LLC. Banc of America Securities LLC may, however, in its sole discretion, release all or any portion of the common stock from the restrictions of the lockup agreements, although they have no current plans to do so. Upon completion of this offering we will have outstanding 15,602,078 shares of common stock, assuming no exercise of the underwriters' over allotment option and no exercise of outstanding options or warrants. Of these shares, the 4,600,000 shares sold in this offering are freely tradeable. The remaining 11,002,078 shares are eligible for sale in the public market as follows: Approximate Shares Eligible Relevant Dates for Future Sale Comment - ------------------------ --------------- --------------------------------------------------- On effective date(1).... Shares sold in this offering and eligible for sale under Rule 144(k) 90 days after effective Additional shares eligible for sale under date(2)................ Rules 144 and 701 180 days after effective All shares subject to lock-up released; additional date(2)................ shares eligible for sale under Rules 144 and 701 More than 181 days after Additional shares becoming eligible for sale under effective date(2)...... Rule 144 more than 180 days from the effective date - -------- (1) Assumes no exercise of the underwriters' over-allotment option. (2) Assumes an effective date of September 30, 1999. In addition, as of June 30, 1999, there were outstanding options and warrants to purchase 4,018,127 shares of common stock. All such options and warrants are subject to lock-up agreements. Banc of America Securities LLC may, in its sole discretion and at any time without notice, release all or any portion of the securities subject to lock-up agreements. Our current officers and directors own a significant portion of our stock and accordingly, no corporate actions requiring stockholder approval can be consummated without approval of this group. Upon completion of this offering, our officers, directors and persons or entities directly related to these individuals will together beneficially own approximately 37% of the outstanding shares. In particular, WK Technology Funds owns approximately 17.2% and Peter Chen owns 11.7% of the shares. As a result, WK Technology Funds and our officers and directors, in general, will be able to control most matters requiring stockholder approval. These matters would include the election of our directors and approval of potential mergers, consolidations or sales of all or substantially all of our assets. Our stock will likely be subject to substantial price and volume fluctuations due to a number of factors, many of which are beyond our control. Stock prices and trading volumes for many communications companies fluctuate widely for a number of reasons, including some reasons that may be unrelated to their businesses or operating results, such as changes in analysts' estimates, the presence or absence of short-selling of common stock and events affecting other companies that the market deems to be comparable. This market volatility, as well as general domestic or international economic, market and political conditions, could negatively affect the market price of our common stock without regard to our operating performance. 19

Provisions in our charter documents may inhibit a change of control or a change of management which may adversely affect the market price for our common stock. Provisions of our charter documents specify procedures for nominating and electing directors and submitting proposals for consideration at stockholder meetings. Some of these provisions could discourage potential acquisition proposals, delay or prevent a change in control transaction and have the effect of discouraging others from making tender offers for our shares. As a result, these provisions may prevent the market price of our common stock from reflecting the effects of actual or rumored takeover attempts. These same provisions may also inhibit changes in our management. Upon the closing of the offering, our board of directors will have the authority to issue up to 5,000,000 shares of preferred stock in one or more series. The board of directors can fix the price, rights, preferences, privileges and restrictions of this preferred stock without any further vote or action by our stockholders. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. Further, the issuance of shares of preferred stock may delay or prevent a change in control transaction without further action by the our stockholders. As a result, the market price of the our common stock may be adversely affected. Our securities have no prior market, and we cannot assure you that our stock price will not decline after the offering. The trading market price of our common stock may decline below the initial public offering price. In addition, an active public market for our common stock may not develop or be sustained after this offering. Before this offering, there has not been a public market for our common stock. The initial public offering price will be determined by negotiations between PC-Tel and the representatives of the underwriters. SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS This prospectus, including the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business," contains forward-looking statements. These statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include among other things, those listed under "Risk Factors" and elsewhere in this prospectus. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined under "Risk Factors." These factors may cause our actual results to differ materially from any forward-looking statement. 20

USE OF PROCEEDS We estimate that we will receive net proceeds of $66,648,000 from the sale of 4,600,000 shares of common stock based on an assumed initial offering price of $16.00 per share (or $76,915,000 assuming the underwriters' over-allotment option of $690,000 shares is exercised in full) after deducting estimated offering expenses and underwriting discounts and commissions. The principal purposes of this offering are to obtain additional capital, create a public market for our common stock and facilitate our future access to public securities markets. We currently expect to use $15.7 million of the proceeds of this offering to repay bank debt. Had this offering closed on June 30, 1999, the amount used to repay bank debt would have equaled $16.0 million. This debt bears interest at the bank's prime interest rate plus 0.5%. Absent such prepayment, this debt is to be repaid in 60 monthly payments ending in January 2004. The prepayment of this debt will result in a 3% penalty. We entered into this debt to fund our acquisition in December 1998 of Communications Systems Division from General DataComm Inc. We will use the remaining proceeds from this offering for general corporate purposes, including working capital. We also may use a portion of the net proceeds to acquire complementary products, technologies or businesses. However, we currently have no commitments or agreements and are not involved in any negotiations with respect to any transactions. Pending use of the net proceeds of this offering, we intend to invest the net proceeds in short-term, interest-bearing securities. DIVIDEND POLICY We have never declared or paid any dividends on our capital stock. We currently expect to retain future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. 21

CAPITALIZATION The following table sets forth our capitalization as of June 30, 1999 (i) on an actual basis, and (ii) on a pro forma basis adjusted to give effect to the receipt by us of the estimated net proceeds from the sale of 4,600,000 shares of common stock in this offering at an assumed initial public offering price of $16.00 per share and the repayment of outstanding bank debt for $16.0 million as of June 30, 1999. The adjusted balance sheet data as of June 30, 1999 also reflects the write-off of deferred debt issuance costs and the expense of the prepayment penalty related to the bank debt. The outstanding share information in the table excludes, as of June 30, 1999, 3,815,710 shares of common stock subject to outstanding stock options under our 1995 and 1997 stock plans, and 202,417 shares of common stock issuable upon exercise of outstanding warrants. The outstanding share information in the table also does not reflect option grants under our 1997 stock plan made during the period between July 1 and August 3, 1999 for the purchase of 565,390 shares, including an option grant to purchase 400,000 shares of common stock to Mr. William F. Roach, who became our President and Chief Operating Officer in August 1999. June 30, 1999 ------------------------------ Pro Forma After the Actual Offering ------------- --------------- (in thousands, except share and per share data) Current portion of long-term debt............... $ 1,847 $ -- ------------- ------------- Long-term debt, net of current portion.......... 13,630 -- ------------- ------------- Stockholders' equity: Preferred stock: par value $0.001 per share, aggregate liquidation preference of $10,015, 9,385,548 shares authorized, 8,510,748 issued and outstanding, actual; zero shares issued and outstanding pro forma after the offering.. 9 -- Common stock: par value $0.001 per share, 50,000,000 shares authorized, 2,491,330 issued and outstanding, actual; 15,602,078 shares issued and outstanding, pro forma after the offering...................................... 2 16 Additional paid-in-capital...................... 12,881 79,524 Deferred compensation........................... (2,162) (2,162) Retained earnings............................... 7,131 5,735 ------------- ------------- Total stockholders' equity...................... 17,861 83,113 ------------- ------------- Total capitalization............................ $ 33,338 $ 83,113 ============= ============= 22

DILUTION Net tangible book value per share of common stock represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding. Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share immediately after the completion of this offering. Our pro forma net tangible book value as of June 30, 1999 was approximately $6.7 million, or $0.61 per share of common stock. Pro forma net tangible book value per share represents total tangible assets less total liabilities, divided by the number of outstanding shares of common stock. Our pro forma net tangible book value per share stated here gives effect to the conversion of all outstanding shares of preferred stock into 8,510,748 shares of common stock effective immediately upon the closing of this offering. After giving effect to the sale of the 4,600,000 shares of common stock offered by us at an assumed initial public offering price of $16.00 per share and after deducting underwriting discounts and estimated offering expenses, the pro forma as adjusted net tangible book value at June 30, 1999 would have been approximately $73.4 million, or approximately $4.70 per share of common stock. This represents an immediate increase in net tangible book value of $4.09 per share to existing stockholders and an immediate dilution in net tangible book value of $11.30 per share to new investors of common stock in this offering. The following table illustrates this dilution on a per share basis: Assumed initial public offering price per share............... $16.00 ------ Pro forma net tangible book value per share at June 30, 1999.. $0.61 ----- Increase per share attributable to this offering.............. 4.09 ----- Pro forma as adjusted net tangible book value per share after this offering................................................ 4.70 ------ Dilution per share to new investors........................... $11.30 ====== - -------- The table above excludes, as of June 30, 1999, 3,815,710 shares of common stock subject to outstanding options under our 1995 and 1997 stock plans, and 202,417 shares of common stock issuable upon exercise of outstanding warrants. To the extent options or warrants are exercised, there will be further dilution to new investors. The following table sets forth, on a pro forma basis adjusted for the offering as of June 30, 1999, the differences between the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid by existing stockholders and by new investors, before deducting underwriting discounts and commissions and estimated offering expenses, at an assumed initial public offering price of $16.00 per share. Shares Purchased Total Consideration Average ------------------ ------------------- Price Number Percent Amount Percent Per Share ---------- ------- ----------- ------- --------- Existing stockholders.......... 11,002,078 70.5% $10,156,798 12.1% $ 0.92 New investors.................. 4,600,000 29.5% 73,600,000 87.9% 16.00 ---------- ----- ----------- ----- Total........................ 15,602,078 100.0% $83,756,798 100.0% ========== ===== =========== ===== - -------- If the underwriters' over-allotment option is exercised in full, the percentage of shares of common stock held by existing stockholders after this offering would be reduced to approximately 67.5% and the number of shares of common stock held by new investors would increase to 5,290,000 or approximately 32.5% of the total number of shares of common stock outstanding after this offering. 23

Selected Consolidated Financial Data The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations", our Consolidated Financial Statements and related notes and other financial information appearing elsewhere in this prospectus. The statement of operations data for the years ended December 31, 1996, 1997 and 1998 and the balance sheet data as of December 31, 1997 and 1998 are derived from audited financial statements included elsewhere in this prospectus. The statement of operations data for the period from inception to December 31, 1994 and year ended December 31, 1995 and the balance sheet data as of December 31, 1994, 1995 and 1996 are derived from audited financial statements not included in this prospectus. The balance sheet data as of June 30, 1999 and the statement of operations data for the six months ended June 30, 1998 and 1999 are unaudited, have been prepared on the same basis as the audited statements and, in the opinion of management, contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair representation of PC-Tel's operating results for such periods and financial condition at such date. The operating results for the six-month period ended June 30, 1999 are not necessarily indicative of the results to be expected for any other interim period or any future fiscal year. Period From Six Months February 10, 1994 Year Ended December 31, Ended June 30, (inception) to ---------------------------------------- ----------------- December 31, 1994 1995 1996 1997 1998 1998 1999 ----------------- --------- --------- --------- --------- ------- -------- (in thousands, except per share data) Statement of Operations Data: Revenues................ $ -- $ 191 $ 16,573 $ 24,009 $ 33,004 $12,343 $33,046 Cost of revenues........ -- 106 9,182 12,924 13,878 5,948 16,997 ----- --------- --------- --------- --------- ------- ------- Gross profit............ -- 85 7,391 11,085 19,126 6,395 16,049 ----- --------- --------- --------- --------- ------- ------- Operating expenses: Research and development........... 198 822 2,152 3,348 4,932 2,455 4,423 Sales and marketing.... 42 275 839 3,168 5,624 2,407 4,945 General and administrative........ 43 115 477 1,612 2,169 791 2,063 Acquired in-process research and development........... -- -- -- -- 6,130 -- -- Amortization of deferred compensation expense............... -- -- 41 -- 43 10 164 ----- --------- --------- --------- --------- ------- ------- Total operating expenses............ 283 1,212 3,509 8,128 18,898 5,663 11,595 ----- --------- --------- --------- --------- ------- ------- Income (loss) from operations............. (283) (1,127) 3,882 2,957 228 732 4,454 ----- --------- --------- --------- --------- ------- ------- Other income (expense), net: Interest income........ 4 35 127 299 504 254 303 Interest expense....... -- -- -- -- (25) (11) (895) ----- --------- --------- --------- --------- ------- ------- Total other income (expense), net...... 4 35 127 299 479 243 (592) ----- --------- --------- --------- --------- ------- ------- Income (loss) before provision for income taxes.................. (279) (1,092) 4,009 3,256 707 975 3,862 Provision for income taxes.................. 1 1 1,005 955 212 292 1,158 ----- --------- --------- --------- --------- ------- ------- Net income (loss)....... $(280) $ (1,093) $ 3,004 $ 2,301 $ 495 $ 683 $ 2,704 ===== ========= ========= ========= ========= ======= ======= Basic earnings per share.................. $ -- $ -- $ 4.79 $ 1.13 $ 0.21 $ 0.29 $ 1.10 ===== ========= ========= ========= ========= ======= ======= Diluted earnings per share.................. $ -- $ -- $ 0.29 $ 0.20 $ 0.04 $ 0.06 $ 0.21 ===== ========= ========= ========= ========= ======= ======= Shares used in computing basic earnings per share.................. -- -- 627 2,032 2,355 2,320 2,461 Shares used in computing diluted earnings per share.................. -- -- 10,280 11,645 12,325 12,400 12,638 As of December 31, ---------------------------------------------------------- June 30, 1994 1995 1996 1997 1998 1999 ----------------- --------- --------- --------- --------- -------- (in thousands) Balance Sheet Data: Cash and short-term investments............ $ 594 $ 1,676 $ 5,585 $ 6,685 $ 12,988 $23,534 Working capital......... 702 3,068 6,236 12,840 16,313 18,778 Total assets............ 747 3,980 14,110 23,148 45,996 50,483 Long term debt, net of current portion........ -- 3 5 38 14,709 13,630 Total stockholders' equity................. 746 3,228 6,689 13,610 15,139 17,861 24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion in conjunction with our Consolidated Financial Statements and related notes appearing elsewhere in this prospectus. Except for historical information, the following discussion contains forward-looking statements that involve risks and uncertainties, including, among other things, statements regarding our anticipated revenues, profits, costs and expenses, revenue mix and plans for addressing Year 2000 issues. Such forward-looking statements include, among others, those statements including the words, "may", "will", "plans", "seeks", "expects," "anticipates," "intends," "believes" and similar language. Our actual results may differ significantly from those discussed in the forward-looking statements. Factors that might cause future results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those discussed in "Risk Factors" and elsewhere in this prospectus. Overview We provide cost-effective software-based connectivity solutions that address Internet access and other communications requirements for existing analog and emerging broadband networks. Our communications products enable Internet access through desktop PCs, notebook computers and non-PC devices. From our inception in February 1994 through the end of 1995, we were a development stage company primarily engaged in product development, product testing and the establishment of strategic relationships with customers and suppliers. From 1996 to 1999, our total headcount increased to support corporate growth from 18 at the end of 1995 to 125 at June 30, 1999. We first recognized revenue on product sales in the fourth quarter of 1995, and became profitable in 1996, our first full year of product shipments. Revenues increased from $16.6 million in 1996 to $24.0 million in 1997 to $33.0 million in 1998. Revenues for the six months ended June 30, 1999 were $33.0 million. We sell soft modems to manufacturers and distributors principally in Asia through our sales personnel, independent sales representatives and distributors. Our sales to manufacturers and distributors in Asia were 74.4%, 77.1% and 75.9% of our total sales for the years ended 1996, 1997 and 1998, respectively, and 76.9% and 98.6% for the six months ended June 30, 1998 and 1999, respectively. The predominance of our sales are in Asia because our customers are primarily motherboard and modem manufacturers, and the majority of these manufacturers are located in Asia. In many cases, our indirect OEM customers specify that our products be included on the modem boards or motherboards that they purchase from the board manufacturers, and we sell our products directly to the board manufacturers for resale to our indirect OEM customers. Industry statistics indicate that approximately two-thirds of modems manufactured in Asia are sold back to OEMs located in the United States. We recognize revenues from product sales to customers upon shipment. We provide for estimated sales returns, allowances and discounts related to such sales at the time of shipment. We recognize revenues from product sales to distributors upon a "sell through" basis from the distributor to the end user. We recognize revenues from non-recurring engineering contracts as contract milestones are achieved. In the fourth quarter of 1998, we acquired substantially all of the assets and selected liabilities of Communications Systems Division of General DataComm, Inc., for a total purchase price of $17.0 million. We began to recognize revenues in the three months ended June 30, 1999 from licensing the patent portfolio that we acquired in this acquisition. These revenues are recognized based on confirmation from licensees of the royalty payments due to us. 25

Results of Operations The following table sets forth the results of our operations expressed as a percentage of total revenues. Six Months Ended Year Ended December 31, June 30, ------------------------- ------------------ 1996 1997 1998 1998 1999 ------- ------- ------- -------- -------- Revenues........................ 100.0% 100.0% 100.0% 100.0% 100.0% Cost of revenues................ 55.4 53.8 42.0 48.2 51.4 ------- ------- ------- -------- -------- Gross profit.................. 44.6 46.2 58.0 51.8 48.6 ------- ------- ------- -------- -------- Operating expenses: Research and development...... 13.0 13.9 14.9 19.9 13.4 Sales and marketing........... 5.1 13.2 17.0 19.5 15.0 General and administrative.... 2.9 6.7 6.6 6.4 6.2 Acquired in-process research and development.............. -- -- 18.6 -- -- Amortization of deferred compensation expense......... 0.2 -- 0.1 0.1 0.5 ------- ------- ------- -------- -------- Total operating expenses.... 21.2 33.8 57.2 45.9 35.1 ------- ------- ------- -------- -------- Operating income................ 23.4 12.4 0.8 5.9 13.5 ------- ------- ------- -------- -------- Other income (expense), net: Interest income............... 0.8 1.2 1.5 2.1 0.9 Interest expense.............. -- -- (0.1) (0.1) (2.7) ------- ------- ------- -------- -------- Total other income (expense), net............. 0.8 1.2 1.4 2.0 (1.8) Income before provision for income taxes................... 24.2 13.6 2.2 7.9 11.7 Provision for income taxes...... 6.1 4.0 0.6 2.4 3.5 ------- ------- ------- -------- -------- Net income...................... 18.1% 9.6% 1.6% 5.5% 8.2% ======= ======= ======= ======== ======== Six Months Ended June 30, 1998 and 1999 (All amounts in tables, other than percentages, are in thousands) Revenues - -------------------------------------------------------------------------------- Six Months Ended June 30, --------------- 1998 1999 ------- ------- Revenues....................................................... $12,343 $33,046 % change from prior period..................................... N/A 167.7% - -------------------------------------------------------------------------------- Our historical revenues primarily consisted of product sales of soft modems to board manufacturers and distributors in Asia. The 167.7% increase in revenues for the six months ended June 30, 1999 over the same period in the previous year was attributable to an increase in unit sales in 1999. We believe that this unit increase was due principally to the general acceptance of our products in the low cost, or sub-$1,000, PC marketplace, the increase of market share of our MicroModem product and the certification by Microsoft of its Windows 98 logo for our products. The benefit of increase of sales volume was partly offset by downward pressure on average selling prices and sales discounts to customers. 26

Gross Profit - -------------------------------------------------------------------------------- Six Months Ended June 30, ----------------- 1998 1999 -------- -------- Gross profit................................................. $ 6,395 $ 16,049 Percentage of revenue........................................ 51.8% 48.6% % change from prior period................................... N/A 151.0% - -------------------------------------------------------------------------------- Cost of revenues consists primarily of chipsets which we purchase from third party manufacturers and also includes amortization of intangibles related to our acquisition of the Communications Systems Division in December 1998, accrued intellectual property royalties, cost of operations, reserves for inventory obsolescence and distribution costs. The royalties accrued are our best estimate based on royalty agreements already signed, or in negotiation, as well as advice from patent counsel. Upon consummation of the Communications Systems Division acquisition, we reduced our royalty reserves because we believe that we can obtain necessary licenses of the patent portfolio in exchange for grants of cross licenses rather than the payment of fees. Gross profit increased $9.7 million, or 151.0%, to $16.0 million for the six months ended June 30, 1999 from $6.4 million for the same period the previous year. The increase in gross profit was the direct result of increased revenues. However, as a percentage of revenues, gross profit decreased from 51.8% for the six months ended June 30, 1998 to 48.6% for the same period in 1999. Average selling prices decreased faster than the rate of cost reduction, which adversely effected our gross profit margins. We believe that decreases in the average selling price of our products through volume discounts have resulted in our attaining greater market share. Research and Development - -------------------------------------------------------------------------------- Six Months Ended June 30, ------------------ 1998 1999 -------- -------- Research and development.................................... $ 2,455 $ 4,423 Percentage of revenue....................................... 19.9% 13.4% % change from prior period.................................. N/A 80.2% - -------------------------------------------------------------------------------- Research and development expenses include compensation costs for software and hardware development, prototyping, certification and pre-production costs. We expense all research and development costs as incurred. Research and development expenses increased for the six months ended June 30, 1999 due to the addition of personnel for new product development in the G.Lite, modem riser card and HIDRA projects and engineering work related to v.90 modems. As a percentage of revenues, research and development decreased for the six months ended June 30, 1999 because revenue increased proportionally greater than research and development expenses. Approximately 70% of all research and development expenses are payroll related. The headcount in this area increased approximately 87% from the same period in the prior year, which included 18 additional staff members from the Communications Systems Division acquisition in December 1998. We expect that our research and development expenses will increase in absolute dollars due to the anticipated additional headcount and continued efforts in broadband product development. Sales and Marketing - -------------------------------------------------------------------------------- Six Months Ended June 30, ------------------ 1998 1999 -------- -------- Sales and marketing......................................... $ 2,407 $ 4,945 Percentage of revenue....................................... 19.5% 15.0% % change from prior period.................................. N/A 105.4% - -------------------------------------------------------------------------------- 27

Sales and marketing expenses consist primarily of personnel costs, sales commissions and marketing costs. Marketing costs include promotional goods, trade shows, press tours and advertisements in trade magazines. Sales and marketing expenses increased $2.5 million for the six months ended June 30, 1999, but decreased as a percentage of total revenues, compared to the same period in the prior year. The dollar increase reflects the addition of sales and marketing personnel to develop new accounts, support customers, and drive new product developments and product launches. We also expanded our sales regions geographically to include Japan and Korea. The increase in sales and marketing expenses is also due to increased governmental telephony certification of our products in Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom, the production of sales materials, travel costs, trade shows and press tours. General and Administrative - -------------------------------------------------------------------------------- Six Months Ended June 30, ------------------ 1998 1999 -------- --------- General and administrative.................................. $ 791 $ 2,063 Percentage of revenue....................................... 6.4% 6.2% % change from prior period.................................. N/A 160.8% - -------------------------------------------------------------------------------- General and administrative expenses include costs associated with our general management, human resources and finance functions as well as professional service charges, such as legal, tax and accounting fees. Other general expenses include rent, insurance, utilities, travel and other operating expenses to the extent not otherwise allocated to other functions. These general and administrative expenses increased $1.3 million for the six months ended June 30, 1999, over the same period in the prior year but decreased as a percentage of total revenues, compared to the same period in the prior year. This increase reflected additional legal costs related to contract negotiations, patent submissions, additional tax planning, as well as litigation expenses related to the Motorola lawsuit. We also incurred additional expenses related to the increase in staff. Amortization of Deferred Compensation Expense - -------------------------------------------------------------------------------- Six Months Ended June 30, ------------------ 1998 1999 -------- --------- Amortization of deferred compensation expense............... $ 10 $ 164 Percentage of revenue....................................... 0.1% 0.5% % change from prior period.................................. N/A 1,540% - -------------------------------------------------------------------------------- In connection with the grant of stock options to employees, we amortized $164,000 in deferred compensation for the six months ended June 30, 1999. The deferred compensation expense related to the grant of stock options to employees for the six months ended June 30, 1998 was $10,000. We expect that the deferred compensation expense will increase to approximately $340,000 per quarter through the third quarter of 2003, based on option grant activity through August 3, 1999. Other Income (Expense), Net - -------------------------------------------------------------------------------- Six Months Ended June 30, ------------------ 1998 1999 -------- --------- Other income (expense), net................................ $ 243 $ (592) Percentage of revenue...................................... 2.0% (1.8)% % change from prior period................................. N/A (343.6)% - -------------------------------------------------------------------------------- 28

Other income (expense), net, consists of interest income, net of interest expense. Interest income is expected to fluctuate over time. Interest expense will continue to consist primarily of interest on capital leases and the $16.3 million loan issued to acquire Communications Systems Division. Other income (expense), net, decreased $835,000 for the six months ended June 30, 1999 over the same period for the prior year. The decrease was due primarily to the interest expense related to the bank loan issued to acquire the Communications Systems Division. We intend to repay the bank loan following completion of the offering. Provision for Income Taxes - -------------------------------------------------------------------------------- Six Months Ended June 30, ------------------ 1998 1999 -------- -------- Provision for income taxes.................................. $ 292 $ 1,158 Effective tax rate.......................................... 30.0% 30.0% % change from prior period.................................. N/A 296.6% - -------------------------------------------------------------------------------- Provision for income taxes increased for the six months ended June 30, 1999 over the same period for the prior year due to higher taxable income, while the effective tax rate remained constant at 30%. Year Ended December 31, 1996, 1997 and 1998 Revenues - -------------------------------------------------------------------------------- 1996 1997 1998 ------- ------- ------- Revenues............................................. $16,573 $24,009 $33,004 % change from prior period........................... N/A 44.9% 37.5% - -------------------------------------------------------------------------------- Revenues increased 37.5% for 1998 due to an increase in unit sales over 1997. This unit increase was due principally to acceptance of our products in the marketplace following the certification by Microsoft of its Windows 95 and 98 logos for our products and the launch of our v.90 soft modem products early in 1998. The benefit of increased sales volume was partly offset by downward pressure on prices throughout the industry. Revenues for 1997 increased 44.9% reflecting a doubling in unit sales over the same period in 1996. This revenue growth was fueled by the introduction of our K56Flex soft modem in late 1997. The benefit of increased sales volume was partly offset by downward pressure on prices throughout the industry. Gross Profit - -------------------------------------------------------------------------------- 1996 1997 1998 ------- ------- ------- Gross profit......................................... $ 7,391 $11,085 $19,126 Percentage of revenue................................ 44.6% 46.2% 58.0% % change from prior period........................... N/A 50.0% 72.5% - -------------------------------------------------------------------------------- Gross profit increased $8.0 million, or 72.5%, for 1998 and increased as a percentage of revenues to 58.0% from 46.2% in 1997. The increase was due to the increase in revenues and lower unit costs obtained through volume discounts from our semiconductor vendors, which were partly offset by declining selling prices throughout the industry. The increase was also due in part to a $3.0 million reversal in royalty reserves in the fourth quarter of 1998. Upon consummation of the Communications Systems Division acquisition in December 1998, we reduced our royalty reserves because we believe that in some instances we can obtain necessary licenses of third party technologies in exchange for grants of cross licenses of our patent portfolio rather than the payment of license fees or royalties. Without considering the $3.0 million reversal in royalty reserves, gross profit as a percentage of revenues would have been 48.9% in 1998. 29

The increase in gross profit as a percentage of revenues from 1996 to 1997 reflects the change in the mixture of sales toward higher margin modems, economies of scale and lower reserves required for product obsolescence. The addition of personnel in the operations area enabled us to focus on better managing product cost, improving product transition strategies and reducing inventory levels. Research and Development - -------------------------------------------------------------------------------- 1996 1997 1998 ------ ------ ------ Research and development................................ $2,152 $3,348 $4,932 Percentage of revenue................................... 13.0% 13.9% 14.9% % change from prior period.............................. N/A 55.6% 47.3% - -------------------------------------------------------------------------------- Research and development expenses increased $1.6 million, or 47.3%, for 1998. The increase was due to the addition of research and development personnel to facilitate new product development for our v.90, G.Lite and Modem Riser products. Research and development expenses increased $1.2 million in 1997, reflecting the growth in our software development team to facilitate new product development for our K56Flex and v.90 products. Sales and Marketing - -------------------------------------------------------------------------------- 1996 1997 1998 ------ ------ ------ Sales and marketing..................................... $ 839 $3,168 $5,624 Percentage of revenue................................... 5.1% 13.2% 17.0% % change from prior period.............................. N/A 277.6% 77.5% - -------------------------------------------------------------------------------- Sales and marketing expenses increased $2.5 million for 1998. We continued to develop our sales organization in 1998 to expand into different distribution channels, particularly the OEM channel. Consequently, sales and marketing personnel grew by approximately 63% to develop new accounts, support customers and drive new product developments and product launches. Sales and marketing expenses in 1998 also reflected higher sales commissions and increased promotional activity including increased spending in trade shows and press tours. Sales and marketing expenses increased $2.3 million for 1997, reflecting the addition of sales and marketing personnel to support customers, develop new accounts and expand our business geographically. Higher sales and marketing expenses in 1997 also included increased commission expenses due to higher revenues, increased promotional activity, the production of sales material and the costs of trade shows and press tours. General and Administrative - -------------------------------------------------------------------------------- 1996 1997 1998 ------ ------ ------ General and administrative.............................. $ 477 $1,612 $2,169 Percentage of revenue................................... 2.9% 6.7% 6.6% % change from prior period.............................. N/A 237.9% 34.6% - -------------------------------------------------------------------------------- General and administrative expenses increased $557,000 for 1998. This increase reflected additional legal costs related to the negotiation and review of an increased number of contracts, an increase in patent submissions, tax planning and litigation expenses related to the Motorola lawsuit. General and administrative expenses increased $1.1 million for 1997, reflecting higher costs associated with the expansion of our infrastructure, including increased personnel required to implement and sustain a financial reporting structure and increased expenses resulting from the move to a larger facility. 30

Acquired In-Process Research & Development - -------------------------------------------------------------------------------- 1996 1997 1998 ---- ---- ------ Acquired in-process research & development.................... -- -- $6,130 Percentage of revenue......................................... -- -- 18.6% % change from prior period.................................... N/A -- -- - -------------------------------------------------------------------------------- Upon completion of our acquisition of the Communications Systems Division in December 1998, we immediately expensed $6.1 million, representing purchased in- process technology that had not yet reached technological feasibility and had no alternative future use. The value assigned to purchased in-process technology, based on a percentage of completion discounted cash flow method, was determined by identifying research projects in areas for which technological feasibility has not been established. The value was determined by estimating the costs to develop the purchased in-process technology into commercially viable products, estimating the resulting net cash flows from such projects, and discounting the net cash flows back to their present value. The discount rate includes a risk-adjusted discount rate to take into account the uncertainty surrounding the successful development of the in-process technology. The valuation includes cash inflows from in-process technology through 2002 with revenues commencing in 1999 and increasing significantly in 2000 before declining in 2002. A royalty payment of 3% was assumed from in- process technology to existing technology, based on management's estimate of a patent license rate. The HIDRA and industrial modem projects were approximately 56% complete at the time of the valuation and the expected timeframe for achieving these product releases was assumed to be in the second half of 1999. The DSL project was approximately 56% complete at the time of the valuation and the expected timeframe for achieving this product release is assumed to be in early 2000. Significant remaining development efforts must be completed in the next six to 18 months in order for the projects of the Communications Systems Division to become implemented in a commercially viable timeframe. Amortization of Deferred Compensation Expense - -------------------------------------------------------------------------------- 1996 1997 1998 ------ ----- ----- Amortization of deferred compensation expense........... $ 41 $ -- $ 43 Percentage of revenue................................... 0.2% -- 0.1% % change from prior period.............................. N/A -- -- - -------------------------------------------------------------------------------- In connection with the grant of stock options to employees, we amortized $43,000 in deferred compensation for the year ended December 31, 1998. There was no deferred compensation expense for the year ended December 31, 1997. The deferred compensation expense related to the grant of stock options to employees for the year ended December 31, 1996 was $41,000. Other Income (Expense), Net - -------------------------------------------------------------------------------- 1996 1997 1998 ------ ----- ----- Other income (expense), net............................. $ 127 $ 299 $ 479 Percentage of revenue................................... 0.8% 1.2% 1.4% % change from prior period.............................. N/A 135.4% 60.2% - -------------------------------------------------------------------------------- Other income (expense), net, increased $180,000 for 1998. The increase was due to higher average cash balances. Provision for Income Taxes - -------------------------------------------------------------------------------- 1996 1997 1998 ------ ----- ----- Provision for income taxes.............................. $1,005 $ 955 $ 212 Effective tax rate...................................... 25.1% 29.3 % 30.0 % % change from prior period.............................. N/A (5.0)% (77.8)% - -------------------------------------------------------------------------------- 31

Provision for income taxes decreased $743,000, or 77.8%, for 1998 due to lower gross profits, while the effective tax rate for 1998 remained at 30.0%. Income taxes remained relatively constant for 1997 and 1996. The lower effective tax rate for 1996 was due to the benefit realized from net operating losses carried forward from our inception. We have deferred tax assets on our balance sheet as of December 31, 1998 amounting to $4.2 million. We believe that our expected effective tax rate will be below the statutory tax rate due to our research and development tax credits and the increase in international sales through our wholly owned subsidiaries. 32

Quarterly Results of Operations The following table presents our operating results for each of the six quarters up to and including the period ended June 30, 1999. The information for each of these quarters is unaudited and has been prepared on the same basis as the audited financial statements appearing elsewhere in this prospectus. In the opinion of management, all necessary adjustments consisting only of normal recurring adjustments, have been included to present fairly the unaudited quarterly results when read in conjunction with our audited Consolidated Financial Statements and the related notes appearing elsewhere in this prospectus. These operating results are not necessarily indicative of the results of any future period. Quarter Ended --------------------------------------------------------- Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, 1998 1998 1998 1998 1999 1999 -------- -------- --------- -------- -------- -------- Revenues................ $5,515 $6,828 $9,063 $11,598 $15,156 $17,890 Cost of revenues........ 2,533 3,415 4,902 3,028 7,926 9,071 ------ ------ ------ ------- ------- ------- Gross profit........... 2,982 3,413 4,161 8,570 7,230 8,819 ------ ------ ------ ------- ------- ------- Operating expenses: Research and development........... 1,129 1,326 1,283 1,194 2,043 2,380 Sales and marketing.... 1,068 1,339 1,713 1,504 2,298 2,647 General and administrative........ 384 407 423 955 815 1,248 Acquired in-process research and development........... -- -- -- 6,130 -- -- Amortization of deferred compensation expense............... -- 10 17 16 16 148 ------ ------ ------ ------- ------- ------- Total operating expenses............. 2,581 3,082 3,436 9,799 5,172 6,423 ------ ------ ------ ------- ------- ------- Operating income (loss)................. 401 331 725 (1,229) 2,058 2,396 ------ ------ ------ ------- ------- ------- Other income (expense), net: Interest income........ 106 148 140 110 116 187 Interest expense....... (5) (6) (6) (8) (453) (442) ------ ------ ------ ------- ------- ------- Total other income (expense), net....... 101 142 134 102 (337) (255) ------ ------ ------ ------- ------- ------- Income (loss) before provision for income taxes.................. 502 473 859 (1,127) 1,721 2,141 Provision (benefit) for income taxes........... 151 141 258 (338) 516 642 ------ ------ ------ ------- ------- ------- Net income (loss)....... $ 351 $ 332 $ 601 $ (789) $ 1,205 $ 1,499 ====== ====== ====== ======= ======= ======= Quarter Ended --------------------------------------------------------- Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, 1998 1998 1998 1998 1999 1999 -------- -------- --------- -------- -------- -------- Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of revenues........ 45.9 50.0 54.1 26.1 52.3 50.7 ------ ------ ------ ------- ------- ------- Gross profit........... 54.1 50.0 45.9 73.9 47.7 49.3 ------ ------ ------ ------- ------- ------- Operating expenses: Research and development........... 20.5 19.4 14.2 10.3 13.5 13.3 Sales and marketing.... 19.4 19.6 18.9 13.0 15.1 14.8 General and administrative........ 7.0 6.0 4.7 8.2 5.4 7.0 Acquired in-process research and development........... 0.0 0.0 0.0 52.9 0.0 0.0 Amortization of deferred compensation expense............... -- 0.1 0.1 0.1 0.1 0.8 ------ ------ ------ ------- ------- ------- Total operating expenses............. 46.9 45.1 37.9 84.5 34.1 35.9 ------ ------ ------ ------- ------- ------- Operating income (loss)................. 7.2 4.9 8.0 (10.6) 13.6 13.4 ------ ------ ------ ------- ------- ------- Other income (expense), net: Interest income........ 1.9 2.2 1.5 1.0 0.8 1.1 Interest expense....... (0.1) (0.1) -- (0.1) (3.0) (2.5) ------ ------ ------ ------- ------- ------- Total other income (expense), net....... 1.8 2.1 1.5 0.9 (2.2) (1.4) ------ ------ ------ ------- ------- ------- Income (loss) before provision for income taxes.................. 9.0 7.0 9.5 (9.7) 11.4 12.0 Provision (benefit) for income taxes........... 2.7 2.1 2.8 (2.9) 3.4 3.6 ------ ------ ------ ------- ------- ------- Net income (loss)....... 6.3% 4.9% 6.7% (6.8)% 8.0% 8.4% ====== ====== ====== ======= ======= ======= 33

Our quarterly operating results have varied significantly in the past and may vary significantly in the future depending on a number of factors, many of which are beyond our control. Our revenues have been negatively affected by market-wide delays in purchasing activities associated with the anticipated announcement by the ITU of the v.90 standard whereas our revenues have been positively affected by the market acceptance of our soft modems. We have also experienced seasonality in our quarterly operating results. A detailed discussion of these and other factors are described under Risk Factors elsewhere in this prospectus. Our gross profit for the fourth quarter ended December 31, 1998 was favorably impacted by the reversal of $3.0 million in royalty reserves. Without considering the reversal, gross profit as a percentage of revenues would have been 48.0% in the fourth quarter of 1998. Liquidity and Capital Resources Six Months Ended June 30, 1998 and 1999 - -------------------------------------------------------------------------------- 1998 1999 ------- ------- Net cash provided by operating activities..................... $ 1,080 $12,262 Net cash used in investing activities......................... (149) (6,980) Net cash provided by (used in) financing activities........... 4,756 (1,018) Cash and short-term investments at end of period.............. 12,988 23,534 Working capital............................................... N/A 18,778 - -------------------------------------------------------------------------------- The increase in net cash provided by operating activities for the six months ended June 30, 1999 compared to 1998 was primarily due to better collection in accounts receivable due to the use of letters of credit and a higher net income in 1999. Net cash used in investing activities for the six months ended June 30, 1999 reflected the purchases of short-term investments, property and equipment, while net cash used in financing activities for the six months ended June 30, 1999 reflected the repayment of principal of the notes payable arrangements associated with the Communications Systems Division acquisition. As of June 30, 1999, we had $23.5 million in cash and cash equivalents and short-term investments and working capital of $18.8 million. As of June 30, 1999, we had outstanding debt of $15.5 million under notes payable arrangements which we will repay for $15.7 million, including a prepayment penalty, following the closing of this offering. Year Ended December 31, 1996, 1997 and 1998 - -------------------------------------------------------------------------------- 1996 1997 1998 ------- ------- -------- Net cash provided by operating activities......... $ 4,753 $ 917 $ 2,719 Net cash provided by (used in) investing activities....................................... (1,258) 576 (17,344) Net cash provided by (used in) financing activities....................................... 414 (393) 20,928 Cash and equivalents at end of period............. 5,585 6,685 12,988 Working capital................................... 6,236 12,840 16,313 - ------------------------------------------------------------------------------ Since our inception through December 31, 1998, we have funded our operations primarily through the sale of convertible preferred stock and cash generated from operations. We received $388,000 and $5.0 million from the sale of convertible preferred stock in 1996 and 1998, respectively. Net cash provided by operating activities for 1996, 1997 and 1998 were $4.8 million, $917,000 and $2.7 million, respectively. The decrease in net cash provided by operating activities for 1997 compared to 1996 was primarily due to increased working capital requirements associated with higher revenues as well as lower net income in 1997. The increase in net cash provided by operating activities for 1998 compared to 1997 was primarily due to higher net income before considering the write-off of acquired in-process research and development and also increased accruals. 34

Net cash provided by (used for) investing activities was $(1.3) million, $576,000 and $(17.3) million for 1996, 1997 and 1998, respectively. Net cash provided by investing activities for 1997 reflected proceeds from the sale of short-term investments, net of purchases of property and equipment, while net cash used in investing activities for 1998 represented the Communications Systems Division acquisition, and purchases of property, plant and equipment. The timing and amount of future capital expenditures will depend primarily on our growth. Our principal commitments consist of leases for our office facilities as well as other general obligations under our capital leases. We anticipate that we will relocate to larger office facilities within the next six months and we expect to incur additional capital expenditures of approximately $500,000 per year. We currently have no other material commitments for capital expenditures. As of June 30, 1999, we had $23.5 million in cash and cash equivalents and short-term investments and working capital of $18.8 million. In December 1998, we became obligated under notes payable in the aggregate principal amount of $16.3 million in connection with the acquisition of Communications Systems Division. We intend to repay these notes following the closing of this offering. In connection with these notes payable, we issued a warrant to purchase 200,000 shares of Series C preferred stock at an exercise price of $8.00 per share. The warrants are immediately exercisable and expire ten years from the date of issuance. The fair value of the warrants at the date of the issuance was estimated to be $1.4 million. We recorded the fair value of the warrants as a deferred charge which will be amortized over the term of the notes. We believe that the net proceeds from the offering, together with existing sources of liquidity, will be sufficient to meet our working capital and anticipated capital expenditure requirements for at least the next 12 months. Thereafter, we may require additional funds to support our working capital requirements or for other purposes, and may seek, even before such time, to raise additional funds through public or private equity or debt financing or from other sources. Additional financing may not be available at all, and if it is available, such financing may not be obtainable on terms acceptable to us or that are not dilutive to our stockholders. Recent Accounting Pronouncements In March 1998, the American Institute of Certified Public Accountants issued Statement of Position No. 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which we adopted in fiscal 1999. SOP No. 98-1 requires entities to capitalize certain costs related to internal-use software once certain criteria has been met. The adoption did not have a material impact on our financial position or results of operations. In April 1998, the American Institute of Certified Public Accountants issued SOP No. 98-5 "Reporting on the Costs of Start-Up Activities," which we adopted in fiscal 1999. SOP No. 98-5 requires that all start-up costs related to new operations must be expensed as incurred. In addition, all start-up costs that were previously capitalized must be written off when SOP No. 98-5 is adopted. The adoption did not have a material impact on our financial position or results of operations. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires certain accounting and reporting standards for derivative financial instruments and hedging activities. We are subject to SFAS No. 133 for the first quarter beginning January 1, 2001. Because we do not currently hold any derivative instruments and do not engage in hedging activities, we do not believe that the adoption of SFAS No. 133 will have a material impact on our financial position or results of operations. Qualitative and Quantitative Disclosures About Market and Interest Rate Risk We are exposed to minimal market risks. We manage the sensitivity of our results of operations to these risks by maintaining a conservative investment portfolio, which is comprised solely of highly-rated, short-term investments. We do not hold or issue derivative, derivative commodity instruments or other financial 35

instruments for trading purposes. We are exposed to currency fluctuations, as we sell our products internationally. We manage the sensitivity of our international sales by denominating all transactions in U.S. dollars. We may be exposed to interest rate risks, as we may use additional financing to fund additional acquisitions and fund other capital expenditures. The interest rate that we may be able to obtain on financings will depend on market conditions at that time and may differ from the rates we have secured in the past. Year 2000 Compliance We have completed our initial assessment of the potential overall impact of the impending century change on our business, financial condition and operating results. Based on our current assessment, we believe the current versions of our products are Year 2000 compliant. However, our products operate in complex network environments and directly or indirectly interact with a number of other hardware and software systems that we cannot adequately evaluate for Year 2000 compliance. We may face claims based on Year 2000 problems in other companies' products, or issues arising from the integration of multiple products within an overall system. We have not been a party to any litigation or arbitration proceeding involving our products or services related to Year 2000 compliance issues. We may in the future be required to defend our products or services in such proceedings, or to negotiate resolutions of claims based on Year 2000 issues. We have reviewed our internal management information and other critical business systems to identify any Year 2000 problems. We also have communicated with the external vendors that supply us with material software and information systems and with significant suppliers to determine their Year 2000 readiness. Based on our vendors' representations, we believe that the third-party hardware and software we use is Year 2000 compliant. To date, we have not incurred any material costs directly associated with Year 2000 compliance efforts, except for compensation expense associated with salaried employees who have devoted some of their time to Year 2000 assessment and remediation efforts. We do not expect the total cost of Year 2000 problems to be material to our business, financial condition or operating results. However, during the months prior to the century change, we will continue to evaluate new versions of our products, new software and information systems provided by third parties and any new infrastructure systems that we acquire, to determine whether they are Year 2000 compliant. Despite our current assessment, we may not identify and correct all significant Year 2000 problems on a timely basis. Year 2000 compliance efforts may involve significant time and expense and unremediated problems could harm our business, financial condition and operating results. We currently do not have any estimate of potential costs related to potential Year 2000 problems. We currently have no contingency plans to address the risks associated with unremediated Year 2000 problems. 36

BUSINESS Overview We are a leading developer and supplier of cost-effective software-based connectivity solutions. Our solutions enable Internet access and other communications applications through existing analog and emerging broadband networks. We have developed a proprietary software architecture that substantially reduces the hardware, space and power requirements of conventional hardware-based connectivity devices. Our software architecture is also easily upgradeable, minimizing the risk of technological obsolescence. Our communications products are designed to enable widespread Internet access and other communication applications through, desktop PCs, notebook computers and non-PC devices. We are a pioneer in developing host signal processing technology, a proprietary set of algorithms that enables cost-effective software-based digital signal processing solutions. Host signal processing technology utilizes the computational and processing resources of a host central processing unit rather than requiring additional special-purpose hardware. The reduction of hardware components in our architecture reduces space requirements by 50% and power requirements by 70% compared to conventional solutions. The first implementation of our host signal processing technology was in a software modem, or soft modem, in 1995. Through June 1999, we have shipped 11.3 million soft modems. Based on our unit shipments in 1998, we believe we are the largest worldwide producer of soft modems, representing 68% of all soft modems sold that year, as estimated by Vision Quest 2000. We also believe that in 1998 we sold 6% of all analog modems estimated by Dataquest to have been 59.1 million units. Various OEMs, including Acer, Dell, emachines, Fujitsu and Sharp, have integrated our soft modems into their products. We continue to innovate and expand upon our successful host signal processing architecture so that we can provide high speed connectivity solutions for broadband communications, including xDSL, cable and wireless communications. These emerging opportunities include connectivity solutions for client-side applications, enterprise servers, service providers and industrial markets. We have extended our host signal processing architecture and have developed a G.Lite solution, LiteSpeed, that enables downstream broadband data transmission speeds of up to 1.5 Mbps and upstream broadband data transmission speeds of 512 Kbps over existing copper telephone lines. We expect to begin shipments of this product in the first half of 2000. We also have developed an embedded solution for non-PC devices that either do not use a central processing unit or lack the excess processing capacity necessary to support our host signal processing solution. These devices include Internet appliances, such as set-top boxes and webphones, video game consoles and remote monitoring devices. By offering reductions in size, cost and power consumption, we also believe that this solution is ideal for service providers and server-side applications such as single and multi-port remote access servers and concentrators. We enhanced our position as an intellectual property leader with the acquisition of our Communications Systems Division from General DataComm, Inc. in the fourth quarter of 1998. As a result of this acquisition and our own intellectual property development efforts, we hold 32 patents, a number of which cover technology that is considered essential for International Telecommunication Union, or ITU, standard communications solutions. We also have 26 additional patent applications pending or filed. Industry Overview In recent years, dramatic increases in business and consumer demand for multimedia information, entertainment and voice and data communication have resulted in a corresponding increase in demand for high speed remote access. The accelerated growth of content-rich applications, which require high bandwidth, has changed the nature of information networks. High-speed connectivity is now a requirement for business, government, academic and home environments. Businesses, ranging from large and small corporate enterprises to home offices, are increasingly dependent upon data networks, not only for communication within the office, but also to exchange information among corporate sites, remote locations, telecommuters, business partners, 37

suppliers and customers. Consumers are also increasingly accessing data networks such as the Internet to communicate, collect and publish information and conduct retail purchases. These market trends have resulted in a significant increase in the demand for connectivity devices. International Data Corporation estimates that by 2003, the number of Internet connectivity devices will grow to over 722 million. Analog Connectivity Solutions Although there has been significant publicity given to broadband connectivity, the majority of Internet access is still through dial-up, or analog, connections. Analog technology converts digital data into an analog signal for transmission over telephone networks, and executes the reverse analog-to-digital signal conversion to enable the host device to receive the transmitted data. Analog modems, which, according to Dataquest, comprised 90% of the modem market in 1998, are primarily utilized by PC devices. Dataquest estimates that 59.1 million analog modems were sold in 1998, and expects this number to reach 74.8 million units in 2001. Although the number of analog modems is expected to grow in the near future, new technologies have emerged to address the volume of bandwidth intensive data and demand for enhanced multimedia capabilities. Broadband Connectivity Solutions The data transmission constraints of copper telephone wires have led the communications industry to focus on broadband communications. In order to address the demand for high-speed connectivity, telecommunications service providers have developed and deployed cost-effective technologies in their networks. However, the lack of ubiquitous low-cost, high-bandwidth connectivity from the backbone network to the customer premises has been the underlying issue preventing the majority of the market from taking advantage of the array of high-bandwidth network services. Although the broadband access market is underdeveloped, its potential size has attracted a high level of attention. Telephone, cable and satellite companies each have different strategies and capabilities for providing this broadband connectivity to the Internet. Each has its advantages based on price, performance and availability. Digital Subscriber Line. DSL utilizes the ubiquitous, existing public switched telephone network, or PSTN, infrastructure, without the need for expensive additions and upgrades. DSL technologies dramatically increase the data transmission capacity of standard telephone lines and are expected to enable a wide range of new services including high speed Internet access and digital television. Most of the businesses and homes today are connected to the PSTN by twisted-pair copper wire. It is estimated that there are nearly 700 million copper wire access lines in existence today worldwide, and that more than 95% consist of a single twisted-pair copper wire. A wide array of DSL technologies known as xDSL products are rapidly emerging. The "x" in xDSL represents the various kinds of digital subscriber line technologies. Each type of DSL has distinguishing advantages and disadvantages, depending on a variety of bandwidth and deployment features suitable for different applications. DSL is either symmetric, which delivers the same data rate both downstream and upstream, or asymmetric, which delivers faster data rates downstream than upstream. The other distinguishing feature is the data rate itself. DSL technologies allow for the transmission of data at speeds ranging from 128 Kbps to 52 Mbps depending on the distance between the central office and the subscriber. Common types of DSL technologies include: ADSL. Asymmetric digital subscriber line, or ADSL, allows more bandwidth downstream than upstream. This asymmetry, combined with "always-on" access, makes ADSL ideal for Internet surfing, video-on-demand and remote local area network access. Users of these applications typically download much more information than they send. In order to implement an ADSL solution, a splitter, which is a device that separates the voice signal from the data signal, must be installed both at the head-end and at the customer's premises. This process of installing splitters for each subscriber means a service truck needs to be sent to each customer site in order to initiate service. This process is expensive and time consuming 38

and ultimately slows the overall service deployment. ADSL provides speeds up to 8 Mbps downstream and up to 1 Mbps upstream, depending on the line conditions and the length of the loop. G.Lite. G.Lite is a lower-speed version of ADSL that will eliminate the need for the service provider to install a splitter at the customer's premises. G.Lite allows for a downstream data transmission rate of up to 1.5 Mbps and an upstream data transmission rate of up to 512 Kbps, and is expected to be as simple as the "plug-and-play" nature of traditional, analog dial-up modems. G.SHDSL. Single-pair HDSL, or G.SHDSL, requires only a single copper twisted-pair and has a maximum loop length of 10,000 feet from the telephone company's central office. G.SHDSL can offer symmetrical data transmission rates of up to 1.544 Mbps. Since G.SHDSL uses only one copper twisted-pair, the capacity of existing infrastructure is greatly increased. VDSL. Very-high-bit-rate digital subscriber line, or VDSL, technology is the fastest DSL technology, supporting a maximum downstream rate of 52 Mbps and an upstream rate of 10 Mbps over a single copper twisted-pair wire. The one limitation of VDSL is that the maximum loop length is only between 1,000 and 4,500 feet from the telephone company's central office. Wireless. The main alternatives in wireless broadband access are wireless and broadband satellite. Wireless provides advantages over wireline, the primary benefits being speed and ease of installation. The strength of wireless is that it can quickly provide high-speed Internet access within a 10, 20 or 35 mile radius depending on the frequency band used. In the next several years, wireless is expected to help unlock broadband competition thereby enabling new operators to bypass existing wireline networks and deliver local and long distance telephone service and Internet access services. Cable Modems. Designed to provide broadband Internet access, cable modems are targeted primarily at the consumer market. Cable lines pass by more than 100 million North American homes, but only 20% of those homes can now get cable modem service. Cable lines offer downstream transmission speeds of up to 36 Mbps and upstream transmission speeds of up to 10 Mbps. In order to fully realize the benefits of two way communications, cable operators must upgrade their networks to improve the provisioning of existing cable services and to support high-speed data and other new services. Non-PC Connectivity While existing Internet connectivity devices are primarily PC-based, development of enabling technologies and the growth in consumer dependence are spurring the deployment of non-PC devices. These devices include Internet appliances such as set-top boxes and webphones, video game consoles and remote monitoring devices. International Data Corporation predicts that as many as 42% of all Internet access devices will be in the form of non-PC devices by 2001. However, it is difficult to integrate modem functionality into these compact devices due to the limited availability of power and space. Server-Side As the number of connectivity devices increases, service providers will be required to increase the number of server-side access ports to ensure reliability and quality service for their customers. Presently, communications equipment providers are limited to using either expensive multiport chips or a single modem port per chip. Internet service providers and other service providers who locate their server-side equipment at the telephone companies' central offices do not have the space or power available to accommodate the expected growth in demand for client-side access. Service providers are demanding connectivity solutions that increase the density of modem ports per chip while reducing cost, space and power requirements. Evolution from Hardware to Software-based Connectivity Solutions The rapid development of emerging technologies for broadband access combined with changing industry standards and protocols is driving manufacturers to turn towards software-based connectivity solutions as 39

opposed to conventional hardware connectivity solutions. Further, trends such as the acceptance of alternative access devices, the significant increase in available processing power, cost reduction pressures and space and power constraints have permitted software-based products to emerge as viable and cost-effective alternatives. One of the primary reasons that PC manufacturers have been better able to utilize software-based solutions has been the dramatic increase in central processing unit processing power. Prior to the introduction of Intel's 266 MHz Pentium II processor, most PCs lacked the processing power required to effectively utilize software-based connectivity solutions. By 1998, a majority of the PCs shipped were equipped with CPUs equivalent to or exceeding the processing power of Intel's 350 MHz Pentium II. This significant increase in processing power is expected to continue into the future as demonstrated by Intel's announcement of its intention to deliver 1.0 GHz processors by 2001. With microprocessor performance continuing to rapidly increase, technologies that support software algorithms running off the central processing unit, rather than on extraneous hardware, will become increasingly valuable and feasible. Another significant trend driving the growth of software-based solutions is the increasing pressure on OEMs to reduce costs. With the market acceptance of low-cost, or sub-$1,000, PCs and a general decline in PC selling prices, OEMs are demanding further price reductions, from suppliers of central processing units and motherboard manufacturers. As a result, central processing unit suppliers and motherboard manufacturers are increasingly employing software- based solutions as a cost-effective way to meet these demands. This response eliminates additional, special purpose hardware and replaces it with integrated software. As a result, Cahners In-Stat estimates analog soft-modem annual sales will grow from five million units in 1998 to over 40 million units by 2000. Software-based solutions are also increasingly utilized to address the power and space requirements of non-PC devices. The limited availability of power and space in these devices has hindered the successful integration of hardware- based modem functionality. Because soft modems shift processing capacity into software and, thus, significantly reduce power and space constraints, they are increasingly integrated as a critical part in the development of the non-PC device market. PC-Tel Solution We are a leading developer and supplier of cost-effective software-based connectivity solutions that address Internet access and other communications through existing analog and emerging broadband networks. These solutions are based on our proprietary software algorithms which enable the movement of core signal processing capabilities out of hardware and into software. Our host signal processing architecture allows us to develop connectivity solutions that provide significant benefits over traditional hardware-based solutions, including: Extensibility and Scaleability. Our host signal processing architecture allows us to quickly and cost-effectively develop new products to capitalize on rapidly growing market segments. We believe that we can use our intellectual property portfolio to readily adapt to the speed and design requirements of additional emerging connectivity technologies. For example, in response to growing market acceptance, we have developed a host signal processing architecture solution for G.Lite, which we call LiteSpeed, that enables downstream data transmission speeds of up to 1.5 Mbps and upstream data transmission speeds of up to 512 Kbps over existing copper telephone lines. As the broadband market develops, we believe we can capitalize on our proprietary technology to continue the cost-effective migration from hardware into software. Cost Effectiveness. By shifting the composition of connectivity devices from hardware into software, we are able to significantly reduce the hardware required in conventional connectivity solutions. Our proprietary software-based solution eliminates extraneous hardware and reduces our customers' manufacturing costs, while still offering superior or comparable performance. For example, our host signal processing technology eliminates as much as 40% of the hardware used in conventional connectivity solutions. 40

Upgradeability, Adaptability and Flexibility. The software component of our architecture is upgradeable, minimizing the risk of technological obsolescence. By embedding core functionality in software, performance upgrades and the adaptation to new standards and protocols can be accomplished quickly and easily through software downloads rather than through costly replacements of existing hardware. For example, customers who purchased our 33.6K modems are able to easily upgrade the product to an ITU-compliant 56K modem through a simple software download. Ease of upgradeability is of considerable value in the rapidly changing communications marketplace and a substantial competitive advantage over conventional connectivity solutions. In addition, our LiteSpeed DSL technology will also provide a similar capability in offering an end-user the ability to easily upgrade to higher bandwidth services. Further, our G.Lite technology is completely compatible with analog transmission networks, offering the user complete flexibility in choosing access technology and transmission speed. By providing connectivity solutions that can be easily adapted to new standards and protocols, we reduce interoperability obstacles, which simplifies purchasing decisions and accelerates deployment times for OEMs. Reduced Space and Power Requirements. The reduction of hardware components enabled by our host signal processing architecture provides the dual benefits of 50% reduced space and 70% lower power requirements compared to conventional solutions. These benefits enable connectivity capabilities in non-PC devices that are difficult to implement with conventional hardware-based solutions. In addition, the efficiency of our proprietary algorithms increases the modem port density per chip in server- side devices, reducing power requirements and heat generation. PC-Tel Strategy PC-Tel's goal is to be the leading provider of cost-effective software-based connectivity solutions that enable Internet access and other communication applications through existing analog and emerging broadband networks. Key elements of our strategy include: Target Emerging High-Growth Communications Technologies. We identify emerging high-growth communications technologies and develop innovative software-based connectivity solutions to capitalize on these new market opportunities as they gain acceptance. Our software-based technology is extensible, allowing us to quickly and cost-effectively develop new applications. We have recently leveraged our core technologies to design and develop a fully functional software-based G.Lite solution, LiteSpeed. In addition, we are currently developing implementation options for extending HSP technology into the emerging wireless data network market, which includes devices that offer high speed access to Internet connections as well as wireless connections to computing on Internet devices within homes and businesses. We believe that our communications technology will enable us to develop significant applications in the broadband modem markets. Continue To Enhance Software-Based Solutions. We are committed to enhancing the scope of our host signal processing technology to further reduce the number of hardware components in our software-based solutions. We believe that our success in minimizing the hardware content of our soft modems will continue to enhance our ability to address emerging markets in non-PC devices that require smaller designs and reduced power consumption. This reduction of hardware content provides numerous benefits for our OEM customers, including: . reducing costs, . decreasing board space, . decreasing inventory, . minimizing technological obsolescence, . accelerating time to market, and . streamlining production flow. 41

In addition, because of the software-based functionality of our products, we have developed a core expertise in ensuring the compatibility of our host signal processing products with multiple operating systems including Linux, OS/2, Windows 3.1, 95, 98, 2000, NT and CE, and VXWorks. Enable Migration to Emerging Communications Technologies. We aim to develop innovative products based on our host signal processing architecture that enable existing platforms to migrate to emerging broadband communications technologies. The current level of processing power available in PCs and non-PC devices does not support the amount of signal processing calculations required for higher speed broadband applications without overloading the central processing unit. For these applications, we have developed an accelerated host signal processing architecture that adds low-cost, application-specific hardware to efficiently handle a portion of the signal processing load. Accelerated host signal processing architecture enables us to deliver an ideal platform from which to migrate to a full host signal processing solution for next generation devices. Extend Our Intellectual Property Leadership Position and Establish Industry Standards. We are actively extending our intellectual property position through rapid internal development, strategic acquisitions and licensing of innovative communications technology. We hold 32 patents, with an additional 26 patents pending. We are actively pursuing the filing of additional patent applications to cover our intellectual property advancements. We believe that these intellectual property advancements will optimize the performance, efficiency and cost of our software-based connectivity solutions. Our intellectual property leadership position allows us to establish industry standards so that we can be well positioned to implement leading-edge second generation connectivity solutions in technologies in advance of our competitors. License Proprietary Digital Signal Processing Solutions. We are developing and intend to license reference designs for digital signal processing communications applications in non-PC devices. By using low cost digital signal processing chips coupled with our software-based technology, we are providing enhanced throughput and capacity per chip. In addition, because our digital signal processing algorithms are highly efficient, we can enable cost savings by reducing space requirements, lowering power consumption and port density for remote access. Products Current Products In the fourth quarter of 1998, we began shipping our newest product, the MicroModem. This product integrates our host signal processing technology with a micro form-factor DAA. Our patented MicroModem features reduce power and size requirements and replace approximately 90 discrete hardware components with two mini DAA chips. The MicroModem has recently been certified as being compatible with the telecommunications standards of most industrialized countries, allowing OEMs to accomplish seamless global interoperability. As illustrated in Figure 1 below, in contrast to the conventional hardware modem, our host signal processing soft architecture replaces the memory chip, digital signal processing chip, universal asynchronous receiver and transmitter, or UART, and controller chip with customized software that draws upon the excess capacity of the host central processing unit. A single proprietary Application Specific Integrated Circuit, or ASIC, acts as interface between the analog and digital data. We have further reduced the cost, size and design effort required for standardized worldwide PC modem use by using an integrated Data Access Arrangement, or DAA, and a coder/decoder, or CODEC. This integration reduces the number of components in a conventional DAA by approximately 40%. 42

FIGURE 1--CONVENTIONAL DSP vs. HSP MODEM ARCHITECTURE Schematic with two boxes. Caption is "Modem Evolution". First box describes a traditional hardware modem, second box describes PCtel's soft modem. Bottom text caption "CODEC--performs analog-to-digital and digital-to-analog signal conversions", "DAA--Data Access Arrangement interfaces and protects the modem with the telecommunications network.", "CONTROLLER--controls data and error compression function.", "DATAPUMP--performs modulation and demodulation calculations.", "Memory--handles the data buffering.", "UART--Universal Asynchronous Receive Transmit synchronizes incoming and outgoing data.", "INTEGRATED SILICON DAA and CODEC--Direct Access Arrangement interfaces and protects the modem with the telecommunications network while the CODEC performs analog-to-digital and digital-to-analog conversion." 43

Next Generation Products We are currently focusing our design and development efforts in the following application areas: Next Generation Technology Product Description - ------------------------------------------------------------------------------- G.Lite We have developed a G.Lite solution, LiteSpeed, to address the demand for DSL connectivity. LiteSpeed uses less power and space and costs less than conventional solutions for G.Lite. We expect to commercially release this product in the first half of 2000. - ------------------------------------------------------------------------------- USB External Modem We have developed our first external modem, which connects through the Universal Serial Bus, or USB, interface. The USB is an open specification developed to advance the use of peripheral devices with personal computers. Major PC manufacturers now ship machines with USB enabled hardware predominantly to Europe due to the continent's differing telephony standards. We believe that our external modem will allow us to capture significant revenue opportunities in the peripheral device market. - ------------------------------------------------------------------------------- Home Networking The number of private homes with multiple PCs or multiple devices, such as printers, scanners and notebook computers, has reached a critical mass, driving consumer demand for home networking and shared Internet access. In order to capitalize on this emerging market opportunity, we are working with a silicon supplier to include our soft modem on a processor which will deliver home networking functionality. - ------------------------------------------------------------------------------- Industrial Modem We are developing a small hardware platform for the non-PC market. This platform uses one low cost digital signal processor and our software performs both the controller and the digital signal processing functions. The v.34 version of our industrial modem is currently being tested. - ------------------------------------------------------------------------------- Remote Access Solution We are developing a reference design to deliver the functionality of six modem ports per digital signal processing chip in a server-side modem solution. Our innovative design would reduce power, cost and space requirements to nearly one-sixth of those used today by providing alternatives to expensive chips or a single modem port per chip. We intend to license our design to the leading companies in the growing remote access solution marketplace, the first version which will support three modems per DSP and is currently being tested. 44

Emerging Product Opportunities In addition to our products currently under development, we continue to explore emerging opportunities in the area of broadband communications. Emerging Opportunities Product Description - ------------------------------------------------------------------------------- Wireless - ------------------------------------------------------------------------------- Wireless Protocols Our HSP technology can be applied to various wireless standards. We expect that the wireless solutions which can take advantage of HSP architecture are optimal for customers with capacity requirements between 19.2 Kbps today, and up to 10 Mbps in the near future. We are currently developing software enhancements to our products in order to enable their use in wireless environments with speeds of up to 384 Kbps by the end of 2000. - ------------------------------------------------------------------------------- xDSL - ------------------------------------------------------------------------------- ADSL We expect to begin developing a G.DMT modem in 2000 which (G.DMT) will provide downstream transmission speeds of up to 512 Kbps and upstream transmission speeds of up to 8 Mbps. G.DMT is a full-rate ADSL standard and is being endorsed by the ITU as a worldwide standard. - ------------------------------------------------------------------------------- G.SHDSL G.SHDSL modems will offer both downstream and upstream transmission speeds of up to 1.5 Mbps. We have initiated design and simulation studies for this product. These efforts will position us to pursue the G.SHDSL opportunity as it becomes widely adopted. - ------------------------------------------------------------------------------- VDSL We intend to develop a VDSL modem once VDSL technologies become more fully deployed. We expect that this technology will provide downstream transmission speeds of up to 52 Mbps and upstream transmission speeds of up to 10 Mbps. - ------------------------------------------------------------------------------- Server Side - ------------------------------------------------------------------------------- VPN Controller Our VPN Controller project is expected to enhance HIDRA by integrating additional functionality to support virtual private networks, or VPNs. The key to maximizing the value of a VPN is the ability for companies to upgrade their VPNs as their business needs change. - ------------------------------------------------------------------------------- VOIP The Voice Over Internet Protocol, or VOIP, project is expected to enhance the HIDRA solution by integrating voice capability into the HIDRA infrastructure such that HIDRA will be able to provide VOIP gateway functionality. HIDRA will implement voice compression and packetization along with the signaling and addressing gateway functions required for a complete VOIP solution. - ------------------------------------------------------------------------------- Cable - ------------------------------------------------------------------------------- Cable Modem Cable modems connect PCs to the cable network and offer downstream transmission speeds of up to 36 Mbps and upstream transmission speeds of up to 10 Mbps. We are researching cable technology to follow advancements and will undertake an HSP cable modem development if and when our studies show a significant advantage over existing technologies. 45

Intellectual Property Licensing We also offer our software-based solutions through intellectual property licensing and product royalty arrangements. Current licensees of our intellectual property, principally ITU-standard technology, include modem and semiconductor manufacturers, such as Conexant, Texas Instruments and U.S. Robotics, and RISC processor manufacturers including Hitachi, Intel and NEC. Customers We sell our products directly and indirectly to the following principal distributors and customers: Embedded Modem Board Motherboard PC OEM Systems Systems Distributors Manufacturers Manufacturers Companies Integrators Integrators Golden Way Amigo Asus Acer CTX Casio InnoMicro Askey Computer Chaintech Dell Everex Fujitsu Silicon Application Aztech FIC emachines MicroCenter Intel Corporation BTC Shuttle Fujitsu Mitsuba NEC E-Tech Talent Trade Asia Mitac Tiny Yamaha Zoltrix Sharp TriGem TwinHead - ----------------------------------------------------------------------------------- For the six months ended June 30, 1999, revenues derived from sales to customers Talent Trade Asia, TriGem and Silicon Application Corporation accounted for approximately 42%, 20%, and 10%, respectively, of product sales. For the year ended December 31, 1998, revenues derived from sales to customers Silicon Application Corporation, BTC, Askey Computer and Zoltrix accounted for 15%, 13%, 12% and 12%, respectively, of our product sales. No other customers represented more than 10% of our product sales for these periods. Sales, Marketing and Support We sell our products directly to modem board and motherboard manufacturers who assemble and distribute the end product both directly to OEMs and systems integrators and indirectly through distributors. In the United States, we primarily sell our products through direct sales. In Taiwan, we sell our products through distributors such as Golden Way and Silicon Application Corporation, and in Japan, through distributors such as InnoMicro. In many cases, modems are manufactured by third parties on behalf of the final brand name OEM. We focus on developing long-term customer relationships with our direct and indirect customers. In many cases, our indirect OEM customers specify that our products be included on the modem boards or motherboards that they purchase from board manufacturers, and we sell our products directly to the board manufacturers for resale to our indirect OEM customers. We employ a direct sales force with a thorough level of technical expertise, product background and industry knowledge. Our sales force includes a highly trained team of application engineers to assist customers in designing, testing and qualifying system designs that incorporate our products. Our sales force also supports the sales efforts of our distributors. We believe the depth and quality of our sales support team is critical to: . achieving design wins, . improving customers' time to market, . maintaining a high level of customer satisfaction, and . engendering customer loyalty for our next generation of products. Our marketing strategy is focused on further building market awareness and acceptance of our new products. We market our products directly to both prospective and existing customers. Additionally, we undertake broad scale marketing programs in conjunction with key local and global partners. Our marketing organization also provides a wide range of programs, materials and events to support the sales organization. 46

As of June 30, 1999, we employed 54 individuals in sales, marketing and support and maintained regional sales support operations in Tokyo, Japan, Taipei, Taiwan and Paris, France. Research and Development We recognize that a strong technical base is essential to our long term success and have made a substantial investment in research and development. We will continue to devote substantial resources to product development and patent submissions. We monitor changing customer needs and work closely with our customers, partners and market research organizations to track changes in the marketplace, including emerging industry standards. As an example of our commitment to technical leadership, we have developed expertise in the following major areas: . Digital Signal Processing Algorithms. This expertise enables us to recognize ongoing revenue from the licensing of our reference designs, as well as further optimization for our software digital signal processing implementations. . Software Digital Signal Processing. This expertise has allowed us to provide the modem data pump functionality in the form of software. An expensive and power consuming digital signal processing chip is no longer needed. . Modem Protocol. This expertise has enabled us to develop software containing the necessary error correction and data compression protocols such as v.42, v.42bis, MNP 2-5, Soft ATM and SAR. . Telecommunications Infrastructure Interface. This expertise has allowed us to develop the software connection to the public telephone network through relays and the DAA. This portion of the software also performs the functionality of the UART, controller and memory while eliminating significant amounts of hardware. . Microsoft Windows Device Drivers. We have developed software expertise in working within the Windows environment. The interrupt-driven architecture of Windows operating systems presents many difficulties for software- based connectivity solutions, including latency and other technical issues. We have patented these solutions. . Central Processing Units and Operating Systems. We have demonstrated our expertise in porting our soft modem solution to all Windows operating systems, including Windows NT and Windows CE, in addition to other operating systems, such as OS/2, VXWorks and Linux. We have also ported our technology to various high performance processor platforms, such as those from Advanced Micro Devices, Cyrix, ARM, Intel StrongARM and MIPS. Expertise in these systems, which are utilized in embedded systems applications, allows us to integrate our technology into devices such as Internet appliances. . Host Signal Processing Architecture. We have leveraged our leadership in host signal processing and extended the architecture to include innovations such as accelerated host signal processing, which will be used in our future G.Lite product. This modification delivers maximum software content along with any required application-specific hardware to deliver the most cost-effective solution in the market. These multiple areas of expertise represent distinct disciplines which are combined in one unique cross-functional development team. Communications Systems Division, which we acquired in December 1998, provides us with additional areas of expertise, including the experience of successfully introducing intellectual property for inclusion into ITU standards. We believe these technical and organizational skills provide us significant competitive advantages. As of June 30, 1999, we employed 58 employees in research and development, 36 of whom have advanced degrees, including nine who have earned PhDs. Manufacturing We outsource the manufacturing of our ASIC, CODEC and DAA chips to independent foundries in order to avoid significant fixed overhead, staffing and capital requirements associated with semiconductor fabrication. 47

Our primary chipset suppliers are Delta Integration, Kawasaki/LSI, ST Micro Electronics, Silicon Labs and Taiwan Semiconductor Manufacturing Corporation. The major operations of each of these manufacturers meet ISO-9001 international manufacturing standards. Our DAA chips are currently purchased from Silicon Labs on a purchase order basis. We have a limited guaranteed supply of DAA chips through a long-term contract arrangement with Silicon Labs. We have no guaranteed supply or long-term contract agreements with any other of our suppliers. Licenses, Patents and Trademarks We seek to protect our technology through a combination of patents, copyrights, trade secret laws, trademark registrations, confidentiality procedures and licensing arrangements. We hold a total of 32 patents and also have 26 additional patent applications pending or filed. We believe that our patent portfolio is one of the largest in the analog modem market. To supplement our proprietary technology, we have licensed rights to use patents held by third parties. Our industry is characterized by frequent litigation regarding patent and other intellectual property rights. We have been sued by Motorola, Inc. and by ESS Technology on patent related claims. See "Business--Legal Proceedings" and "Risk Factors--We have been sued by Motorola for patent infringement. If this litigation resolves unfavorably to us, our business is likely to be harmed," and "--Other third parties may also assert that our products infringe their intellectual property rights." In addition, there are numerous risks that result from our reliance on our proprietary technology in the conduct of our business. See "Risk Factors--We rely heavily on our intellectual property rights which offer only limited protection against potential infringers. If we cannot protect these rights, this could adversely affect our business." Competition The connectivity device market is intensely competitive. Our current competitors include 3Com, Conexant, ESS Technology, Lucent Technologies and Motorola. Motorola introduced soft modems in the third quarter of 1998 and Conexant introduced soft modems in the fourth quarter of 1998. We expect competition to increase in the future as current competitors enhance their product offerings, new suppliers enter the connectivity device market, new communication technologies are introduced and additional networks are deployed. We may in the future also face competition from other suppliers of products based on host signal processing technology or new or emerging communication technologies, which may render our existing or future products obsolete or otherwise unmarketable. We believe that these competitors may include Analog Devices, Alcatel, Aware, Broadcom, Com21, Efficient Networks, Orckit, Terayon Communications and Texas Instruments. Compared to us, many of our competitors, including those described above, have: . longer operating histories with more experience in designing and selling connectivity device products and services, . greater presence in our connectivity device markets, which can provide an immediate advantage in marketing new product introductions, . greater name recognition, which can facilitate customer acceptance of new products and technologies, . access to a larger customer base, . substantially greater financial resources, which could enable a competitor to significantly reduce the price of new products below prevailing market rates to capture market share, . significantly greater research and development and other technical resources, which may enable a competitor to respond more quickly to new or emerging technologies and changes in customer requirements, or to introduce new products that are superior to our products, and 48

. significantly greater sales and marketing resources to devote to the promotion, sale and support of competitive products which could be deployed to overcome business challenges. We believe that the principal competitive factors required by users and customers in the connectivity device market include compatibility with industry standards, price, functionality, ease of use and customer service and support. We believe that our products currently compete favorably with respect to these factors. Employees As of June 30, 1999, we employed 125 people full-time, including 54 in sales and marketing, 58 in research and development, and 13 in general and administrative functions. Over 50% of our employees have advanced degrees, with 10 having earned doctoral level degrees. None of our employees is represented by a labor union. We consider our employee relations to be good. Properties Our administrative offices are located in San Jose, California, where we currently lease approximately 32,000 square feet under a lease that expires in 2001. Our Communications System Division is located in Waterbury, Connecticut, where we currently lease approximately 6,000 square feet under a lease that expires in 2001. We also have a lease in Taipei, Taiwan for approximately 3,000 square feet which expires in 2002 and a lease in Tokyo, Japan for approximately 700 square feet which expires this June. We anticipate that we will relocate to larger office facilities within the next six months. Legal Proceedings We have been sued by Motorola, Inc., for patent infringement in an action filed in the fall of 1998. See "Risk Factors--We have been sued by Motorola for patent infringement. If this litigation resolves unfavorably to us, our business is likely to be harmed." In April 1999, ESS Technology Inc. filed a complaint against us in the U.S. District Court for the Northern District of California, alleging that we failed to grant licenses for some of our ITU-related patents to ESS on fair, reasonable and non-discriminatory terms. ESS's complaint includes claims based on antitrust law, patent misuse, equitable estoppel, breach of contract mandating specific performance and unfair competition. In its complaint, ESS also seeks a declaration that some of our ITU-related patents are unenforceable and that we should be ordered by the court to grant a license to ESS on fair, reasonable and non-discriminatory terms. Due to the nature of litigation generally and because the lawsuit brought by ESS is at an early stage, we cannot ascertain the outcome of the final resolution of the lawsuit, the availability of injunctive relief or other equitable remedies, or estimate the total expenses, possible damages or settlement value, if any, that we may ultimately incur in connection with ESS's suit. This litigation could be time consuming and costly, and we will not necessarily prevail given the inherent uncertainties of litigation. However, we believe that we have valid defenses to this litigation, including the fact that other companies license these ITU-related patents from us on the same terms that are being challenged by ESS. We believe that it is unlikely this litigation will have a material adverse effect on our financial condition or results of operations. We are vigorously contesting, and intend to continue to vigorously contest, all of ESS's claims. See "Risk Factors--Other third parties may also assert that our products infringe their intellectual property rights." 49

MANAGEMENT Executive Officers and Directors The following table sets forth information with respect to the executive officers and directors of PC-Tel as of August 2, 1999. Name Age Position - ---- --- -------- Peter Chen............... 44 Chief Executive Officer, Chairman of the Board William F. Roach......... 55 President and Chief Operating Officer Andrew D. Wahl........... 50 Vice President, Finance, Chief Financial Officer Steve Manuel............. 34 Vice President, Marketing Frank Reo................ 54 Vice President, Business Development William Wen-Liang Hsu.... 44 Vice President, Engineering, Director Han Yeh.................. 45 Vice President, Technology, Director Derek S. Obata........... 41 Vice President, Sales Richard C. Alberding(1)(2)......... 68 Director Martin H. Singer(2)...... 48 Director Wen C. Ko................ 50 Director Giacomo Marini(1)........ 47 Director Mike Min-Chu Chen........ 50 Director - -------- (1)Member of audit committee (2)Member of compensation committee Mr. Peter Chen co-founded PC-Tel in March 1994 and has served as Chief Executive Officer and Chairman of the Board, since PC-Tel's inception. Mr. Chen is also the cousin of one of our directors, Dr. Mike Min-Chu Chen. Mr. Chen has over 14 years experience in data communications and modem development at Digicom Systems, Inc. (a company which he co-founded), Cermetek, Inc., and Anderson-Jacobson, Inc., all data communications companies. Mr. Chen has a Bachelor of Science in Control Engineering from National Chiao-Tung University, Taiwan, and holds a Master of Science in Electrical Engineering from Arizona State University. Mr. William F. Roach has been the President and the Chief Operations Officer of PC-Tel since August 1999. From January 1997 until joining PC-Tel, Mr. Roach served as a Senior Vice President, Worldwide Sales and Marketing for Maxtor Corporation, a data storage company, from November 1996 to January 1997 as Executive Vice President for Worldwide Marketing for Wyle Electronics, an electronic component distribution company, and from 1989 to November 1996, as Executive Vice President, Worldwide Sales, for Quantum Corporation, a data storage company. Mr. Roach received a Bachelor of Science in Industrial Economics from Purdue University. Mr. Andrew D. Wahl has been the Vice President of Finance and Chief Financial Officer of PC-Tel since January 1997. From March 1995 to April 1996, Mr. Wahl served as Chief Financial Officer and, from April 1996 to January 1997, as President and Chief Executive Officer for Designs for Education, Inc., an apparel company. From 1993 to March 1995, Mr. Wahl served as Chief Financial and Operations Officer for StarBase Corporation, an object-oriented database developer. Prior to that, Mr. Wahl held various senior positions in general management, finance and management consulting. Mr. Wahl received a Bachelor of Arts in Political Science from Villanova University and a Master in Business Administration in Accounting from Rutgers University. Mr. Steve Manuel has been Vice President of Marketing of PC-Tel since September 1997. Prior to that, Mr. Manuel served as Vice President of Sales between January 1997 and September 1997. From March 1992 to June 1995 he worked at Logitech, Inc., a computer input devices company, where he served as the Strategic OEM Account Development Manager and the Director of OEM Sales and Marketing for the Imaging Division from June 1995 to January 1997. At Logitech, Inc., Mr. Manuel was initially responsible for worldwide account 50

management for numerous OEM customers, and later worldwide sales and sales strategy development and implementation. Mr. Manuel received an Associate of Science from Control Data Institute. Mr. Frank V. Reo has been PC-Tel's Vice President of Business Development since February 1998. From February 1993 to February 1998, Mr. Reo served initially as Manager and later as Director of Business Development for the modem group at Cirrus Logic, a semiconductor company. In this position, he was responsible for product marketing, business development and applications engineering. Mr. Reo is a graduate in electronic engineering from Philco Technical Institute, Philadelphia. Mr. William Wen-Liang Hsu co-founded PC-Tel and has served as the Vice President of Engineering and a director since its inception in March 1994. From August 1988 to March 1994, Mr. Hsu served in various positions with Sierra Semiconductor, a semiconductor company, including Engineering Director. At Sierra Semiconductor, Mr. Hsu managed a development group, and was responsible for digital signal processing firmware development for modem products with data, fax and voice features. Mr. Hsu received a Bachelor of Science in Communication Engineering from National Chiao-Tung University, Taiwan, and a Master of Science in Computer Engineering from Oregon State University. Mr. Han Yeh co-founded PC-Tel and has served as the Vice President of Technology and a director since its inception in March 1994. Mr. Yeh was a staff engineer at Sierra Semiconductor, a semiconductor company, from September 1993 to March 1994. Mr. Yeh holds a Bachelor of Science in Control Engineering from National Chiao-Tung University, Taiwan, and a Master of Science in Electrical Engineering from New York State University at Stony Brook. Mr. Derek S. Obata has been Vice President of Sales for PC-Tel since April 1998. From 1997 until joining PC-Tel, Mr. Obata was an independent consultant providing strategic planning, business development, marketing and sales support to emerging high technology companies. Mr. Obata served from 1996 to 1998 as Vice President, Worldwide Sales for Network Peripherals Incorporated, a networking company, and from 1992 to 1995 as Vice President, Worldwide Sales at Ministor Peripherals Corporation, a data storage company. Prior to this period, Mr. Obata served in a number of sales and sales management positions with Conner Peripherals and Seagate Technologies, which are data storage companies. Mr. Obata holds a Bachelor of Science in Engineering Sciences from the University of California, Berkeley. Mr. Richard C. Alberding has been a director of PC-Tel since August 1999. Mr. Alberding retired from the Hewlett-Packard Company, a computer, peripherals and measurement products company, in June 1991, serving at that time as an Executive Vice President with responsibility for worldwide company sales, support and administration activities for measurement and computation products, as well as all corporate level marketing activities. Mr. Alberding is a director of Digital Link Corporation, Digital Microwave Corporation (which included a nine month period as interim Chairman/CEO), JLK Direct Distribution Inc., Paging Network, Inc., Sybase Inc. and Walker Interactive Systems. Mr. Alberding holds a B.A. degree in Business Administration/Marketing from Augusta College in Rock Island, Illinois, and an Associate of Science degree in Electrical Engineering from DeVry Technical Institute in Chicago. Dr. Martin H. Singer has been a director of PC-Tel since August 1999. Since December 1998, Dr. Singer has been President and CEO of SAFCO Technologies, Inc., a wireless communications company. From 1994 to 1997, Mr. Singer served as Vice-President and General Manger of the Wireless Access Business Development Division for Motorola, Inc., a communications equipment company. Prior to this period, Dr. Singer held senior management and technical positions in Motorola, Inc., Tellabs, Inc., AT&T and Bell Labs. Dr. Singer holds a Bachelor of Arts in Psychology from the University of Michigan, and a Master of Arts and a Ph.D. in Experimental Psychology from Vanderbilt University. Mr. Wen C. Ko has been a director for PC-Tel since May 1999. Since 1990, Mr. Ko has served as Chairman of seven WK Investment Funds, which are high-tech venture capital investment companies, and during 1992 to 1995 as Chairman of Taipei Venture Capital Association. Prior to this, Mr. Ko served in a 51

number of positions including Chairman & President and Computer Country Manager at Hewlett Packard Taiwan Ltd., a computation and communication system manufacturer and Research & Development Manager at International Business Machines, an information system technology company. Mr. Ko holds a Bachelor of Science in Electrical Engineering from National Cheng Kung University, Taiwan, and a Master of Science in System Science from Michigan State University. Mr. Giacomo Marini has been a director of PC-Tel since October 1996. Since March 1995 Mr. Marini has served as President of MK Group LLC, a private investment and management consulting business that invests in and advises high technology companies, and from February 1998 to February 1999 as Interim Chief Executive Officer at FutureTel, Inc., a digital video capture company. From August 1993 to February 1995, Mr. Marini served as President and Chief Executive Officer of Common Ground Software, Inc. (formerly No Hands Software, Inc.), an electronic publishing software company. He is currently on the board of various private companies. He holds a Computer Science Laureate Degree from the University of Pisa, Italy. Dr. Mike Min-Chu Chen has been a director of PC-Tel since February 1994 and is the cousin of our Chief Executive Officer and Chairman of the Board, Peter Chen. From May 1985 to August 1998, Dr. Chen served as the Executive Vice President, Chief Executive Officer and Director of C & C International Services, Inc., an engineering and procurement service company. From March 1987 to August 1998, Dr. Chen served as Executive Vice President, Chief Executive Officer and Director of Act Engineering, Inc., an engineering design and trading company. From December 1996 to February 1997, Dr. Chen served as director of ERT Holding, Inc., a company engaged in the environmental rubber recycling manufacturing business, and served as President of International Operations from December 1996 to February 1997 and then as Chairman from February 1997 to October 1997. He is currently on the board of various private companies. Dr. Chen holds a Bachelor of Science in Naval Architecture from National Taiwan Ocean University, a Master in Science in Mechanical Engineering and Naval Architecture from National Taiwan University, Taiwan, and a Doctorate in Ocean Engineering from Oregon State University. Board Composition Our board of directors currently consists of eight members. Upon completion of this offering, our bylaws will provide for a classified board of directors consisting of three classes of directors, each serving staggered three-year terms. As a result, a portion of our board of directors will be elected each year. Class I directors' terms will expire at the annual meeting of stockholders to be held in 2000, Class II directors' terms will expire at the annual meeting of stockholders to be held in 2001 and Class III directors' terms will expire at the annual meeting of stockholders to be held in 2002. The Class I directors will be Peter Chen and Han Yeh, the Class II directors will be Wen C. Ko, Richard C. Alberding and William Wen-Liang Hsu, and the Class III directors will be Mike Min-Chu Chen, Giacomo Marini and Martin H. Singer. At each annual meeting of stockholders held after the initial classification, the successors to directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. In addition, our bylaws provide that the authorized number of directors may be changed by an amendment to the bylaws, duly adopted by the board of directors or by the stockholders or by a duly adopted amendment to the certificate of incorporation. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors. This classification of the board of directors may delay or prevent a change in control of our company or in our management. Executive officers are appointed by the board of directors in accordance with our bylaws, subject to the rights, if any, of an officer under any contract of employment. Board Committees We established an audit committee and a compensation committee in August 1999. The audit committee consists of Giacomo Marini and Richard C. Alberding. The audit committee reviews our internal accounting 52

procedures and consults with and reviews the services provided by our independent accountants. The compensation committee consists of Richard C. Alberding and Martin H. Singer. The compensation committee reviews and recommends to the board of directors the compensation and benefits of all our officers and directors, including stock compensation and loans, and establishes and reviews general policies relating to the compensation and benefits of our employees. Compensation Committee Interlocks and Insider Participation Prior to establishing the compensation committee, the board of directors as a whole performed the functions delegated to the compensation committee. No member of the board of directors or the compensation committee serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. Director Compensation We do not pay our directors cash compensation for their service as members of the board of directors, although they are reimbursed for expenses in connection with attendance at board and committee meetings. Under our 1998 director option plan, non employee directors automatically receive stock option grants subject to the terms and conditions. Limitations On Directors' Liability And Indemnification Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for: . any breach of their duty of loyalty to the corporation or its stockholders; . acts of omissions not in good faith or which involve intentional misconduct or a knowing violation of law; . unlawful payments of dividends or unlawful stock repurchases or redemptions; or . any transaction from which the director derived an improper personal benefit. The limitations of liability do not apply to liabilities arising under the federal securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission. Our certificate of incorporation and bylaws provide that we will indemnify our directors and officers and may indemnify our employees and other agents to the fullest extent permitted by law. We believe that indemnification under our bylaws covers at least negligence and gross negligence on the part of indemnified parties. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in their capacity as an officer, director, employee or other agent, regardless of whether the bylaws would permit indemnification. 53

We have entered into agreements to indemnify our directors, executive officers and controller, in addition to the indemnification provided for in our bylaws. These agreements, among other things, provide for indemnification of our directors, executive officers and controller for judgment, fines, settlement amounts and expenses, including attorneys' fees incurred by the director, executive officer or controller in any action or proceeding, including any action by or in the right of PC-Tel, arising out of the person's services as a director, executive officer or controller of us, any of our subsidiaries or any other company or enterprise to which the person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers. The limited liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty and may reduce the likelihood of derivative litigation against our directors and officers, even though a derivative action, if successful, might otherwise benefit us and our stockholders. A stockholder's investment in us may be adversely affected to the extent we pay the costs of settlement or damage awards against our directors and officers under these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees in which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of us pursuant to the foregoing provisions or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. Executive Compensation Summary Compensation Table The following table sets forth the compensation earned, awarded or paid for services rendered to us in all capacities for the fiscal year ended December 31, 1998, by our Chief Executive Officer and our four next most highly compensated executive officers who earned more than $100,000 in salary and bonus during the fiscal year ended December 31, 1998 whom we refer to in this prospectus collectively as the named executive officers: Long-Term Compensation Annual Compensation Awards ------------------------------------- ------------ All Other Securities Annual Underlying All Other Salary ($) Bonus ($) Compensation ($) Options (#) Compensation ($) ---------- --------- ---------------- ------------ ---------------- Peter Chen.............. $173,750 $56,316 -- 125,000 $102(1) Chief Executive Officer and Chairman Andrew D. Wahl.......... 136,500 31,833 -- 15,000 288(1) Vice President, Finance and Chief Financial Officer William Wen-Liang Hsu... 136,876 31,244 -- 90,000 102(1) Vice President, Engineering Han Yeh................. 136,876 31,244 -- 90,000 174(1) Vice President, Technology Derek Obata............. 105,192 68,641 -- 195,000 72(1) Vice President, Sales - -------- (1) Consists of premiums paid by us for term life insurance. 54

OPTION GRANTS DURING LAST FISCAL YEAR The following table shows information regarding stock options granted to the named executive officers during the fiscal year ended December 31, 1998. The potential realizable value is based on the assumption that our common stock appreciates at the annual rate shown, compounded annually, from the date of grant until the expiration of the ten-year term. These numbers are calculated based on Securities and Exchange Commission requirements and do not reflect projections or estimates of future stock price growth. Potential realizable values are computed by: . Multiplying the number of shares of common stock subject to a given option by the exercise price; . Assuming that the total stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table for the entire ten-year term of the option; and . Subtracting from that result the total option exercise price. Actual gains, if any, on stock option exercises will be dependent on the future performance of the common stock. The percentage of total options is based on an aggregate of 1,393,900 options granted by us during the fiscal year ended December 31, 1998, to our employees, directors and consultants, including the named executive officers. Options were granted with an exercise price equal to the fair market value of our common stock, as determined in good faith by our board of directors. Individual Grants ------------------------------------------- Potential Realizable % of Total Value at Assumed Number of Options Annual Rates of Securities Granted to Exercise Stock Appreciation Underlying Employees Price for Option Term Options During Per Expiration --------------------- Name Granted (#) Period Share Date 5% ($) 10% ($) - ---- ----------- ---------- -------- ---------- --------- ----------- Peter Chen.............. 125,000(1) 8.97% $7.45 1/30/08 585,658 1,484,173 Andrew D. Wahl.......... 15,000(2) 1.08% $7.45 2/27/08 70,279 178,101 William Wen-Liang Hsu... 90,000(3) 6.46% $7.45 1/30/08 421,674 1,068,604 Han Yeh................. 90,000(4) 6.46% $7.45 1/30/08 421,674 1,068,604 Derek S. Obata.......... 130,000(5) 9.33% $7.45 3/31/08 609,084 1,543,540 65,000(6) 4.66% $4.85 4/30/08 198,259 502,427 - -------- (1) As of June 30, 1999, 44,271 shares of the option to purchase 125,000 shares of common stock have vested. The options for Mr. Chen vested as to 25% on January 2, 1999, and the balance vests in a series of monthly installments over the next three years of service. (2) As of June 30, 1999, 5,000 shares of the option to purchase 15,000 shares of common stock have vested. The options for Mr. Wahl vested as to 25% on February 1, 1999, and the balance vests in a series of monthly installments over the next three years of service. (3) As of June 30, 1999, 31,875 shares of the option to purchase 90,000 shares of common stock have vested. The options for Mr. Hsu vested as to 25% on January 2, 1999, and the balance vests in a series of monthly installments over the next three years of service. (4) As of June 30, 1999, 31,875 shares of the option to purchase 90,000 shares of common stock have vested. The options for Mr. Yeh vested as to 25% on January 2, 1999, and the balance vests in a series of monthly installments over the next three years of service. (5) As of June 30, 1999, 32,500 shares of the option to purchase 130,000 shares of common stock have vested. The options for Mr. Obata vested as to 25% on April 20, 1999, and the balance vests in a series of yearly installments over the next three years of service. (6) The fair market value of our common stock on the date of grant was $7.45. As of June 30, 1999, 18,958 shares of the non-qualified option to purchase 65,000 shares of common stock have vested. The shares for Mr. Obata under this option vests five years from the anniversary date of the grant (April 20, 2003) or vesting may accelerate for a portion of the options based on a performance based vesting schedule. 55

AGGREGATE OPTION EXERCISES DURING LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES The following table sets forth information with respect to the named executive officers concerning option exercises for the year ended December 31, 1998 and exercisable and unexercisable options held as of December 31, 1998. The value of unexercised in-the-money options is based on a price of $9.25 per share, the fair market value of our stock on December 31, 1998 as determined by our board of directors, minus the per share exercise price, multiplied by the number of shares underlying the option. As of June 30, 1999, no options to purchase our common stock granted since January 1, 1998 have been exercised by the named executive officers. Value of Unexercised Number of Securities Underlying In-the-Money Options at Options at December 31, 1998 December 31, 1998 ----------------------------------- ------------------------- Exercisable Unexercisable Exercisable Unexercisable --------------- ---------------- ----------- ------------- Peter Chen.............. 87,502 162,498 $767,830 $554,045 Derek Obata............. -- 195,000 -- 520,000 Andrew Wahl............. 62,292 82,708 498,336 568,664 Han Yeh................. 45,000 135,000 394,875 556,875 William Wen-Liang Hsu... 45,000 135,000 394,875 556,875 Incentive Stock Plans 1995 Stock Plan Our 1995 stock plan provides for the granting to employees of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or the Code, and for the granting to employees and consultants of nonstatutory stock options. The maximum aggregate number of shares which may be optioned and sold under the 1995 stock plan is 3,200,000 shares of common stock. As of December 31, 1998, options to purchase an aggregate of 662,753 shares of common stock were outstanding under the 1995 stock plan, with a weighted average exercise price of $0.234. The board of directors has determined that no further options will be granted under the 1995 stock plan after this offering. The 1995 stock plan provides that in the event of a merger of our company with or into another corporation, or the sale of substantially all of our assets, each outstanding option will be assumed or substituted for by the successor corporation. If the successor corporation refuses to assume or substitute for the options, the options will terminate as of the closing of the merger or sale of assets. 1997 Stock Plan Our 1997 stock plan, as amended and restated August 3, 1999, provides for the granting to employees of incentive stock options within the meaning of Section 422 of the Code, and for the granting to employees and consultants of nonstatutory stock options and stock purchase rights, or SPRs. The 1997 stock plan was originally approved by the board of directors in November 1996 and was amended by our board of directors in August 1999, and was approved by our stockholders in August 1999. As of December 31, 1998, options to purchase an aggregate of 2,422,555 shares of common stock were outstanding under the 1997 stock plan with a weighted price of $5.575. Unless terminated sooner, the 1997 stock plan will terminate automatically in 2007. A total of 5,500,000 shares of common stock are currently reserved for issuance pursuant to the 1997 stock plan, plus annual increases equal of the lesser of: . 700,000 shares, . 4% of the outstanding shares on such date, or . a lesser amount determined by the board. The 1997 stock plan may be administered by the board of directors or a committee of the board. The board of directors or committee of the board has the power to determine the terms of the options or SPRs granted, including the exercise price, the number of shares subject to each option or SPR, the exercisability 56

thereof, and the form of consideration payable upon such exercise. In addition, the board of directors or committee of the board has the authority to amend, suspend or terminate the 1997 stock plan, provided that no such action may affect any share of common stock previously issued and sold or any option previously granted under the 1997 stock plan. Options and SPRs granted under the 1997 stock plan are not generally transferable by the optionee, and each option and SPR is exercisable during the lifetime of the optionee only by such optionee. Options granted under the 1997 stock plan must generally be exercised within three months of the end of optionee's status as an employee or consultant of our company, or within twelve months after such optionee's termination by death or disability, but in no event later than the expiration of the option's ten year term. The exercise price of all incentive stock options granted under the 1997 stock plan must be at least equal to 100% of the fair market value of the common stock on the date of grant. The exercise price of nonstatutory stock options and SPRs granted under the 1997 stock plan is determined by the board of directors or a committee of the board, but with respect to nonstatutory stock options intended to qualify as "performance based compensation" within the meaning of Section 162(m) of the Code, the exercise price must at least be equal to 100% of the fair market value of the common stock on the date of grant. With respect to any participant who owns stock possessing more than 10% of the voting power of all classes of our outstanding capital stock, the exercise price of any incentive stock option granted must equal at least 110% of the fair market value on the grant date and the term of such incentive stock option must not exceed five years. The term of all other options granted under the 1997 stock plan may not exceed ten years. The 1997 stock plan provides that in the event of a merger of our company with or into another corporation, a sale of substantially all of our assets, each option or right shall be assumed or an equivalent option or right substituted by the successor corporation. If the outstanding options or rights are not assumed or substituted as described in the preceding sentence, the board of directors or a committee of the board shall provide for the optionee to have the right to exercise the option or SPR as to all of the optioned stock, including shares as to which it would not otherwise be exercisable for a period of fifteen days from the date of such notice, and the option or SPR will terminate upon the expiration of such period. 1998 Employee Stock Purchase Plan Our 1998 employee stock purchase plan was adopted by the board of directors in May 1998 but will not become effective until the closing date of this offering. A total of 800,000 shares of common stock has been reserved for issuance under the 1998 employee stock purchase plan, plus annual increases equal to the lesser of: . 350,000 shares, . 2% of the outstanding stock on such date, or . a lesser amount determined by the board of directors. The 1998 employee stock purchase plan, which is intended to qualify under Section 423 of the Code, contains successive six-month offering periods. The offering periods generally start on the first trading day on or after February 15 and August 15 of each year, except for the first such offering period which commences on the first trading day on or after the effective date of this offering and ends on the last trading day on or before February 14, 2000. Employees are eligible to participate if they are customarily employed by us or any participating subsidiary for at least 20 hours per week and more than five months in any calendar year. However any employee who: . immediately after grant owns stock possessing 5% or more of the total combined voting power or value of all classes of our capital stock, or . whose rights to purchase stock under all employee stock purchase plans of our company accrues at a rate which exceeds $25,000 worth of stock for each calendar year may not be granted an option to purchase stock under the 1998 employee stock purchase plan. 57

The 1998 employee stock purchase plan permits participants to purchase common stock through payroll deductions of up to 15% of the participant's compensation. The maximum number of shares a participant may purchase during a single offering period is 2,000 shares. Amounts deducted and accumulated by the participant are used to purchase shares of common stock at the end of each offering period. The price of stock purchased under the 1998 employee stock purchase plan is 85% of either the fair market value of the common stock at the beginning or end of the offering period whichever is lower. Participants may end their participation at any time during an offering period, and they will be paid their payroll deductions to date. Participation ends automatically upon termination of employment with us. Rights granted under the 1998 employee stock purchase plan are not transferable by a participant other than by will, the laws of descent and distribution, or as otherwise provided under the 1998 employee stock purchase plan. The 1998 employee stock purchase plan provides that, in the event of a merger of our company with or into another corporation or a sale of substantially all of our assets, each outstanding option may be assumed or substituted for by the successor corporation. If the successor corporation refuses to assume or substitute for the outstanding options, the offering period then in progress will be shortened and a new exercise date, before the date of the proposed sale or merger, will be set. The 1998 employee stock purchase plan will terminate in 2008. The board of directors has the authority to amend or terminate the 1998 employee stock purchase plan, except that no such action may adversely affect any outstanding rights to purchase stock under the 1998 employee stock purchase plan. 1998 Director Option Plan Non employee directors are entitled to participate in the 1998 director option plan. The 1998 director option plan was adopted by the board of directors in May 1998, but it will not become effective until the closing date of this offering. The 1998 director option plan has a term of ten years, unless terminated sooner by the board of directors. A total of 200,000 shares of common stock have been reserved for issuance under the 1998 director option plan. The 1998 director option plan provides for the automatic grant of options to purchase 15,000 shares of common stock to each new non employee director upon election to the board of directors. Options to purchase 15,000 shares will vest one-third on each anniversary of its date of grant until the option is fully vested, provided that the optionee continues to serve as a director on such dates. After the initial 15,000 share option is granted to the non employee director, he or she shall automatically be granted an option to purchase 7,500 shares on January 1 of each year, if on such date he or she shall have served on the board of directors for at least six months. The 7,500 share options shall vest completely on the anniversary of their date of grant, provided that the optionee continues to serve as a director on such dates. All of the options granted under the 1998 director option plan shall have a term of 10 years. The exercise price of all options shall be 100% of the fair market value per share of the common stock, generally determined with reference to the closing price of the common stock as reported on the Nasdaq National Market on the date of grant. The 1998 director option plan provides that in the event of a merger of our company with or into another corporation, a sale of substantially all of our assets, each option or right shall be assumed or an equivalent option or right substituted by the successor corporation. If the outstanding options or rights are not assumed or substituted as described in the preceding sentence, the board of directors or a committee of the board shall provide for the optionee to have the right to exercise the option or SPR as to all of the optioned stock, including shares as to which it would not otherwise be exercisable for a period of thirty days from the date of such notice, and the option or SPR will terminate upon the expiration of such period. Options granted under the 1998 director option plan must be exercised within three months of the end of the optionee's tenure as a director of our company, or within twelve months after such director's termination by death or disability, but in no event later than the expiration of the option's ten year term. No option granted under the 1998 director option plan is transferable by the optionee other than by will or the laws of descent and distribution, and each option is exercisable, during the lifetime of the optionee, only by such optionee. 58

401(k) Plan Our 401(k) plan covers all of our employees beginning the first of the month following the month of their employment. Pursuant to this plan, employees may elect to contribute up to 15% of their current compenation to the 401(k) plan up to the statutorily prescribed annual limit, which was $10,000 in 1998. Contributions by employees to the 401(k) plan, and income earned on plan contributions, are not taxable to employees until withdrawn. Further, contributions by PC-Tel, if any, will be deductible by PC-Tel, when made. Participating employees vest in employer contributions over five years at a rate of 20% for each year of service. There have been no employer contributions to the 401(k) plan during the year. Employment Agreements and Change of Control Arrangements We require each of our employees to enter into confidentiality agreements prohibiting the employee from disclosing any of our confidential or proprietary information. In addition, the agreements generally provide that upon termination the employee will not solicit our employees. At the time of commencement of employment, our employees also generally sign offer letters specifying basic terms and conditions of employment. In general, our employees are not subject to written employment agreements. We entered into an agreement on March 31, 1998 with Derek S. Obata which provides, among other things, that his employment is at-will, he will receive an annual salary of $150,000 and that in the event of a change in control of our company, he will be entitled to one year severance pay. We entered into an agreement on July 20, 1999 with William F. Roach. The agreement provides, among other things, that his employment will be at-will and his annual salary will be initially set at $250,000 per year with an annual bonus of $150,000 payable upon our achieving quarterly net income targets. In addition, the agreement provides for Mr. Roach to be granted an option to purchase 400,000 shares of our common stock which vests according to the following schedule: 30% at the end of his first year of employment, 25% in years two and three and 20% in year four. Vesting after the twelfth month of employment is on a monthly basis. If this offering should take place within the first year of his employment, 50% of his first year's options will vest at the time of the offering, and the remaining 50% of his first year's options will vest upon reaching the completion of his twelfth month of employment. In addition, if his employment is terminated for any reason, other than for cause, he will be entitled to one year of severance. If the termination occurs within the first year of employment, he will be entitled to exercise his entire first year stock options. 59

CERTAIN TRANSACTIONS Since January 1, 1995, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or are to be a party in which the amount exceeds $60,000, and in which any director, executive officer, holder of more than 5% of our common stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest other than compensation agreements and other agreements, which are described under "Management," and the transactions described below. Transactions with Directors, Executive Officers and 5% Stockholders Series A preferred stock. Between February 10, 1994 and March 14, 1995 we sold 4,413,333 shares of our common stock at a per share price between $0.10 and $0.30. On May 9, 1995 we effected a recapitalization of our outstanding stock converting each share of common stock into 1 share of Series A preferred stock. On June 29, 1995 we sold 222,222 shares of our Series A preferred stock at a price per share of $0.30. The following table lists the number of shares of Series A preferred stock sold to our directors, executive officers, or 5% stockholders (and any members of the immediate family of such persons): Shares of Series A preferred stock Purchaser purchased --------- --------------- Peter & Sophia Chen......................................... 666,666 Han C. Yeh.................................................. 280,000 I-Chung Yeh................................................. 133,333 Der-Chin Yeh................................................ 66,666 Yan-Chiou Yeh............................................... 26,666 Mike Min-Chu Chen........................................... 666,666 Wen-Liang Hsu............................................... 200,000 Rai-Yei Lee................................................. 800,000 Steel Su.................................................... 800,000 Ming-Hsiung Michael Ho...................................... 106,666 Series B preferred stock. Between October 18, 1995 and January 10, 1996 we sold 3,250,000 shares of our Series B preferred stock at a price per share of $1.20. The following table lists the number of shares of Series B preferred stock sold to our directors, executive officers, and 5% stockholders (and any members of the immediate family of such persons): Shares of Series B preferred stock Purchaser purchased --------- --------------- WK Technology Fund.......................................... 555,800 WK Technology Fund II....................................... 402,500 WK Technology Fund III...................................... 958,366 Series C preferred stock. On February 4, 1998, we sold 625,200 shares of its Series C preferred stock at a price per share of $8.00. The sale of Series C preferred stock included, among others, the sale of 125,000 shares of Series C preferred stock to WK Technology Funds, which is a holder of more than 5% of our common stock. In addition, Wen C. Ko, one of our directors, is Chairman of WK Technology Fund, WK Technology Fund II and WK Technology Fund III. 60

Employment Agreements With Executive Officers We entered into an agreement on March 31, 1998 with Derek S. Obata which provides, among other things, that his employment is at-will and he will receive an annual salary of $150,000. We entered into an agreement on July 20, 1999 with William F. Roach. The agreement provides, among other things, that his employment will be at-will and his annual salary will be initially set at $250,000 per year with an annual bonus of $150,000 payable upon our achieving quarterly net income targets. In addition, the agreement provides for Mr. Roach to be granted an option to purchase 400,000 shares of our common stock which vests according to the following schedule: 30% at the end of his first year of employment, 25% in years two and three and 20% in year four. Vesting after the twelfth month of employment is on a monthly basis. If this offering should take place within the first year of his employment, 50% of his first year's options will vest at the time of the offering, and the remaining 50% of his first year's options will vest upon reaching the completion of his twelfth month of employment. In addition, if his employment is terminated for any reason, other than for cause, he will be entitled to one year of severance. If the termination occurs within the first year of employment, he will be entitled to exercise his entire first year stock options. Loan to Executive Officer On August 3, 1999, our board authorized an unsecured loan to William F. Roach, our President and Chief Operating Officer, pursuant to a full-recourse promissory note, for a principal amount of $54,000 with a per annum interest rate of 8%. The promissory note shall become immediately due and payable upon the earlier of (i) one year from the date the promissory note is executed or (ii) the termination of Mr. Roach's employment with us. Other Transactions Steel Su, a holder of more than 5% of our common stock and a member of our board of directors from March 1995 until November 1997, served as the President of BTC, a significant customer. For the years ended December 31, 1995, 1996, 1997 and 1998, the revenues generated from BTC were approximately $99,000, $1,660,000, $2,153,000 and $4,953,000, respectively. Indemnification We have entered into indemnification agreements with each of our directors, officers and controller. These indemnification agreements will require us to indemnify our officers to the fullest extent permitted by Delaware law. All future transactions, including any loans from us to our officers, directors, principal stockholders or affiliates, will be approved by a majority of the board of directors or, if required by law, a majority of disinterested stockholders, and will be on terms no less favorable to us than could be obtained from unaffiliated third parties. 61

PRINCIPAL STOCKHOLDERS The following table sets forth information known to us with respect to the beneficial ownership of our common stock as of June 30, 1999, and as adjusted to reflect the sale of common stock in this offering by: . each stockholder known by us to own beneficially more than 5% of our common stock, . each of the named executive officers, . each of our directors, and . all of our directors and executive officers as a group. The table below assumes no exercise of the underwriters' over-allotment option. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or will become exercisable within 60 days after June 30, 1999 are deemed outstanding, while such shares are not deemed outstanding for purposes of computing percentage ownership of any other person. Unless otherwise indicated in the footnotes below (i) the persons and entities named in the table have sole voting and investment power with respect to all shares beneficially owned, subject to community property laws where applicable and (ii) except as set forth in the footnotes to the table, the address of each of the individuals listed in the table is PC-Tel, Inc., 70 Rio Robles, San Jose, California 95134. As of June 30, 1999, there were 11,204,495 shares of common stock outstanding, as adjusted to reflect the conversion of all outstanding shares of preferred stock and warrants upon closing of this offering. Shares Beneficially Owned --------------------------- Percent Percent prior to after Name of Beneficial Owner Number offering offering - ------------------------ --------- -------- -------- 5% Stockholders Entities affiliated with the WK Technology Funds(1)......................................... 1,932,812 17.2 12.2 Steel Su(2)....................................... 599,479 5.1% 3.8% Directors and Executive Officers Peter Chen(3)..................................... 726,980 6.4 4.3 Andrew D. Wahl(4)................................. 89,583 * * Steve Manuel(5)................................... 55,417 * * William Wen-Liang Hsu(6).......................... 548,958 4.9 3.5 Han Yeh(7)........................................ 688,958 6.1 4.3 Derek S. Obata(8)................................. 54,176 * * Frank Reo(9)...................................... 32,500 * * Mike Min-Chu Chen(10)............................. 232,812 2.1 1.5 Giacomo Marini(11)................................ 26,146 * * Richard C. Alberding.............................. 0 * * William F. Roach.................................. 0 * * Martin H. Singer.................................. 0 * * Wen C. Ko(1)...................................... 1,932,812 17.2 12.2 All directors and executive officers as a group (13 persons)(12)................................. 4,388,333 37.2 26.7 - -------- *Less than 1% of the outstanding shares of common stock. (1) Includes 555,800 shares held by WK Technology Fund, 402,500 shares held by WK Technology Fund II, and 958,366 shares held by WK Technology Fund III and options to purchase 16,146 shares of our common stock held by WK Associates which are exercisable within 60 days of June 30, 1999. Wen C. Ko is one of our directors and is Chairman of the WK Technology Funds. The WK Technology Funds' 62

principal addresses is 10th Floor, 115, Sec. 3, Ming Sheng East Road, Taipei, Taiwan 23136. Mr. Ko disclaims beneficial ownership of the shares held by WC Technology Fund, WC Technology Fund II, and WK Technology Fund III, except to the extent of his pecuniary interest therein. (2) Includes 583,333 shares held by Mr. Su individually and options to purchase 16,146 shares exerciseable within 60 days of June 30, 1999. (3) Includes 240,666 shares held by Mr. Chen with his wife as community property, 333,333 owned by himself individually, and 8,000, held by each of his minor children living at home, Robert and Michael Chen. Additionally includes options held by Mr. Chen to purchase 136,981 shares of our common stock exercisable within 60 days of June 30, 1999. Mr. Chen disclaims beneficial ownership of the shares held by his children, except to the extent of his pecuniary interest therein. (4) Includes options to purchase 89,583 share of our common stock exercisable within 60 days June 30, 1999. (5) Includes options to purchase 55,417 shares of our common stock exercisable within 60 days of June 30, 1999. (6) Includes 285,300 shares held by the William Wen-Liang Hsu and Rai-Yun Lee Family Trust, a revocable trust, over which shares Mr. Hsu has joint dispositive power, 123,700 shares held by himself personally, 20,830 held by each of his children living at home, Frederick and Joanne Hsu, 2,673 shares held by Hui-Ju Wang, Mr. Hsu's mother, and options to purchase 95,625 shares of our common stock exercisable within 60 days of June 30, 1999. Mr. Hsu disclaims the beneficial ownership of the shares held by his children and mother, except to the extent of his pecuniary interest therein. (7) Includes 577,333 shares owned by Mr. Yeh individually. Additionally includes 16,000 shares held by Emily C. Yeh, a minor daughter who lives in Mr. Yeh's home, and options to purchase 95,625 share of our common stock exercisable within 60 days of June 30, 1999. Mr. Yeh disclaims beneficial ownership of the shares held by Emily G. Yeh, except to the extent of his pecuniary interest therein. (8) Includes options to purchase 54,167 shares of our common stock exercisable within 60 days of June 30, 1999. (9) Includes options to purchase 32,500 shares of our common stock exercisable within 60 days of June 30, 1999. (10) Includes 193,966 shares owned by Mr. Chen individually. Additionally includes 11,350 shares held by each of his children living at home. Willis and Thomas L. Chen, a minor son living at Mr. Chen's home, and options to purchase 16,146 shares exercisable within 60 days of June 30, 1999. Mr. Chen disclaims beneficial ownership of the shares held by his children, except to the extent of his pecuniary interest therein. (11) Includes 12,800 shares held by Mr. Marini individually and options to purchase 13,346 shares exerciseable within 60 days of June 30, 1999. (12) Includes shares held by each director and executive officer and family members in each of their households. Additionally includes options to purchase our common stock, held by each director and executive officer, exerciseable within 60 days of June 30, 1999. 63

DESCRIPTION OF CAPITAL STOCK General Upon completion of the offering we will be authorized to issue 50,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of undesignated preferred stock, $0.001 par value. The following description of our capital stock does not purport to be complete and is subject to and qualified in its entirety by our certificate of incorporation and bylaws, which are included as exhibits to the registration statement of which this prospectus forms a part, and by the provisions of applicable Delaware law. Common Stock As of June 30, 1999, there were 11,002,078 shares of common stock outstanding which were held of record by 163 stockholders, as adjusted to reflect the conversion of all outstanding shares of preferred stock upon closing of this offering. The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available for that purpose. See "Dividend Policy." In the event of a liquidation, dissolution or winding up of PC-Tel, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock to be issued upon the closing of this offering will be fully paid and nonassessable. Preferred Stock Immediately prior to this offering, our certificate of incorporation provided for three series of preferred stock, Series A preferred stock of which 4,635,548 shares were issued and outstanding, Series B preferred stock, of which 3,250,000 shares were issued and outstanding, and Series C preferred stock, of which 625,200 shares were issued and outstanding. Upon the closing of this offering, each outstanding share of Series A preferred stock, Series B preferred stock, and Series C preferred stock will automatically convert into one share of common stock. Upon the closing of this offering, the board of directors will be authorized, subject to any limitations prescribed by law, without stockholder approval, from time to time to issue up to an aggregate of 5,000,000 shares of preferred stock, $0.001 par value per share, in one or more series, each of the series to have such rights and preferences, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the board of directors. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. Issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for others to acquire, or of discouraging others from attempting to acquire, a majority of the outstanding voting stock of PC-Tel. We have no present plans to issue any shares of preferred stock. Warrants At June 30, 1999, there were warrants outstanding to purchase a total of 200,000 shares of Series C preferred stock and 2,417 shares of common stock. Upon the closing of this offering, the warrants to purchase 200,000 shares of Series C preferred stock will become exercisable for an aggregate of 200,000 shares of common stock and will expire on December 31, 2008, unless earlier exercised. The warrants to purchase 2,417 shares of common stock will expire on February 4, 2001, unless earlier exercised. All warrants may be exercised on a "net" basis whereby, in lieu of paying the exercise price in cash, the holder may instruct us to retain a number of shares that has a fair market value at the time of exercise equal to the aggregate exercise price. 64

Registration Rights The holders of 3,875,200 shares of common stock, and the holders of warrants to purchase 200,000 shares of common stock or their permitted transferees, are entitled to rights with respect to registration of the shares under the Securities Act at any time after 180 days following the closing of this offering. These rights are provided under the terms of an agreement between us and the holders of registrable securities. Subject to limitations in the agreement, the holders of at least 30% of the registrable securities then outstanding may require, on two occasions beginning after the date of this prospectus, that we use our best efforts to register the registrable securities for public resale. If we register any of our securities either for our own account or for the account of other security holders, the holders of registrable securities are entitled to include their shares of common stock in the registration, subject to the ability of the underwriters to limit the number of shares included in the offering. The holders of registrable securities may also require us to register all or a portion of their registrable securities on Form S-3 when use of such form becomes available to us, provided, among other limitations, that the proposed aggregate selling price (net of any underwriters' discounts and expenses of sale) is at least $1.0 million. All registration expenses must be borne by us and all selling expenses relating to registrable securities must be borne by the holders of the securities being registered. Delaware Anti-Takeover Law and Charter and Bylaw Provisions Provisions of Delaware law and our certificate of incorporation and bylaws could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise and the removal of incumbent officers and directors. These provisions, summarized below, are expected to discourage types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposed to acquire or restructure us outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms. We are subject to Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years following the date the person became an interested stockholder, unless (with certain exceptions) the "business combination" or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a "business combination" includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an "interested stockholder" is a person who, together with affiliates and associates, owns (or within three years prior to the determination of interested stockholder status, did own) 15% or more of a corporation's voting stock. The existence of this provision would be expected to have an anti- takeover effect with respect to transactions not approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by stockholders. Upon the closing of this offering, our certificate of incorporation and bylaws will require that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of the stockholders and may not be effected by a consent in writing. In addition, upon the close of this offering, special meetings of our stockholders may be called only by the board of directors or some of our officers. Our certificate of incorporation and bylaws also provide that, effective upon the closing of this offering, our board of directors will be divided into three classes, with each class serving staggered three-year terms. These provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of PC-Tel. Transfer Agent and Registrar The transfer agent and registrar for the common stock is Norwest Bank Minnesota, N.A. Its address is 161 North Concord Exchange, St. Paul, Minnesota, 55075 and its telephone number at this location is (615) 450-4189. 65

SHARES ELIGIBLE FOR FUTURE SALE Prior to this offering, there has been no market for our common stock, and a significant public market for the common stock may not develop or be sustained after this offering. Future sales of substantial amounts of common stock (including shares issued upon exercise of outstanding options and warrants) in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through sale of our equity securities. As described below, no shares currently outstanding will be available for sale immediately after this offering because of contractual restrictions on resale. Sales of substantial amounts of our common stock in the public market after the restrictions lapse could adversely affect the prevailing market price and our ability to raise equity capital in the future. Upon completion of this offering we will have outstanding 15,602,078 shares of common stock (based upon shares outstanding as of June 30, 1999), assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options or warrants that do not expire prior to completion of this offering. Of these shares, the 4,600,000 shares sold in this offering will be freely tradable without restriction under the Securities Act except for any shares purchased by "affiliates" of PC-Tel as that term is defined in Rule 144 under the Securities Act. The remaining 11,204,495 shares of common stock, including common stock equivalents of 202,417 shares, held by existing stockholders were issued and sold by us in reliance on exemptions from the registration requirements of the Securities Act. All of our stockholders and all of our directors and officers have entered into lock-up agreements with the underwriters that provide that we and those holders of stock and options may not dispose of or hedge any common stock or securities convertible into or exchangeable for shares of common stock. These restrictions will be in effect for a period of 180 days after the date of this prospectus. At any time and without notice, Banc of America Securities LLC may, in its sole discretion, release all or some of the securities from these lock-up agreements. In addition, holders of stock options could exercise such options and sell some of the shares issued upon exercise as described below: Approximate Shares Eligible Relevant Dates for Future Sale Comment ------------------------------ --------------- ------------------------------------------ On effective date(1).......... Shares sold in this offering and eligible for sale under Rule 144(k) 90 days after effective Additional shares eligible for sale under date(2)...................... Rules 144 and 701 180 days after effective All shares subject to lock-up released; date(2)...................... additional shares eligible for sale under Rules 144 and 701 More than 181 days after ef- Additional shares becoming eligible for fective date(2).............. sale under Rule 144 more than 180 days after the effective date -------- (1) Assumes no exercise of the underwriters' over-allotment option. (2) Assumes an effective date of September 30, 1999. In addition, as of June 30, 1999, there were outstanding options and warrants to purchase 4,018,127 shares of common stock. All such options and warrants are subject to lock-up agreements. Rule 144 In general, under Rule 144, an affiliate of PC-Tel, or person (or persons whose shares are aggregated) who has beneficially owned restricted shares for at least one year, will be entitled to sell in any three-month period a number of shares that does not exceed the greater of . 1% of the then outstanding shares of common stock (approximately 15,804 shares immediately after this offering) or 66

. the average weekly trading volume during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC. Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about PC-Tel. Rule 144(k) Under Rule 144(k), a person who is not deemed to have been one of our "affiliates" at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an "affiliate," is entitled to sell such shares without complying with the manner of sale, notice filing, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately upon the completion of this offering. Rule 701 Rule 701, as currently in effect, permits resale of shares in reliance upon Rule 144 but without compliance with certain restrictions, including the holding period requirement, of Rule 144. Any employee, officer or director of or consultant to PC-Tel who purchased shares pursuant to a written compensatory plan or contract may be entitled to rely on the resale provision of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. Rule 701 further provides that non-affiliates may sell such shares in reliance on Rule 144 without having to comply with the holding period, public information, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares are required to wait until 90 days after the date of this Prospectus before selling such shares. However, all Rule 701 shares are subject to lock-up agreements and will only become eligible for sale at the earlier of the expiration of the 180-day lock-up agreements or no sooner than 90 days after the offering upon obtaining the prior written consent of Banc of America Securities LLC. We are unable to estimate the number of shares that will be sold under Rule 144, as this will depend on the market price for the common stock, the personal circumstances of the sellers and other factors. 180 days following the date of this prospectus, we intend to file a registration statement on Form S-8 under the Securities Act covering, among other things, shares of common stock subject to outstanding options under the 1995 stock plan, the 1997 stock plan, the 1998 director option plan and the 1998 employee stock purchase plan. Based on the number of shares subject to outstanding options as of September 30, 1999 and currently reserved for issuance under the incentive plans, such registration statement would cover approximately 9,700,000 shares. Such registration statement will automatically become effective upon filing. Accordingly, shares registered under such registration statement will, subject to Rule 144 volume limitations applicable to affiliates of PC-Tel, be available for sale in the open market immediately after the 180-day lock-up agreements expire. Registration Rights Also beginning six months after the date of this offering, holders of 3,875,200 shares of common stock, as converted, and the holders of warrants to purchase 200,000 shares of common stock, as converted, or their permitted transferees will be entitled to certain rights with respect to registration of such shares for sale in the public market. See "Description of Capital Stock-- Registration Rights." Registration of such shares under the Securities Act would result in such shares becoming freely tradable without restriction under the Securities Act (except for shares purchase by affiliates) immediately upon the effectiveness of such registration. 67

UNDERWRITING We are offering the shares of common stock described in this prospectus through a number of underwriters. Banc of America Securities LLC, Warburg Dillon Read LLC and Needham & Company, Inc., are the representatives of the underwriters. We have entered into an underwriting agreement with the representatives. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each of the underwriters has agreed to purchase, the number of shares of common stock listed next to its name in the following table: Number of Underwriter Shares ----------- --------- Banc of America Securities LLC..................................... Warburg Dillon Read LLC............................................ Needham & Company, Inc............................................. --------- Total............................................................ 4,600,000 ========= The underwriters initially will offer shares to the public at the price specified on the cover page of this prospectus. The underwriters may allow to some dealers a concession of not more than $ per share. The underwriters also may allow, and any other dealers may reallow, a concession of not more than $ per share to some other dealers. If all the shares are not sold at the initial public offering price, the underwriters may change the offering price and the other selling terms. The common stock is offered subject to a number of conditions, including: . receipt and acceptance of our common stock by the underwriters and . the right to reject orders in whole or in part. We have granted an option to the underwriters to buy up to 690,000 additional shares of common stock. These additional shares would cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days to exercise this option. If the underwriters exercise this option, they will each purchase additional shares approximately in proportion to the amounts specified in the table above. We, all our stockholders and all of our officers and directors have entered into lock-up agreements with the underwriters. Under those agreements, we and those holders of stock and options may not dispose of or hedge any common stock or securities convertible into or exchangeable for shares of common stock. These restrictions will be in effect for a period of 180 days after the date of this prospectus. At any time and without notice, Banc of America Securities LLC may, in its sole discretion, release all or some of the securities from these lock-up agreements. We will indemnify the underwriters against some liabilities, including some liabilities under the Securities Act. If we are unable to provide this indemnification, we will contribute to payments the underwriters may be required to make in respect of those liabilities. The shares of common stock have been approved for listing on the Nasdaq National Market under the symbol "PCTI." In connection with this offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include: . short sales, . stabilizing transactions, and . purchase to cover positions created by short sales. 68

Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in this offering. Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. The underwriters also may impose a penalty bid. This means that if the representatives purchase shares in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them. The underwriters may engage in activities that stabilize, maintain or otherwise affect the price of the common stock, including: . over-allotment, . stabilization, . syndicate covering transactions, and . imposition of penalty bids. As a result of these activities, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the Nasdaq National Market, in the over-the-counter market or otherwise. The underwriters do not expect sales to discretionary accounts to exceed 5% of the total number of shares of common stock offered by this prospectus. Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between us and the underwriters. Among the factors to be considered in such negotiations are: . our history and prospects, and the history and prospectus of the industry in which we compete, . our past and present financial performance, . an assessment of our management, . the present state of our development, . our prospects for future earnings, . the prevailing market conditions of the applicable U.S. securities market at the time of this offer, . market valuations of publicly traded companies that we and the underwriters believe to be comparable to us, and . other factors deemed relevant by us and the underwriters. The underwriters have reserved up to 200,000 shares of the common stock offered hereby for sale to certain of our employees, directors, and friends at the initial public offering price set forth on the cover page of this prospectus. Such persons must commit to purchase no later than the close of business on the day following the date of this prospectus. The number of shares available for sale to the general public will be reduced to the extent such persons purchase these reserved shares. 69

LEGAL MATTERS The validity of the common stock offered hereby will be passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California. Certain legal matters will be passed upon for the Underwriters by Brobeck Phleger & Harrison, LLP, San Francisco, California. Certain legal matters related to intellectual property will be passed on for PC-Tel by Knobbe, Martens, Olson & Bear, LLP, Newport Beach, California. EXPERTS The consolidated financial statements and schedule of PC-Tel, Inc. included in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. The financial statements of the Communications Systems Division, a division of General DataComm, Inc. included in this prospectus and elsewhere in the registration statement have been audited by PricewaterhouseCoopers LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein, in reliance upon the authority of said firm as experts in giving said report. WHERE YOU CAN FIND ADDITIONAL INFORMATION We filed with the Securities and Exchange Commission, Washington, D.C., a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock sold in this offering. This prospectus does not contain all the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to PC-Tel and our common stock, we refer you to the registration statement and to the exhibits and schedules that were filed with the registration statement. Statements contained in this prospectus as to the contents of any contract or other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration statement may be inspected by anyone without charge at the Public Reference Section of the Securities and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of all or any portion of the registration statement may be obtained from the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. The Securities and Exchange Commission maintains a World Wide Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission. The address of the site is http://www.sec.gov. Upon completion of this offering, PC-Tel will become subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, and, in accordance with the requirements of the Securities Exchange Act of 1934, will file periodic reports, proxy statements and other information with the Securities and Exchange Commission. These periodic reports, proxy statements and other information will be available for inspection and copying at the regional offices, public reference facilities and web site of the Securities and Exchange Commission referred to above. 70

PC-TEL, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PC-Tel, Inc. Report of Independent Public Accountants............................... F-2 Consolidated Balance Sheets............................................ F-3 Consolidated Statements of Operations.................................. F-4 Consolidated Statements of Stockholders' Equity........................ F-5 Consolidated Statements of Cash Flows.................................. F-6 Notes to the Consolidated Financial Statements......................... F-7 Communications Systems Division, a division of General DataComm, Inc. Report of Independent Public Accountants............................... F-22 Balance Sheets......................................................... F-23 Statements of Income and Divisional Equity............................. F-24 Statements of Cash Flows............................................... F-25 Notes to Financial Statements.......................................... F-26 Unaudited Pro Forma Condensed Combined Statement of Operations of PC-Tel, Inc. and Communications Systems Divison Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 1998 (unaudited)......................................... P-1 Notes to Pro Forma Condensed Combined Statement of Operations (unaudited) .......................................................... P-3 F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To PC-Tel, Inc.: We have audited the accompanying consolidated balance sheets of PC-Tel, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1997 and 1998 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PC-Tel, Inc. and subsidiaries as of December 31, 1997 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP San Jose, California March 4, 1999 F-2

PC-TEL, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, --------------- June 30, 1999 Pro Forma June Stockholders' 30, Equity 1997 1998 1999 (Note 8) ------- ------- ------- ------------- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents............ $ 6,685 $12,988 $17,252 Short-term investments............... -- -- 6,282 Accounts receivable, net of allowance for doubtful accounts of $604, $1,689 and $3,382, respectively..... 6,058 12,931 5,516 Subscriptions receivable............. 5,002 -- -- Inventories.......................... 989 2,073 3,590 Prepaid expenses and other assets.... 926 264 472 Deferred tax asset................... 2,680 4,205 4,658 ------- ------- ------- Total current assets............... 22,340 32,461 37,770 PROPERTY AND EQUIPMENT, net............ 713 1,042 1,475 GOODWILL AND OTHER INTANGIBLE ASSETS, net................................... -- 10,812 9,730 OTHER ASSETS........................... 95 1,681 1,508 ------- ------- ------- $23,148 $45,996 $50,483 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt.... $ -- $ 1,640 $ 1,847 Accounts payable..................... 1,577 5,155 3,564 Accrued royalties.................... 6,505 5,144 6,516 Income taxes payable................. -- 1,207 2,044 Accrued liabilities.................. 1,418 3,002 5,021 ------- ------- ------- Total current liabilities.......... 9,500 16,148 18,992 ------- ------- ------- LONG-TERM DEBT, net of current portion............................... 38 14,709 13,630 ------- ------- ------- COMMITMENTS AND CONTINGENCIES (Note 6) STOCKHOLDERS' EQUITY: Preferred stock, $0.001 par value; aggregate liquidation preference of $10,015 as of December 31, 1998 and June 30, 1999 Authorized--9,385,548 Outstanding--7,885,548, 8,510,748, 8,510,748 and 0 shares pro forma, respectively; subscribed--625,200, 0, 0 and 0 shares pro forma, respectively....................... 9 9 9 $ -- Common stock, $0.001 par value Authorized--50,000,000 Outstanding--2,208,990, 2,412,247, 2,491,330 and 11,002,078 shares pro forma, respectively................ 2 2 2 11 Additional paid-in capital........... 9,667 10,915 12,881 12,881 Deferred compensation................ -- (214) (2,162) (2,162) Retained earnings.................... 3,932 4,427 7,131 7,131 ------- ------- ------- ------- Total stockholders' equity......... 13,610 15,139 17,861 17,861 ------- ------- ------- ------- $23,148 $45,996 $50,483 $50,483 ======= ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. F-3

PC-TEL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Six Months Ended Year Ended December 31, June 30, ----------------------- ---------------- 1996 1997 1998 1998 1999 ------- ------- ------- ------- ------- (unaudited) REVENUES............................ $16,573 $24,009 $33,004 $12,343 $33,046 COST OF REVENUES.................... 9,182 12,924 13,878 5,948 16,997 ------- ------- ------- ------- ------- GROSS PROFIT........................ 7,391 11,085 19,126 6,395 16,049 ------- ------- ------- ------- ------- OPERATING EXPENSES: Research and development.......... 2,152 3,348 4,932 2,455 4,423 Sales and marketing............... 839 3,168 5,624 2,407 4,945 General and administrative........ 477 1,612 2,169 791 2,063 Acquired in-process research and development (Note 4)............. -- -- 6,130 -- -- Amortization of deferred compensation..................... 41 -- 43 10 164 ------- ------- ------- ------- ------- Total operating expenses........ 3,509 8,128 18,898 5,663 11,595 ------- ------- ------- ------- ------- INCOME FROM OPERATIONS.............. 3,882 2,957 228 732 4,454 ------- ------- ------- ------- ------- OTHER INCOME (EXPENSE), NET: Interest income................... 127 299 504 254 303 Interest expense.................. -- -- (25) (11) (895) ------- ------- ------- ------- ------- Total other income (expense), net............................ 127 299 479 243 (592) ------- ------- ------- ------- ------- INCOME BEFORE PROVISION FOR INCOME TAXES.............................. 4,009 3,256 707 975 3,862 PROVISION FOR INCOME TAXES.......... 1,005 955 212 292 1,158 ------- ------- ------- ------- ------- NET INCOME.......................... $ 3,004 $ 2,301 $ 495 $ 683 $ 2,704 ======= ======= ======= ======= ======= Basic earnings per share............ $ 4.79 $ 1.13 $ 0.21 $ 0.29 $ 1.10 Diluted earnings per share.......... $ 0.29 $ 0.20 $ 0.04 $ 0.06 $ 0.21 Shares used in computing basic earnings per share................. 627 2,032 2,355 2,320 2,461 Shares used in computing diluted earnings per share................. 10,280 11,645 12,325 12,400 12,638 The accompanying notes are an integral part of these consolidated financial statements. F-4

PC-TEL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, except share and per share amounts) (Accumulated Preferred Stock Common Stock Additional Deficit)/ ---------------- ---------------- Paid-In Deferred Retained Shares Amount Shares Amount Capital Compensation Earnings Total --------- ------ --------- ------ ---------- ------------ ------------ ------- BALANCE, DECEMBER 31, 1995................... 7,562,208 $ 8 -- $-- $ 4,593 $ -- $(1,373) $ 3,228 Issuance of Series B convertible preferred stock for cash at $1.20 per share....... 323,340 -- -- -- 388 -- -- 388 Issuance of common stock on exercise of stock options......... -- -- 1,454,999 1 27 -- -- 28 Stock compensation expense for stock option grants......... -- -- -- -- 41 -- -- 41 Net income............. -- -- -- -- -- -- 3,004 3,004 --------- --- --------- --- ------- ------- ------- ------- BALANCE, DECEMBER 31, 1996................... 7,885,548 8 1,454,999 1 5,049 -- 1,631 6,689 Subscription for Series C convertible preferred stock for cash at $8.00 per share, net of issuance costs of $406......... 625,200 1 -- -- 4,595 -- -- 4,596 Issuance of common stock on exercise of stock options......... -- -- 753,991 1 23 -- -- 24 Net income............. -- -- -- -- -- -- 2,301 2,301 --------- --- --------- --- ------- ------- ------- ------- BALANCE, DECEMBER 31, 1997................... 8,510,748 9 2,208,990 2 9,667 -- 3,932 13,610 Issuance costs for Series C convertible preferred stock....... -- -- -- -- (44) -- -- (44) Deferred compensation expense for stock option grants......... -- -- -- -- 257 (257) -- -- Stock compensation expense for stock option grants......... -- -- -- -- -- 43 -- 43 Issuance of common stock on exercise of stock options......... -- -- 203,257 -- 34 -- -- 34 Issuance of Series C convertible stock warrants in conjunction with notes payable............... -- -- -- -- 1,350 -- -- 1,350 Costs incurred related to initial public offering.............. -- -- -- -- (349) -- -- (349) Net income............. -- -- -- -- -- -- 495 495 --------- --- --------- --- ------- ------- ------- ------- BALANCE, DECEMBER 31, 1998................... 8,510,748 9 2,412,247 2 10,915 (214) 4,427 15,139 Deferred compensation expense for stock option grants (unaudited)........... -- -- -- -- 2,112 (2,112) -- -- Stock compensation expense for option grants (unaudited).... -- -- -- -- -- 164 -- 164 Issuance of common stock on exercise of stock options (unaudited)........... -- -- 79,083 -- 10 -- -- 10 Costs incurred related to initial public offering (unaudited).. -- -- -- -- (156) -- -- (156) Net income (unaudited)........... -- -- -- -- -- -- 2,704 2,704 --------- --- --------- --- ------- ------- ------- ------- BALANCE, JUNE 30, 1999 (unaudited)............ 8,510,748 $ 9 2,491,330 $ 2 $12,881 $(2,162) $ 7,131 $17,861 ========= === ========= === ======= ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. F-5

PC-TEL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Six Months Ended Year Ended December 31, June 30, -------------------------- ------------------ 1996 1997 1998 1998 1999 ------- ------- -------- -------- -------- (unaudited) CASH FLOWS FROM OPERATING AC- TIVITIES: Net income.................... $ 3,004 $ 2,301 $ 495 $ 683 $ 2,704 Adjustments to reconcile net income to net cash provided by operating activities: Acquired in-process research and development.............. -- -- 6,130 -- -- Depreciation and amortization................. 59 193 303 139 1,350 Amortization of deferred debt costs........................ -- -- -- -- 152 Increase in allowance for doubtful accounts............ 70 534 1,085 484 1,693 Increase in inventory reserves..................... 1,514 488 330 146 525 Stock compensation expense for stock option grants.......... 41 -- 43 10 164 Changes in assets and liabilities, net of acquisitions: (Increase) decrease in accounts receivable......... (2,247) (4,363) (8,391) (3,196) 5,722 (Increase) decrease in inventories................. (1,850) 869 (1,352) (135) (2,042) (Increase) decrease in prepaid expenses and other assets...................... (16) (975) 598 685 (190) Increase in deferred tax asset....................... (2,489) (191) (1,525) (73) (453) Increase in accounts payable and accrued liabilities..... 1,053 1,170 5,157 516 428 Increase (decrease) in accrued royalties........... 2,531 3,974 (1,361) 1,758 1,372 Increase (decrease) in income taxes payable............... 2,532 (2,532) 1,207 63 837 Increase (decrease) in deferred revenue............ 551 (551) -- -- -- ------- ------- -------- -------- -------- Net cash provided by operating activities........ 4,753 917 2,719 1,080 12,262 ------- ------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment.................... (310) (427) (512) (149) (698) Proceeds from sale of available-for-sale investments.................. -- 1,003 -- -- 3,254 Purchase of available-for-sale investments.................. (948) -- -- -- (9,536) Purchase of Communications Systems Division, net of cash acquired..................... -- -- (16,832) -- -- ------- ------- -------- -------- -------- Net cash provided by (used in) investing activities.... (1,258) 576 (17,344) (149) (6,980) ------- ------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable... -- -- 16,313 -- -- Principal payments on notes payable...................... -- -- -- -- (859) Proceeds from issuance of preferred stock.............. 388 -- 5,002 5,002 -- Costs incurred related to issuance of preferred stock.. -- (406) (44) -- -- Costs incurred related to proposed initial public offering..................... -- -- (349) (262) (156) Proceeds from issuance of common stock................. 28 24 34 30 10 Principal payments on capital lease obligations............ (2) (11) (28) (14) (13) ------- ------- -------- -------- -------- Net cash provided by (used in) financing activities.... 414 (393) 20,928 4,756 (1,018) ------- ------- -------- -------- -------- Net increase in cash and cash equivalents................. 3,909 1,100 6,303 5,687 4,264 CASH AND CASH EQUIVALENTS, beginning of period........... 1,676 5,585 6,685 6,685 12,988 ------- ------- -------- -------- -------- CASH AND CASH EQUIVALENTS, end of period..................... $ 5,585 $ 6,685 $ 12,988 $ 12,372 $ 17,252 ======= ======= ======== ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest........ $ -- $ -- $ 25 $ 11 $ 895 Cash paid for income taxes.... $ 961 $ 4,372 $ 462 $ 317 $ 775 Property and equipment acquired under capital leases....................... $ 7 $ 67 $ -- $ -- $ -- Issuance of warrants for preferred and common stock... $ -- $ -- $ 1,400 $ 50 $ -- The accompanying notes are an integral part of these consolidated financial statements. F-6

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Information relating to the six months ended June 30, 1998 and June 30, 1999 is unaudited) DECEMBER 31, 1998 1. ORGANIZATION AND OPERATIONS OF THE COMPANY: PC-Tel, Inc. ("the Company") is a corporation that was originally incorporated in California in February 1994. In July 1998, the Company reincorporated in Delaware and this reincorporation has been reflected retroactively in the accompanying consolidated financial statements. The Company is a leading provider of software based connectivity solutions to individuals and businesses worldwide. The Company designs, develops, produces and markets advanced software-based high performance, low cost modems that are flexible and upgradeable, with functionality that can include data/fax transmission at various speeds, video conferencing and telephony features. The Company's host signal processing software architecture utilizes the host PC's central processing unit to perform digital signal processing and other operations typically handled by dedicated hardware found in conventional hardware-based modems. The Company's host signal processing technology allows the elimination of this dedicated hardware, lowering costs and enhancing capabilities. The Company is subject to certain risks including, but not limited to, competition from larger, more established companies, reliance on a limited number of customers, dependence on new product introductions, short product life cycles, the Company's ability to develop and bring to market new products on a timely basis, volatility of the industry including technical obsolescence, dependence on key employees and the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Consolidation and Foreign Currency Translation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of intercompany accounts and transactions. The functional currency of the Company's subsidiaries is the United States dollar, accordingly, all translation gains and losses resulting from transactions denominated in currencies other than United States dollars are included in net income. As of December 31, 1998, the Company has subsidiaries in the Cayman Islands and Japan. Cash and Cash Equivalents For the purposes of the consolidated balance sheets and the consolidated statements of cash flows, the Company considers all highly liquid debt instruments or money-market type funds with an original maturity of three months or less to be cash equivalents. Short-Term Investments At June 30, 1999, short-term investments consist of U.S. Government investments with an original maturity of approximately four months and a certificate of deposit with an original maturity in excess of three months. These short-term investments are classified as available-for-sale and are recorded at their fair value. If F-7

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) material, any unrealized gains or losses would be classified as Other Comprehensive Income in the accompanying statement of stockholders' equity. As of June 30, 1999, the cost and fair value of the short-term investments were not materially different. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash investments and trade receivables. The Company has cash investment policies that limit its investments to short-term, low-risk investments. With respect to trade receivables, the Company's customers are concentrated in the personal computer industry and modem board manufacturer industry segment and in certain geographic locations. The Company actively markets and sells products in Asia. The Company performs ongoing evaluations of its customers' financial conditions and generally requires no collateral. As of December 31, 1997, approximately 55% of gross accounts receivable was concentrated with three customers. As of December 31, 1998, approximately 54% of gross accounts receivable was concentrated with three customers. As of June 30, 1999, approximately 48% of gross accounts receivable was concentrated with three customers. Inventories Inventories are stated at the lower of cost or market and include material, labor and overhead costs. Inventories at December 31, 1997 and 1998 and June 30, 1999 were composed of finished goods only. Inventories included certain finished goods that were in excess of the Company's expected requirements and the excess amounts were fully reserved as of December 31, 1997, 1998 and June 30, 1999. Due to competitive pressures and technological innovation, it is possible these estimates could change in the near term. Property and Equipment Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives (three to seven years) of the assets. Assets acquired under capital leases are recorded at the present value of the related lease obligations and are depreciated on a straight-line basis over the shorter of the estimated useful life or lease term. Included in property and equipment are assets acquired under capital lease obligations with an original cost of approximately $74,000. Accumulated amortization on the leased assets was approximately $6,000 and $22,000 as of December 31, 1997 and 1998, respectively. Leasehold improvements are amortized over the corresponding lease term. Property and equipment consists of the following (in thousands): December 31, ------------- 1997 1998 June 30, 1999 ----- ------ ------------- (unaudited) Computer and office equipment................. $ 868 $1,296 $1,962 Furniture and fixtures........................ 119 264 271 Leasehold improvements........................ 6 55 72 ----- ------ ------ Total property and equipment.............. 993 1,615 2,305 Less: Accumulated depreciation and amortization................................. (280) (573) (830) ----- ------ ------ Property and equipment, net............... $ 713 $1,042 $1,475 ===== ====== ====== F-8

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Accounting for Impairment of Long-Lived Assets The Company assesses the need to record impairment losses on long-lived assets used in operations when indicators of impairment are present. On an on- going basis, management reviews the value and period of amortization or depreciation of long-lived assets, including costs in excess of net assets of businesses acquired. During this review, the significant assumptions used in determining the original cost of long-lived assets are reevaluated. Although the assumptions may vary from transaction to transaction, they generally include revenue growth, operating results, cash flows and other indicators of value. Management then determines whether there has been a permanent impairment of the value of long-lived assets by comparing future estimated undiscounted cash flows to the asset's carrying value. If the estimated future undiscounted cash flows exceed the carrying value of the asset, a loss is recorded as the excess of the asset's carrying value over fair value. To date, the Company has not needed to record any impairment losses on long-lived assets. Software Development Costs The Company accounts for software development costs in accordance with Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed." The Company's products include a software component. The Company has expensed all software development costs to date, and substantially all development costs have been incurred prior to the Company's products attaining technological feasibility. Revenue Recognition Revenues consist primarily of sales of products to original equipment manufactures ("OEMs") and distributors. Revenues from sales to OEMs are recognized upon shipment. The Company provides for estimated sales returns and allowances related to sales to OEMs at the time of shipment. Revenues from sales to distributors are made under agreements allowing price protection and rights of return on unsold products. In the fourth quarter of 1998, the Company began to record revenue relating to sales to distributors upon sell-through from the distributor to the end customer. Prior to this change, the Company recognized revenues upon shipment to distributors, net of reserves for estimated returns and price protection arrangements. This change did not have a material effect on the Company's financial statements. The Company has also generated revenues from engineering contracts. Revenues from engineering contracts are recognized as contract milestones are achieved. Royalty revenue is recognized when confirmation of royalties due to the Company is received from licensees. Stock-Based Compensation The Company accounts for stock based compensation in accordance with SFAS No. 123 "Accounting for Stock-Based Compensation." SFAS No. 123 permits the use of either a fair value based method or the method defined in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", ("APB No. 25"), to account for stock-based compensation arrangements. Companies that elect to employ the valuation method provided in APB No. 25 are required to disclose the pro forma net income (loss) that would have resulted from the use of the fair value based method. The Company has elected to continue to determine the value of stock-based compensation arrangements under the provisions of APB No. 25 and, accordingly, it has included the pro forma disclosures required under SFAS No. 123 in Note 8. Earnings Per Share The Company computes earnings per share in accordance with SFAS No. 128, "Earnings Per Share". SFAS No. 128 requires companies to compute net income per share under two different methods, basic and F-9

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) diluted, and present per share data for all periods in which a statement of operations is presented. Basic earnings per share is computed by dividing net income per share by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed using the weighted average number of common stock and common stock equivalents outstanding during the period. Common stock equivalents consist of preferred stock using the "if converted" method and stock options and warrants using the treasury stock method. Preferred stock, common stock options and warrants are excluded from the computation of diluted earnings per share if their effect is anti-dilutive. Pursuant to the Securities and Exchange Commission Staff Accounting Bulletin No. 98, convertible preferred stock and common stock issued or granted for nominal consideration prior to the anticipated effective date of the proposed initial public offering must be included in the calculation of basic and diluted net income per common share as if they had been outstanding for all periods presented. To date, the Company has not had any issuances or grants for nominal consideration. The following table provides a reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share for the three years ended December 31, 1998 and for the six months ended June 30, 1998 and June 30, 1999, respectively (in thousands, except per share data): Six Months Ended Year Ended December 31, June 30, ----------------------- --------------- 1996 1997 1998 1998 1999 ------- ------- ------- ------- ------- (unaudited) Net income............................. $ 3,004 $ 2,301 $ 495 $ 683 $ 2,704 ======= ======= ======= ======= ======= Basic earnings per share: Weighted average common shares outstanding......................... 627 2,032 2,355 2,320 2,461 ------- ------- ------- ------- ------- Basic earnings per share............... $ 4.79 $ 1.13 $ 0.21 $ 0.29 $ 1.10 ======= ======= ======= ======= ======= Diluted earnings per share: Weighted average common shares outstanding......................... 627 2,032 2,355 2,320 2,461 common stock option grants and outstanding warrants................ 1,848 1,727 1,518 1,687 1,666 Weighted average preferred stock outstanding......................... 7,805 7,886 8,452 8,393 8,511 ------- ------- ------- ------- ------- Total weighted average common shares and common stock equivalents........ 10,280 11,645 12,325 12,400 12,638 ------- ------- ------- ------- ------- Diluted earnings per share............. $ 0.29 $ 0.20 $ 0.04 $ 0.06 $ 0.21 ======= ======= ======= ======= ======= Comprehensive Income Effective January 1, 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive Income." Comprehensive income is to include amounts which have been previously excluded from net income and reflected instead in stockholders' equity. For all periods presented, comprehensive income is the same as reported net income. The Cost of Computer Software Developed or Obtained for Internal Use In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") No. 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," F-10

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) which the Company adopted in fiscal 1999. SOP No. 98-1 requires entities to capitalize certain costs related to internal-use software once certain criteria has been met. The adoption did not have a material impact on the Company's financial position or results of operations. Costs of Start-Up Activities In April 1998, the American Institute of Certified Public Accountants issued SOP No. 98-5 "Reporting on the Costs of Start-Up Activities," which the Company adopted in fiscal 1999. SOP No. 98-5 requires that all start-up costs related to new operations must be expensed as incurred. In addition, all start-up costs that were previously capitalized must be written off when SOP No. 98-5 is adopted. The adoption did not have a material impact on the Company's financial position or results of operations. Proposed Initial Public Offering The Board of Directors has approved a plan to file a registration statement with the Securities and Exchange Commission to register shares of its common stock in connection with a proposed initial public offering ("IPO"). Costs incurred by the Company related to the IPO have been recorded within the consolidated statements of stockholders' equity. If the Company is not able to complete the IPO, these capitalized costs would be expensed in the consolidated statements of operations. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires certain accounting and reporting standards for derivative financial instruments and hedging activities. The Company becomes subject to SFAS No. 133 for the first quarter beginning after January 1, 2001. Because the Company does not currently hold any derivative instruments and does not engage in hedging activities, the adoption of SFAS No. 133 is not expected to have a material impact on the financial position or results of operations of the Company. 3. RISKS AND UNCERTAINTIES: For the year ended December 31, 1998, the Company's purchases of integrated circuits were primarily concentrated with a limited number of vendors. If these vendors were unable to provide integrated circuits in a timely manner and the Company was unable to find alternative vendors, the Company's business, operating results and financial condition could be adversely affected. The majority of the Company's revenues are derived from a limited number of products utilizing host signal processing technology. The market for these products is characterized by frequent transitions in which products rapidly incorporate new features and performance standards. A failure to develop products with required feature sets or performance standards or a delay in bringing a new product to market could adversely affect the Company's operating results. 4. ACQUISITIONS: Communications Systems Division On December 22, 1998, the Company acquired substantially all of the assets and certain of the liabilities of Communications Systems Division ("CSD"), a division of General DataComm, Inc., for a total purchase F-11

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) price of approximately $17 million. The acquisition, which was accounted for as a purchase, was paid for in cash and financed primarily with notes payable. In conjunction with the acquisition, the Company and one of its wholly owned subsidiaries entered into Notes Payable arrangements for approximately $16.3 million (Note 5). The consolidated statement of operations for the year ended December 31, 1998, includes the results of operations of CSD from the date of acquisition. The excess purchase price over the net tangible assets acquired was $16.8 million of which $6.1 million was allocated to in-process research and development and $10.7 million was allocated to other intangible assets. Amounts allocated to other intangible assets (classified as Goodwill and Other Intangible Assets, net in the accompanying consolidated balance sheets) include patents and intellectual property of $8.7 million, work force of $1.3 million and goodwill of $671,000, all of which are being amortized over their useful lives which was five years on a weighted average basis. The allocation of purchase price is a preliminary estimate by management and is subject to further adjustment. Upon completion of the CSD acquisition, the Company immediately expensed $6.1 million representing purchased in-process technology that had not yet reached technological feasibility and had no alternative future use. The value assigned to purchased in-process technology, based on a percentage of completion discounted cash flow method, was determined by identifying research projects in areas for which technological feasibility has not been established. The value was determined by estimating the costs to develop the purchased in- process technology into commercially viable products, estimating the resulting net cash flows from such projects and discounting the net cash flows back to their present value. The discount rate includes a risk adjusted discount rate to take into account the uncertainty surrounding the successful development of the purchased in-process technology. The valuation includes cash inflows from in-process technology through 2002 with revenues commencing in 1999 and increasing significantly in 2000 before declining in 2002. A royalty payment of 3% was assumed from in-process technology to existing technology, based on management's estimate of a patent license rate. The High Density Remote Access System and industrial modem projects were approximately 56% complete at the time of the valuation and the expected timeframe for achieving these product releases was assumed to be in the second half of 1999. The DSL project was approximately 56% complete at the time of the valuation and the expected time frame for achieving this product release is assumed to be in early 2000. The percentage complete calculations for all projects were estimated based on research and development expenses incurred to date and management estimates of remaining development costs. Significant remaining development efforts must be completed in the next 6 to 18 months in order for CSD's projects to become implemented in a commercially viable timeframe. If these projects are not successfully developed, the Company's future revenue and profitability may be adversely affected. Additionally, the value of other intangible assets acquired may become impaired. The unaudited pro forma financial information for the years ended December 31, 1997 and 1998 is presented below as if CSD had been acquired on January 1, 1997. Year Ended December 31, --------------- 1997 1998 ------- ------- Revenues.................................................. $28,573 $35,632 Net income................................................ $ 2,272 $ 2,978 Diluted net income per share.............................. $ 0.20 $ 0.24 5. NOTES PAYABLE: On December 22, 1998, the Company and one of its wholly owned subsidiaries, each entered into a note payable arrangement ("the Notes Payable") with a bank. The Notes Payable are for a total amount of $16.3 million. The Notes Payable bear interest at the bank's prime interest rate plus 0.5% (8.25% at December 31, 1998) and are subject to certain financial and non-financial covenants. In addition, the bank F-12

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) received a primary security interest in all assets, including intellectual property, of the Company. The Notes Payable are to be repaid in 59 equal monthly installments of approximately $258,000 and a final payment of approximately $5.9 million in January 2004. The Company will be required to pay a 3% penalty if the Notes Payable are paid prior to maturity. No payments on the Notes Payable were required to be made by December 31, 1998. As of December 31, 1998, the aggregate principal maturities of the Notes Payable are as follows (in thousands): 1999.............................................................. $1,614 2000.............................................................. 1,936 2001.............................................................. 2,111 2002.............................................................. 2,291 2003.............................................................. 2,489 2004.............................................................. 5,882 In connection with the Notes Payable, the Company issued a warrant to purchase 200,000 shares of Series C preferred stock at an exercise price of $8.00 per share. The warrants are immediately exercisable and expire ten years from the date of issuance. The fair value of the warrants at the date of the issuance was estimated to be approximately $1.4 million using the Black-Scholes option pricing model. The Company has recorded the fair value of the warrants as a deferred charge which will be amortized over the term of the Notes Payable. 6. COMMITMENTS AND CONTINGENCIES: The Company leases its facilities under operating leases which expire through September 2001. In addition, the Company leases certain of its equipment under capital leases. As of December 31, 1998, the future minimum lease commitments under all leases were as follows (in thousands): Capital Operating Leases Leases ------- --------- 1999..................................................... $29 $ 647 2000..................................................... 4 517 2001..................................................... 4 62 2002..................................................... 3 -- --- ------ Total minimum lease payments............................. 40 $1,226 ====== Less: Amounts representing interest...................... (4) --- Present value of minimum lease payments.................. $36 === Rent expense under operating leases for the years ended December 31, 1996, 1997 and 1998 was approximately $139,000, $248,000 and $364,000, respectively. As of December 31, 1997 and 1998, the Company has accrued royalties of approximately $6.5 million and $5.1 million, respectively. The Company has entered into royalty agreements in fiscal 1998 and continues to negotiate royalty agreements with several other third parties. Accordingly, the Company has accrued its best estimate of the amount of royalties payable based on royalty agreements already signed or in negotiation, as well as advice from patent counsel. Should the final agreements result in royalty rates significantly different from these assumptions, the Company's business, operating results and financial condition could be materially and adversely affected. During 1998, Motorola, Inc. ("Motorola") filed an action for patent infringement against the Company (and one other defendant) of seven Motorola patents. In its complaint, Motorola seeks damages for the F-13

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Company's alleged infringement, including treble damages for the Company's alleged willful infringement and an injunction against the Company. Motorola is also seeking attorney's fees and costs. The Company filed an answer to Motorola's complaint denying infringement of the seven asserted Motorola patents and asserted that each patent is invalid or unenforceable. In addition, the Company asserted counterclaims and declaratory relief for invalidity and/or unenforceability and noninfringements of each of the seven asserted Motorola patents. By its counterclaims, the Company seeks compensatory and punitive damages, an injunction against Motorola, and an award of treble damages for Motorola's violation of the Federal and state antitrust laws, and for violation of Massachusetts General Law. The Company also seeks its costs and attorney's fees in this action. An initial conference with the Court under Delaware local rule was held in April 1999 and discovery started in June 1999. Due to the nature of litigation generally and because the lawsuit brought by Motorola is at an early stage, management cannot ascertain the availability of injunctive relief or other equitable remedies or estimate the total expenses, possible damages or settlement value, if any, that may ultimately be incurred in connection with Motorola's suit. However, management believes, based on the advice of legal counsel, that the Company has meritorious defenses to the allegations contained in Motorola's complaint. This litigation could be time consuming and costly, and the Company will not necessarily prevail given the inherent uncertainties of litigation. In the event that the Company does not prevail in litigation, the Company could be prevented from selling soft modem products or be required to enter into royalty or licensing agreements or pay monetary damages. Such royalty or licensing agreements, if required, may not be available on terms acceptable to the Company or at all. In the event of a successful claim against the Company, the Company's financial position and results of operations could be materially adversely affected. 7. PREFERRED STOCK: Series A convertible preferred stock ("Series A"), Series B convertible preferred stock ("Series B") and Series C convertible preferred stock ("Series C") consist of the following, net of issuance costs (dollars in thousands): December 31, -------------- June 30, 1997 1998 1999 ------ ------ ----------- (unaudited) Series A: $0.001 par value; Authorized--4,635,548 Outstanding--4,635,548 shares; liquidation pref- erence of $1,113................................ $ 5 $ 5 $ 5 Series B: $0.001 par value; Authorized--3,250,000 Outstanding--3,250,000 shares; liquidation pref- erence of $3,900................................ 3 3 3 Series C: $0.001 par value; Authorized--1,500,000 Outstanding or subscribed--625,200 shares; liquidation preference of $5,002................ 1 1 1 ------ ------ --- $ 9 $ 9 $ 9 ====== ====== === The Series C preferred stock was subscribed as of December 31, 1997 and was subsequently issued, and payment was received, in February 1998. Accordingly, a subscription receivable of approximately $5.0 million was recorded as a current asset at December 31, 1997 in the accompanying consolidated balance sheets. F-14

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The rights, restrictions and preferences of the Series A, Series B and Series C (collectively "convertible preferred stock") are as follows: . In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series C shares shall be entitled to receive $8.00 per share, prior and in preference to any distribution of the assets or surplus funds to the holders of Series A, Series B and common stock, plus all declared but unpaid dividends on each share of Series C. After payment of the full amount due to the holders of Series C, the holders of Series A and Series B shall be entitled to receive, prior to any distribution of the Company's assets or property to the holders of common stock, the amount of $0.24 and $1.20 per share, respectively, plus all declared but unpaid dividends on each share of Series A and Series B. The Series A and Series B shall rank on parity as to the receipt of any respective preferential amount for Series A and Series B shares. After payment of the full amount to Series A, Series B and Series C shareholders, the holders of common stock shall be entitled to receive an amount per share equal to $82,000 divided by the number of common shares outstanding at the time of distribution (excluding shares of common then issuable upon conversion of the convertible preferred stock). Any remaining assets shall be distributed ratably to the holders of convertible preferred stock and common stock, each share of preferred being treated as the number of shares of common into which it could then be converted. . Each share of convertible preferred stock is convertible, at the option of the shareholder, into one share of common stock, subject to adjustments to prevent dilution as provided in the respective stock agreements. . The holders of convertible preferred stock are entitled to the number of votes equal to the number of shares of common stock into which each share of convertible preferred stock could be converted. . Each share of convertible preferred stock will automatically convert into common stock in the event of the closing of an underwritten public offering of the Company's common stock from which the Company receives gross proceeds in excess of $15,000,000 and for which the offering price is not less than $16.00 per share. . Each convertible preferred stock shareholder is entitled to receive annual dividends at a rate of $0.019 per Series A share, $0.096 per Series B share and $0.64 per Series C share when, and if, declared by the Board of Directors. No dividends shall be paid on shares of Series A or Series B or common stock until total dividends have been paid, declared or set apart for Series C shareholders. Series A, Series B and Series C shareholders shall receive dividends prior to payment of dividends on common stock. Dividends are non-cumulative. No dividends have been declared to date. 8. COMMON STOCK: As of June 30, 1999, the Company had reserved shares of its common stock for future issuance as follows (unaudited): Conversion of Series A preferred stock............................ 4,635,548 Conversion of Series B preferred stock............................ 3,250,000 Conversion of Series C preferred stock............................ 625,200 Conversion of Series C and common stock warrants.................. 202,417 1995 and 1997 Stock Option Plans.................................. 4,208,670 Director Option Plan and Employee Stock Purchase Plan............. 1,000,000 ---------- 13,921,835 ========== F-15

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Unaudited Pro Forma Stockholders' Equity The Board of Directors have authorized the filing of a registration statement with the Securities and Exchange commission to register shares of its common stock in connection with a proposed initial public offering ("IPO"). If the IPO is consummated under the terms presently anticipated, all of the currently outstanding preferred stock will be converted into 8,510,748 shares of common stock upon the closing of the IPO. The effect of the conversion has been reflected as unaudited pro forma stockholders' equity in the accompanying balance sheet as of June 30, 1999. Stock Option Plans The Company has two stock option plans, the 1995 Stock Option Plan ("1995 Plan") and the 1997 Stock Option Plan ("1997 Plan"). Under the 1995 Plan and the 1997 Plan, the Board of Directors may grant to employees and consultants options and/or purchase rights to purchase the Company's common stock at terms and prices determined by the Board of Directors. The number of authorized shares available for issuance under the 1995 Plan was 3,200,000. As of December 31, 1998, the number of shares that remain available to be granted under the 1995 Plan is 152,673. The number of authorized shares available for issuance under the 1997 Plan is 3,500,000. As of December 31, 1998, the number of shares that remain available to be granted under the 1997 Plan is 1,049,772. In May 1998, the Board of Directors approved an increase in the number of authorized shares available for issuance under the 1997 Plan to 4,500,000 shares of common stock. In August 1999, the Board of Directors approved the amendment and restatement of the 1997 Plan and approved an additional increase in the number of authorized shares available for issuance under the 1997 Plan to 5,500,000 shares of common stock. The increase to 5,500,000 authorized shares requires stockholder approval. The number of authorized shares under the 1997 Plan will increase annually by an amount equal to the lesser of (i) 700,000 shares, (ii) 4% of the outstanding shares on such date or (iii) a lesser amount determined by the Board of Directors. The exercise price and vesting of all grants are to be determined by the Board of Directors. Options granted under the 1997 Plan expire 10 years from the date of grant. The 1997 Plan will terminate in 2007. 1998 Director Option Plan ("Directors Plan") The Directors Plan will not become effective until the effectiveness of the proposed initial public offering. A total of 200,000 shares of common stock have been reserved for issuance under the Directors Plan. The 1998 Director's Plan provides for the automatic grant of 15,000 shares of common stock to each new non-employee director upon election to the Board of Directors. The 15,000 share options will vest one-third as of each anniversary of its date of grant until the option is fully vested, provided that the optionee continues to serve as a director on such dates. After the initial 15,000 share option is granted to the non-employee director, he or she shall automatically be granted an option to purchase 7,500 shares each year on January 1, if on such date he or she shall have served on the Board of Directors for at least six months. The 7,500 share options shall vest completely on the anniversary of their date of grant, provided that the optionee continues to serve as a director on such dates. All of the options granted under the 1998 Director's Plan shall have a term of 10 years. The exercise price of all options shall be 100% of the fair market value per share of the common stock, generally determined with reference to the closing price of the common stock as reported on the Nasdaq National Market on the date of grant. Employee Stock Purchase Plan ("Purchase Plan") In May 1998, a total of 800,000 shares of common stock were reserved for future issuance under the Purchase Plan, plus annual increases equal to the lesser of (i) 350,000 shares (ii) 2% of the outstanding shares on such date or (iii) a lesser amount determined by the Board of Directors. The Purchase Plan will enable eligible employees to purchase common stock at the lower of 85% of the fair market value of the Company's F-16

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) common stock on the first or last day of each six-month offering period. The first offering period will begin upon the closing date of the proposed initial public offering. The Purchase Plan will terminate in 2008. Nonqualified options granted under the 1995 Plan and 1997 Plan must be issued at a price equal to at least 85% of the fair market value of the Company's common stock at the date of grant. The options may be exercised at any time within ten years of the date of grant or within ninety days of termination of employment, or such shorter time as may be provided in the stock option agreement, and vest over a vesting schedule determined by the Board of Directors. Deferred Compensation In connection with the grant of certain stock options to employees during fiscal 1998 and the six months ended June 30, 1999, the Company recorded deferred compensation of $257,000 and $2.1 million, respectively, representing the difference between the estimated fair value of the common stock for accounting purposes and the option exercise price of such options at the date of grant. Such amount is presented as a reduction of stockholders' equity and is amortized ratably over the vesting period of the applicable options. During 1996, the Company granted options to purchase shares of common stock at an exercise price below the fair value of the Company's common stock at the date of grant. Compensation expense of $41,000 was recognized in relation to those grants in the year ended December 31, 1996. The amortization expense relates to options awarded to employees in all operating expense categories. The amortization of deferred compensation has not been separately allocated to these categories. The amount of deferred compensation expense to be recorded in future periods could decrease if options for which accrued but unvested compensation has been recorded are forfeited. Valuation of Stock Options Pro forma information regarding net income and net income per share is required by SFAS No. 123 and has been determined as if the Company had accounted for its stock options under the fair value method of SFAS No. 123. The fair value for the stock options was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions for fiscal years 1996, 1997 and 1998: risk-free interest rates in the range of 5.2% to 6.5%; dividend yields of zero; an estimated volatility factor of the market price of the Company's common stock in the range of 40% to 55%; and an expected life of the option of six months after vest date. The weighted-average estimated fair value of options granted during fiscal 1996, 1997 and 1998 was $0.37, $2.32 and $3.43 per share, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility and expected option life. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. F-17

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the option vesting periods. The Company's pro forma net income (loss) would have been approximately $3.0 million, $2.0 million and $(984,000) for fiscal years 1996, 1997 and 1998, respectively. Pro forma diluted net income (loss) per share would have been $0.29, $0.17 and ($0.42) for fiscal years 1996, 1997 and 1998, respectively. The following table summarizes stock option activity under the 1995 Plan and 1997 Plan: Options Outstanding ---------------------------- Options Weighted Average Available Shares Exercise Price ---------- ---------- ---------------- Balance, December 31, 1995........ 437,003 2,762,997 $0.02 Granted......................... (674,670) 674,670 $0.26 Exercised....................... -- (1,454,999) $0.02 Forfeited....................... 237,667 (237,667) $0.05 ---------- ---------- ----- Balance, December 31, 1996........ -- 1,745,001 $0.12 Authorized...................... 1,500,000 -- Granted......................... (1,172,830) 1,172,830 $2.32 Exercised....................... -- (753,991) $0.03 Forfeited....................... 95,590 (95,590) $0.91 ---------- ---------- ----- Balance, December 31, 1997........ 422,760 2,068,250 $1.36 Authorized...................... 2,000,000 -- -- Granted......................... (1,393,900) 1,393,900 $8.13 Exercised....................... -- (203,257) $0.17 Forfeited....................... 173,585 (173,585) $2.52 ---------- ---------- ----- Balance, December 31, 1998........ 1,202,445 3,085,308 $4.43 Granted (unaudited)............. (893,193) 893,193 $9.83 Exercised (unaudited)........... -- (79,083) $0.12 Forfeited (unaudited)........... 83,708 (83,708) $7.18 ---------- ---------- ----- Balance, June 30, 1999 (unaudited)...................... 392,960 3,815,710 $5.72 ========== ========== ===== Options Outstanding Options Exercisable ----------------------------------------- --------------------------- Number Weighted- Number Outstanding at Average Weighted- Exercisable Weighted- Range of December 31, Remaining Average Exercise December 31, Average Exercise Prices 1998 Contractual Life (Years) Price 1998 Exercise Price - --------------- -------------- ------------------------ ---------------- ------------ -------------- $0.02-$0.12 389,583 7.09 $0.07 307,832 $0.05 $0.48-$0.48 528,000 8.00 $0.48 283,190 $0.48 $1.25-$2.00 423,200 8.10 $1.40 197,721 $1.39 $2.35-$3.50 244,000 8.33 $3.01 99,968 $3.00 $4.50-$4.85 87,500 9.12 $4.76 8,438 $4.50 $7.45-$9.25 1,413,025 9.32 $8.24 30,355 $7.45 --------- ------- 3,085,308 $4.43 927,504 ========= ======= Warrants In connection with the issuance of the Series C preferred stock, the Company issued warrants to a Company advisor to acquire 31,260 shares of common stock at $6.96 per share. The warrants expired unexercised in February 1999. The fair value of this warrant at the date of issuance was $50,000 and this F-18

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) amount has been included as an issuance cost of the Series C preferred stock. The Company also issued warrants to acquire 2,417 shares of common stock at $8.00 in February 1998. The warrants expire in February 2001 and the fair value at the date of issuance was not material. See Note 5 for warrants to purchase 200,000 shares of Series C preferred stock issued in conjunction with the Company's Notes Payable arrangements. 9. INCOME TAXES: The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires that deferred taxes be calculated using an asset and liability approach under which deferred income taxes are provided based upon enacted tax laws and rates applicable to the periods in which the taxes become payable. The domestic and foreign components of income before provision for income taxes were as follows (in thousands): Year Ended December 31, --------------------------- 1996 1997 1998 -------- ------- -------- Domestic........................................ $ 4,009 $ 2,438 ($1,390) Foreign......................................... -- 818 2,097 -------- ------- -------- $ 4,009 $ 3,256 $ 707 ======== ======= ======== The provision for income taxes consisted of the following (in thousands): Year Ended December 31, --------------------------- 1996 1997 1998 -------- ------- -------- Current: Federal....................................... $ 2,848 $ 827 $ 1,188 State......................................... 646 237 482 Foreign....................................... -- 82 67 -------- ------- -------- 3,494 1,146 1,737 -------- ------- -------- Deferred: Federal....................................... (2,152) (240) (942) State......................................... (337) 49 (583) -------- ------- -------- (2,489) (191) (1,525) -------- ------- -------- $ 1,005 $ 955 $ 212 ======== ======= ======== The provision for income taxes differs from the amount computed by applying the Federal statutory income tax rate as follows (in thousands): Year Ended December 31, --------------------------- 1996 1997 1998 -------- ------- -------- Provision at Federal statutory rate............. $ 1,403 $ 1,140 $ 247 State income tax, net of Federal benefit........ 241 95 25 Change in valuation allowance................... (577) -- -- Foreign taxes in excess of statutory rate....... -- 82 67 R & D credit.................................... -- (224) (310) Other........................................... (62) (138) 183 -------- ------- -------- $ 1,005 $ 955 $ 212 ======== ======= ======== F-19

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The net deferred tax asset consists of the following (in thousands): December 31, ------------- 1997 1998 ------ ------ Accrued royalties............................................. $2,070 $1,152 Inventory reserve............................................. 58 262 Deferred amortization of purchased assets..................... -- 2,302 California income tax payable................................. 82 -- Other cumulative temporary differences........................ 470 489 ------ ------ $2,680 $4,205 ====== ====== Other cumulative temporary differences consist of items currently deductible for financial reporting purposes, but not for tax purposes. These items are primarily estimated reserves and accruals. The realization of the deferred tax asset is dependent on generating sufficient taxable income in future years. Although realization is not assured, management believes it is more likely than not that the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during future years is reduced. 10. RELATED PARTY TRANSACTIONS: The President of a significant customer of the Company was a member of the Company's Board of Directors from inception to November 1, 1997. For the years ended December 31, 1996 and 1997, revenues generated from sales to this related party customer were approximately $1.7 million and $2.2 million, respectively. 11. INDUSTRY SEGMENT, CUSTOMER AND GEOGRAPHIC INFORMATION: Effective January 1, 1998, the Company adopted SFAS No. 131, ("SFAS 131") "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 establishes standards for business segments of a company and related disclosures. The Company is organized based upon the nature of the products it offers. Under this organizational structure, the Company operates in one segment, that segment being software-based modems using host signal processing technology. The Company markets its products worldwide through its sales personnel, independent sales representatives and distributors. The Company's sales to customers outside of the United States, as a percent of total revenues, are as follows: Six Months Ended Year Ended December 31, June 30, --------------------------- ------------------- 1996 1997 1998 1998 1999 ------- ------- ------- -------- -------- (unaudited) Taiwan................... 37% 46% 48% 62% 21% China (Hong Kong)........ 15% 20% -- -- 47% Singapore................ 19% 9% -- -- 2% Rest of Asia............. 3% 2% 28% 15% 29% Other.................... 9% 2% 1% 3% -- ------- ------- ------- -------- -------- 83% 79% 77% 80% 99% ======= ======= ======= ======== ======== F-20

PC-TEL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Sales to major customers representing greater than 10% of total revenues are as follows: Six Months Year Ended December 31, Ended June 30, --------------------------- ----------------- Customer 1996 1997 1998 1998 1999 -------- ------- ------- ------- ------- ------- (unaudited) A, related party (See Note 10)................ 10% 9% 13% 5% -- B........................ 16% 4% 12% 21% 6% C........................ 5% 6% 15% 11% 10% D........................ 22% 20% 4% 15% 1% E........................ 13% -- -- -- -- F........................ -- 18% 12% 12% 3% G........................ -- -- 8% -- 20% H........................ -- -- 3% -- 42% As of December 31, 1997, the Company's long-lived assets were primarily located in the United States. The Company's long-lived assets, comprising primarily intangible assets, by geographic region as of December 31, 1998 and June 30, 1999 are as follows: December 31, June 30, 1998 1999 ------------ ----------- (unaudited) United States....................................... $5,357 $5,314 Cayman Islands...................................... $8,178 $7,399 F-21

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Management of General DataComm, Inc.: In our opinion, the accompanying balance sheets and the related statements of income and divisional equity and of cash flows present fairly, in all material respects, the financial position of the Communications Systems Division, a division of General DataComm, Inc., at September 30, 1998 and 1997, and the results of its operations and its cash flows for each of the years then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Stamford, Connecticut December 15, 1998 F-22

COMMUNICATIONS SYSTEMS DIVISION BALANCE SHEETS September 30, ------------- 1998 1997 ------ ------ (in thousands) ASSETS Assets: Fixed assets, net.............................................. $ 119 $ 117 Capitalized software........................................... 1,993 1,359 Security deposit and accrued interest.......................... 8 -- Patents........................................................ -- -- ------ ------ Total assets................................................. $2,120 $1,476 ====== ====== LIABILITIES Liabilities: Income taxes payable........................................... $ 568 $ 940 Deferred income tax liabilities................................ 251 535 ------ ------ Total liabilities............................................ 819 1,475 ------ ------ Divisional Equity................................................ 1,301 1 ------ ------ Total liabilities and divisional equity...................... $2,120 $1,476 ====== ====== The accompanying notes are an integral part of these financial statements. F-23

COMMUNICATIONS SYSTEMS DIVISION STATEMENTS OF INCOME AND DIVISIONAL EQUITY For the years ended September 30, ------------- 1998 1997 ------ ------ (in thousands) Licensing revenues............................................... $3,531 $4,564 Operating Expenses: General and Administrative..................................... 135 83 Selling and Marketing.......................................... 174 146 Research and Development....................................... 1,209 685 ------ ------ 1,518 914 Net income before income taxes................................... 2,013 3,650 Income tax provision............................................. 819 1,475 ------ ------ Net income..................................................... $1,194 $2,175 Divisional equity at beginning of year........................... $ 1 $ 133 Cash transfer from (to) parent................................... 106 (2,307) ------ ------ Divisional equity at end of year............................... $1,301 $ 1 ====== ====== The accompanying notes are an integral part of these financial statements. F-24

COMMUNICATIONS SYSTEMS DIVISION STATEMENTS OF CASH FLOWS For the years ended September 30, -------------- 1998 1997 ------ ------ (in thousands) Cash flows from operating activities: Net income................................................... $1,194 $2,175 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense....................................... 78 62 Increase in security deposit............................... (8) -- (Decrease) increase in income taxes payable................ (372) 940 (Decrease) increase in deferred income taxes............... (284) 526 ------ ------ Net cash provided by operating activities................ 608 3,703 ------ ------ Cash flows from investing activities: Acquisition of property, plant and equipment................. (80) (37) Capitalized software development costs....................... (634) (1,359) ------ ------ Net cash used in investing activities.................... (714) (1,396) Net cash borrowed from (transferred to) GDC.................. 106 (2,307) ------ ------ Net increase in cash and cash equivalents................ -- -- Cash and cash equivalents at beginning of year................. -- -- ------ ------ Cash and cash equivalents at end of year....................... $ -- $ -- ====== ====== The accompanying notes are an integral part of these financial statements. F-25

COMMUNICATIONS SYSTEMS DIVISION NOTES TO FINANCIAL STATEMENTS 1. Description of Business and Summary of Significant Accounting Policies Description of Business Communications Systems Division (the "Company") is a division of General DataComm, Inc., which is a subsidiary of General DataComm Industries, Inc. ("GDC"). The Company, which is principally comprised of scientists and engineers, develops, patents and licenses advanced modem and access technologies. Basis of Presentation The Company's balance sheets and statements of operations include assets, liabilities, revenues and expenses that are specifically identifiable to the Company. In addition, GDC provides certain services, as discussed in Note 6, which are allocated to the Company. Cash All cash balances are transferred to GDC as they arise. Property, Plant and Equipment Property, plant and equipment are stated at cost and depreciated or amortized using the straight-line method over their estimated useful lives. Capitalized Software Development Costs Software development costs are capitalized for those products that have met the requirements of technological feasibility. When the products under development begin to be sold, such capitalized costs will be amortized on a product-by-product basis over the estimated economic life of the product. No amortization was recorded in either fiscal 1998 or fiscal 1997 as the products in development had reached the technological feasibility stage but had not reached the marketability stage. Unamortized costs are reviewed for recoverability and, if necessary, are adjusted so as not to exceed estimated net realizable value. Patents The Company holds various technology patents. The third party cost of these patents has been fully amortized. Registration costs are expensed as incurred. Revenue Recognition The Company has entered into numerous technology licensing agreements whereby licensees pay the Company fees for the use or sale of specific patented technology. Technology licensing fee revenue is recognized in the period received, or alternatively, may be accrued when readily determinable. Income Taxes Income taxes are calculated in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." This statement requires that deferred income taxes reflect the impact of temporary differences in bases of assets and liabilities recognized for financial reporting purposes and amounts recognized for tax purposes. As a division, the Company is included in the consolidated income tax returns of GDC, however, the Company's provision for income taxes has been calculated on a separate return basis. F-26

COMMUNICATIONS SYSTEMS DIVISION NOTES TO FINANCIAL STATEMENTS--(Continued) Employee Benefits and Incentive Plans The Company's employees participate in plans for post-retirement benefits, post-employment benefits, stock option plans, and retirement savings and deferred profit sharing plans, which are sponsored by GDC. No assets, liabilities or expenses have been reflected in the balance sheets and statements of operations related to the post-retirement and post-employment plans, as it is not practical to segregate these amounts. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. Actual results could differ from those estimates. For example, the markets the Company is involved in are characterized by intense competition, rapid technological development and frequent new product introductions, all of which could impact the future value of the Company's capitalized software. 2. Property, Plant and Equipment Property, plant and equipment consists of: September 30, --------- Estimated 1998 1997 Useful Life ---- ---- ------------- Test equipment and fixtures, office equipment...... $651 $578 2 to 10 years Less: accumulated depreciation................... 532 461 ---- ---- $119 $117 ==== ==== Depreciation expense amounted to $78 and $62 in fiscal 1998 and 1997, respectively. 3. Income Taxes For purposes of the financial statements, income taxes are provided on a stand-alone basis as if the Company is a separate entity. The provision for income taxes consists of the following amounts: September 30, ----------- 1998 1997 ---- ------ Current: State.......................................................... $146 $ 246 Federal........................................................ 422 694 ---- ------ 568 940 Deferred: State.......................................................... $ 66 $ 144 Federal........................................................ 185 391 ---- ------ 251 535 ---- ------ Total provision.............................................. $819 $1,475 ==== ====== F-27

COMMUNICATIONS SYSTEMS DIVISION NOTES TO FINANCIAL STATEMENTS--(Continued) The tax effects of temporary differences which give rise to deferred income tax assets and liabilities consisted of the following: September 30, ------------ 1998 1997 ----- ----- Deferred income tax assets: Property, plant and equipment............................... $ 3 $ 8 Deferred income tax liabilities: Capitalized software........................................ (254) (543) ----- ----- Net deferred income tax liabilities....................... $(251) $(535) ===== ===== 4. Operating Leases GDC entered into an operating lease on June 1, 1998 to provide separate facilities for the operation of the Company. Such lease expires in May 2001. The lease contains renewal options and provisions for payment by the lessee of executory costs (taxes, maintenance and insurance). The following is a schedule of the future minimum payments under the lease as of September 30, 1998: Year Amount ---- ------ 1999 $50 2000 50 2001 33 Rent expense under the lease was $17 for the year ended September 30, 1998. Prior to June 1, 1998, the operations of the Company were conducted in facilities shared with other GDC operations. The amounts allocated by GDC, which are included in the statements of income, were $74 and $100 for September 30, 1998 and 1997, respectively. 5. Employment Incentive Plans Stock Option Plans Officers and key employees of GDC may be granted incentive stock options at an exercisable price equal to or greater than the market price on the date of grant and non-incentive stock options at an exercisable price equal to or less than the market price on the date of grant. While individual options can be issued under various provisions, most options, once granted, generally vest in increments of 25% per year over a four-year period and expire within ten years. F-28

COMMUNICATIONS SYSTEMS DIVISION NOTES TO FINANCIAL STATEMENTS--(Continued) The following summarizes activity related to the Company in fiscal 1997 and 1998 under these stock option plans: Weighted Average Shares Exercise Price ------- -------------- Options outstanding, September 30, 1996 (10,497 exercisable)..................................... 79,747 $6.49 Options granted................................... 86,530 7.44 Options exercised................................. -- -- Options cancelled or expired...................... (53,890) 6.50 ------- ----- Options outstanding, September 30, 1997 (20,097 exercisable)..................................... 112,387 6.60 Options granted................................... 85,750 4.32 Options exercised................................. -- -- Options cancelled or expired...................... (11,450) 7.14 ------- ----- Options outstanding, September 30, 1998 (30,632 exercisable)..................................... 186,687 $6.96 ======= ===== The following summarizes additional information related to the Company regarding options outstanding and exercisable options as of September 30, 1998: Options Outstanding at September Options Exercisable at 30, 1998 September 30, 1998 ----------------------------------- Weighted ------------------------ Weighted Average Weighted Number Average Contractual Average Exercise of Exercise Life Number Contractual Prices Shares Price (Years) of Shares Price -------- ------- -------- ----------- --------- ----------- $ 3.38-$ 4.81 65,947 $ 3.81 9.47 197 $ 4.81 $ 5.25-$ 6.75 89,540 6.34 7.98 19,035 5.63 $ 7.31-$ 9.63 25,700 8.95 7.46 9,900 6.83 $10.00-$15.50 5,500 10.92 7.69 1,500 11.83 ------- ------ ---- ------ ------ 186,687 $ 6.96 8.43 30,632 $ 6.96 The weighted average option price of exercisable options was $6.96 and $6.60 at September 30, 1998 and 1997, respectively. All options granted during the two fiscal years ended September 30, 1998 were granted at an option price equal to fair market value at date of grant. Employee Retirement Savings and Deferred Profit Sharing Plan Under the retirement savings provisions of GDC's retirement plan established under Section 401(k) of the Internal Revenue Code, employees are generally eligible to contribute to the plan after three months of continuous service, in amounts determined by the plan. GDC contributes an additional 50 percent of the employee contribution up to certain limits (not to exceed 2 percent of total eligible compensation). Employees become fully vested in GDC's contributions after three years of continuous service, death, disability or upon reaching age 65. The amounts contributed related to the Company's employees for the years ended September 30, 1998 and 1997 were $28 and $33, respectively. The deferred profit sharing provisions of the plan include retirement and other related benefits for substantially all of GDC's full-time employees. Contributions under the plan are funded annually and are based, at a minimum, upon a formula measuring profitability in relation to revenues. Additional amounts may be contributed at the discretion of GDC. There were no such contributions for fiscal 1998 or 1997. F-29

COMMUNICATIONS SYSTEMS DIVISION NOTES TO FINANCIAL STATEMENTS--(Continued) 6. Related Party Transactions and Net Equity The Company is comprised of intellectual property and property, plant and equipment and certain employees that GDC has contributed to the business. All of the Company's cash transactions are managed by GDC. All intercompany accounts which represent all contributed property and the net amounts funded by GDC to date are included in divisional equity. In addition, in fiscal 1998 and fiscal 1997, the Company performed product development work on behalf of GDC. The cost of such work, estimated to be $434 and $480, respectively in fiscal 1998 and fiscal 1997, has been excluded from the operating costs included in the Company's statements of income, as these costs have been fully reimbursed by GDC. GDC provides accounting, treasury, tax and audit, legal, medical and risk insurance services and various other services to the Company. An allocation related to these costs has been made and is included in the statements of income. F-30

PC-TEL, INC. AND COMMUNICATIONS SYSTEMS DIVISION PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (unaudited) In December 1998, PC-Tel, Inc. (the "Company" or "PC-Tel") completed the acquisition of substantially all the assets and certain liabilities of Communications Systems Division, a division of General DataComm, Inc., a Delaware corporation ("CSD"). CSD develops patents and licenses advanced modem and access technologies. The acquisition of CSD has been accounted for as a purchase. The accompanying pro forma condensed combined statement of operations for PC-Tel's fiscal year ended December 31, 1998 assumes that the acquisition took place as of January 1, 1998, and combines PC-Tel's statement of operations for the year ended December 31, 1998 and CSD's statement of operations for its fiscal year ended September 30, 1998. No pro forma condensed balance sheet is required as the acquisition of CSD took place in December 1998 and is already reflected in PC-Tel's consolidated balance sheet as of December 31, 1998, included elsewhere in this Prospectus. The pro forma condensed combined statement of operations for the year ended December 31, 1998 does not include the effect of any nonrecurring charges directly attributable to the acquisition. The purchase price allocation reflected in the accompanying pro forma condensed combined statement of operations has been prepared on an estimated basis. The effects resulting from any differences in the final allocation of the purchase price are not expected to have a material effect on the Company's financial statements. The accompanying pro forma condensed combined statement of operations should be read in conjunction with the historical financial statements and related notes thereto for both PC-Tel and CSD, which are included in this Prospectus. P-1

PC-TEL, INC. AND COMMUNICATIONS SYSTEMS DIVISION PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 1998 --------------------------------------------- Historical Historical Pro Forma Pro Forma PC-Tel CSD(a) Adjustments Combined ---------- ---------- ----------- --------- (unaudited) REVENUES $33,004 $3,531 $ (903)(b) 35,632 COST OF REVENUES................ 13,878 -- (2,162)(c) 16,040 ------- ------ ------- GROSS PROFIT.................... 19,126 3,531 19,592 ------- ------ ------- OPERATING EXPENSES: Research and development...... 4,932 1,209 6,141 Sales and marketing........... 5,624 174 5,798 General and administrative.... 2,169 135 2,304 Acquired in-process research and development.............. 6,130 -- (6,130)(d) -- Amortization of deferred compensation................. 43 -- 43 ------- ------ ------- Total operating expenses.... 18,898 1,518 14,286 ------- ------ ------- INCOME FROM OPERATIONS.......... 228 2,013 5,306 ------- ------ ------- OTHER INCOME (EXPENSE), net: Interest income............... 504 -- 504 Interest expense.............. (25) -- (1,530)(e) (1,555) ------- ------ ------- Total other income (expense), net............. 479 -- (1,051) ------- ------ ------- INCOME BEFORE PROVISION FOR INCOME TAXES................... 707 2,013 4,255 PROVISION FOR INCOME TAXES...... 212 819 246 (f) 1,277 ------- ------ ------- NET INCOME...................... $ 495 $1,194 $ 2,978 ======= ====== ======= BASIC NET INCOME PER SHARE...... $ 0.21 $ 1.26 ======= ======= DILUTED NET INCOME PER SHARE.... $ 0.04 $ 0.24 ======= ======= SHARES USED IN COMPUTING BASIC EARNINGS PER SHARE............. 2,355 2,355 SHARES USED IN COMPUTING DILUTED EARNINGS PER SHARE............. 12,325 12,325 P-2

PC-TEL, INC. AND COMMUNICATIONS SYSTEMS DIVISION NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (unaudited) Note 1. Pro Forma Adjustments Certain pro forma adjustments have been made to the accompanying pro forma condensed combined statement of operations as described below: (a) Includes CSD's historical condensed statement of operations for the year ended September 30, 1998. (b) Reflects the elimination of revenues from licensing arrangements between the Company and CSD. (c) Reflects the amortization of goodwill and other intangibles acquired of $10.8 million for CSD which will be amortized on a straight line basis over their estimated weighted average useful lives of five years. (d) Eliminates the acquired in-process research and development expense of approximately $6.1 million associated with the acquisition of CSD. (e) Reflects the interest expense and amortization of deferred finance charges on the debt incurred for the CSD acquisition. (f) Reflects adjustment to record a provision for income taxes in accordance with PC-Tel's effective tax rate for fiscal 1998. P-3

Inside back cover Background of space shot of planet earth. Text captions "PCtel Technology for connectivity," "Broadband," "Wireless," "Remote Access," "Analog," and "solutions"

- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4,600,000 Shares [ PCtel Logo appears here ] ---------------- Prospectus , 1999 ---------------- Banc of America Securities LLC Warburg Dillon Read LLC Needham & Company, Inc. Until , 1999, all dealers that buy, sell or trade the common stock may be required to deliver a prospectus, regardless of whether they are participating in this offering. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------

PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by PC-Tel in connection with the sale of common stock being registered. All amounts are estimates except the SEC registration fee and the NASD filing fee. SEC registration fee................................................ $ 23,530 NASD filing fee..................................................... 9,000 Nasdaq National Market listing fee.................................. 90,000 Printing and engraving costs........................................ 150,000 Legal fees and expenses............................................. 790,000 Accounting fees and expenses........................................ 300,000 Blue sky fees and expenses.......................................... 15,000 Transfer agent and registrar fees................................... 17,000 Directors and officers insurance.................................... 300,000 Miscellaneous expenses.............................................. 105,470 ---------- Total............................................................. $1,800,000 ========== Item 14. Indemnification of Directors and Officers Section 145 of the Delaware General Corporation Law permits a corporation to include in its charter documents, and in agreements between the corporation and its directors, officers and controller provisions expanding the scope of indemnification beyond that specifically provided by the current law. Article Ninth of our amended and restated certificate of incorporation provides for the indemnification of directors and officers to the fullest extent permissible under Delaware law. Article VI of our bylaws provides for the indemnification of officers, directors and third parties acting on behalf of PC-Tel if such person acted in good faith and in a manner reasonably believed to be in and not opposed to our best interest, and, with respect to any criminal action or proceeding, the indemnified party had no reason to believe his or her conduct was unlawful. We have entered into indemnification agreements with our directors and executive officers, in addition to indemnification provided for in our bylaws, and intended to enter into indemnification agreements with any new directors and executive officers in the future. The indemnification agreements may require us, among other things, to indemnify our directors and officers against certain liability that may arise by reason of their status or service as directors and officers (other than liabilities arising from willful misconduct of culpable nature), to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, and to obtain directors and officers' insurance, if available on reasonable terms. Reference is also made to Section 8 of the Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying officers and directors of PC-Tel against certain liabilities. Item 15. Recent Sales of Unregistered Securities Since inception, we have issued unregistered securities to a limited number of persons, as described below. None of these transactions involved any underwriters, underwriting discounts or commissions, or any public offering, and we believe that each transaction was exempt from the registration requirements of the Securities Act by virtue of Section 4(2) thereof, Regulation D promulgated thereunder or Rule 701 pursuant to compensatory benefit plans and contracts relating to compensation as provided under such Rule 701. The II-1

recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and instruments issued in such transactions. All recipients had adequate access, through their relationships with us, to information about us. 1. On or about February 10, 1994 we issued 2,800,000 shares of our common stock at a per share price of $0.10 for an aggregate purchase price of $420,000 to our founders and certain individuals with whom we had a pre- existing business or personal relationship. 2. On or about November 4, 1994 we issued 1,613,333 shares of our common stock at a per share price of $0.25 for an aggregate purchase price of $605,000 to certain individuals with whom we had a pre-existing business or personal relationship. 3. On May 9, 1995 we effected a recapitalization of our outstanding stock with our then current stockholders by which each share of our common stock was converted into one (1) share of Series A preferred stock and through which we received no consideration. 4. On June 29, 1995 we sold 222,222 shares of our Series A preferred stock at a per share price of $0.30 for an aggregate purchase price of $100,000 to certain individuals with whom we had a pre-existing business or personal relationship. 5. Between October 18, 1995 and on or about January 10th of 1996 we sold 3,250,000 shares of our Series B preferred stock at a per share price of $l.20 to certain individuals with whom we had a pre-existing business or personal relationship. 6. On October 4, 1995, we effected, by amendment to our articles of incorporation, a 3 for 2 reverse stock split of our then outstanding capital stock. 7. On February 4, 1998 we sold 625,200 shares of our Series C preferred stock at a per share price of $8.00 for an aggregate purchase price of $5,00l,600 to certain accredited investors, as that term is defined under Rule 50l of the Securities Act. State Street Securities, Needham & Company, Inc. and Beckman White & Reed acted as placement agents for us and, as partial consideration for services performed, Beckman White & Reed received a one-year warrant to purchase 31,260 shares of our common stock at an exercise price of $6.96 per share and State Street Securities, Edward Gibstein, Mitchell Segal, and Irving Minnaker each received three-year warrants to purchase an aggregate of 2,417 shares of our common stock at an exercise price of $8.00. 8. On December 31, 1998 we issued ten (10) year warrants to purchase an aggregate of 200,000 shares of our Series C preferred stock at an exercise price of $8.00 to Pentech Financial Services, Inc. and PFF Bank & Trust, Inc. in connection with the Technology Alliance Group acquisition from General DataCom, Inc. 9. From inception to December 3l, 1998, we issued and sold an aggregate of 2,412,247 shares of our common stock to employees, consultants, and directors for an aggregate consideration of $83,421 pursuant to exercise of options granted under our 1995 stock plan, 1997 stock plan, and our 1997 stock plan as amended August 3, 1999. Item 16. Exhibits and Financial Statement Schedules (a) Exhibits *1.1 Form of Underwriting Agreement. 3.1 Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect. *3.2 Form of Amended and Restated Certificate of Incorporation of the Registrant to be filed after the closing of the offering made under this Registration Statement. 3.3 Amended and Restated Bylaws of the Registrant. II-2

*4.1 Specimen common stock certificate. 4.2 Warrant to purchase shares of Series C preferred stock of the Registrant issued to Pentech Financial Services, Inc. 4.3 Warrant to purchase shares of Series C preferred stock of the Registrant issued to PFF Bank and Trust, Inc. 4.4 Warrant to purchase shares of common stock of the Registrant issued to Edward Gibstein. 4.5 Warrant to purchase shares of common stock of the Registrant issued to Irving Minnaker. 4.6 Warrant to purchase shares of common stock of the Registrant issued to Mitchell Segal. 4.7 Warrant to purchase shares of common stock of the Registrant issued to State Street Securities, Inc. 4.8 Amended and Restated Rights Agreement dated December 31, 1997. 4.9 Addendum to the Amended and Restated Rights Agreement by and between the Registrant and PFF Bank and Trust, Inc. dated February 1, 1999. 4.10 Addendum to the Amended and Restated Rights Agreement by and between the Registrant and Pentech Financial Services, Inc. dated February 1, 1999. *5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 10.1 Form of Indemnification Agreement between PC-Tel and each of its directors and officers. 10.2 1995 Stock Option Plan and form of agreements thereunder. 10.3 1997 Stock Option Plan, as amended and restated, August 3, 1999, and form of agreements thereunder. 10.4 1998 director option plan and form of agreements thereunder. 10.5 1998 employee stock purchase plan and form of agreements thereunder. 10.6 Employment offer letter between Derek S. Obata and the Registrant dated March 31, 1998. 10.7 Employment offer letter between William F. Roach and the Registrant dated July 19, 1999. 10.8 Sublease between KLA-Tencor Corporation and the Registrant dated September 24, 1998. 10.9 Commercial Security Agreement by and between the Registrant and PPF Bank and Trust and related documents. 10.10 Asset Purchase Agreement by and among PC-Tel, Inc., PC-Tel Global Technologies, Ltd. And General Datacomm, Inc. dated as of December 22, 1998. 10.11 Escrow Agreement by and between the Registrant and General DataComm, Inc. dated December 22, 1998. 10.12 Bonus Pool Disbursement Agreement by and between the Registrant and General DataComm, Inc. dated December 22, 1998. 10.13 Form of Acquisition Bonus Agreement by and between the Registrant and General DataComm, Inc. dated on December 22, 1998. 10.14 Direct Sales Agreement by and between PC-Tel Global Technologies, Ltd. and Kawasaki LSI U.S.A. dated December 4, 1998. 10.15 Volume Purchase Agreement dated June 1, 1998 by and between Silicon Laboratories, Inc. and the Registrant. 21.1 List of Subsidiaries of the Registrant. 23.1 Consent of Arthur Andersen LLP, Independent Public Accountants. 23.2 Consent of PricewaterhouseCoopers, Independent Accountants. *23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1). 24.1 Power of Attorney (see Pages II-5 and II-6). 27.1 Financial Data Schedule. * To be filed by amendment. II-3

(b) Financial Statement Schedules Schedule II Valuation and Qualifying Accounts and Reserves (included on pages S-1 and S-2 of this registration statement). Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. Item 17. Undertakings We hereby undertake to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referenced in Item 14 of this Registration Statement or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. We hereby undertake that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4

SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Clara, State of California, on the 6th day of August, 1999. PC-Tel, Inc. /s/ Peter Chen By: _________________________________ Peter Chen, Chief Executive Officer and Chairman POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter Chen and Andrew D. Wahl and each of them, his attorneys-in-fact, each with the power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated: Signature Title Date --------- ----- ---- /s/ Peter Chen Chief Executive Officer August 6, 1999 ______________________________________ and Chairman of the Board (Peter Chen) (Principal Executive Officer) /s/ William F. Roach President and Chief August 6, 1999 ______________________________________ Operating Officer (William F. Roach) /s/ Andrew D. Wahl Vice President, Finance August 6, 1999 ______________________________________ and Chief Financial (Andrew D. Wahl) Officer (Principal Financial Officer) /s/ William Wen-Liang Hsu Vice President, August 6, 1999 ______________________________________ Engineering Director (William Wen-Liang Hsu) II-5

Signature Title Date --------- ----- ---- /s/ Han Yeh Vice President, Technology August 6, 1999 ______________________________________ Director (Han Yeh) /s/ Richard C. Alberding Director August 6, 1999 ______________________________________ (Richard C. Alberding) /s/ Martin H. Singer Director August 6, 1999 ______________________________________ (Martin H. Singer) /s/ Wen C. Ko Director August 6, 1999 ______________________________________ (Wen C. Ko) /s/ Michael Min-Chu Chen Director August 6, 1999 ______________________________________ (Michael Min-Chu Chen) /s/ Giacomo Marini Director August 6, 1999 ______________________________________ (Giacomo Marini) II-6

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE To PC-Tel, Inc.: We have audited, in accordance with generally accepted auditing standards, the financial statements of PC-Tel, Inc. (a Delaware corporation) included in this Registration Statement and have issued our report thereon dated March 4, 1999. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying schedule is the responsibility of the Company's management and is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth herein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP San Jose, California March 4, 1999 S-1

PC-TEL, INC. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS Balance at Charged to Beginning of Costs and Balance at Description Period Expenses Deductions End of Period ----------- ------------ ---------- ---------- ------------- Year Ended December 31, 1996: Allowance for doubtful accounts................... $ -- $ 70 $ -- $ 70 Year Ended December 31, 1997: Allowance for doubtful accounts................... $ 70 $ 534 $ -- $ 604 Year Ended December 31, 1998: Allowance for doubtful accounts................... $604 $3,356 $(2,271) $1,689 S-2

EXHIBIT INDEX Number Description ------ ----------- *1.1 Form of Underwriting Agreement. 3.1 Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect. *3.2 Form of Amended and Restated Certificate of Incorporation of the Registrant to be filed after the closing of the offering made under this Registration Statement. 3.3 Amended and Restated Bylaws of the Registrant. *4.1 Specimen common stock certificate. 4.2 Warrant to purchase shares of Series C preferred stock of the Registrant issued to Pentech Financial Services, Inc. 4.3 Warrant to purchase shares of Series C preferred stock of the Registrant issued to PFF Bank and Trust, Inc. 4.4 Warrant to purchase shares of common stock of the Registrant issued to Edward Gibstein. 4.5 Warrant to purchase shares of common stock of the Registrant issued to Irving Minnaker. 4.6 Warrant to purchase shares of common stock of the Registrant issued to Mitchell Segal. 4.7 Warrant to purchase shares of common stock of the Registrant issued to State Street Securities, Inc. 4.8 Amended and Restated Rights Agreement dated December 31, 1997. 4.9 Addendum to the Amended and Restated Rights Agreement by and between the Registrant and PFF Bank and Trust, Inc. dated February 1, 1999. 4.10 Addendum to the Amended and Restated Rights Agreement by and between the Registrant and Pentech Financial Services, Inc. dated February 1, 1999. *5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 10.1 Form of Indemnification Agreement between PC-Tel and each of its directors and officers. 10.2 1995 Stock Option Plan and form of agreements thereunder. 10.3 1997 Stock Option Plan, as amended and restated, August 3, 1999, and form of agreements thereunder. 10.4 1998 director option plan and form of agreements thereunder. 10.5 1998 employee stock purchase plan and form of agreements thereunder. 10.6 Employment offer letter between Derek S. Obata and the Registrant dated March 31, 1998. 10.7 Employment offer letter between William F. Roach and the Registrant dated July 19, 1999. 10.8 Sublease between KLA-Tencor Corporation and the Registrant dated September 24, 1998. 10.9 Commercial Security Agreement by and between the Registrant and PPF Bank and Trust and related documents. 10.10 Asset Purchase Agreement by and among PC-Tel, Inc., PC-Tel Global Technologies, Ltd. And General Datacomm, Inc. dated as of December 22, 1998. 10.11 Escrow Agreement by and between the Registrant and General DataComm, Inc. dated December 22, 1998. 10.12 Bonus Pool Disbursement Agreement by and between the Registrant and General DataComm, Inc. dated December 22, 1998. 10.13 Form of Acquisition Bonus Agreement by and between the Registrant and General DataComm, Inc. dated on December 22, 1998.

EXHIBIT INDEX Number Description ------ ----------- 10.14 Direct Sales Agreement by and between PC-Tel Global Technologies, Ltd. and Kawasaki LSI U.S.A. dated December 4, 1998. 10.15 Volume Purchase Agreement dated June 1, 1998 by and between Silicon Laboratories, Inc. and the Registrant. 21.1 The subsidiaries of the Registrant. 23.1 Consent of Arthur Andersen LLP, Independent Public Accountants. 23.2 Consent of PricewaterhouseCoopers, Independent Accountants. *23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1). 24.1 Power of Attorney (see Pages II-5 and II-6). 27.1 Financial Data Schedule. * To be filed by amendment

EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF PC-TEL, INC. PC-Tel, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: A. The name of the corporation is PC-Tel, Inc. The corporation was originally incorporated under the same name and the original Certificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on July 6, 1998. B. This Certificate of Incorporation has been duly adopted in accordance with the provisions of the General Corporation Law of the State of Delaware by the Board of Directors and the Stockholders of the corporation. C. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Certificate of Incorporation restates and integrates and further amends the provisions of the Certificate of Incorporation of this corporation. D. The text of the Certificate of Incorporation is hereby amended and restated in its entirety to read as follows: Article I. The name of the corporation is PC-Tel, Inc. (the "Company"). Article II. The address of the Company's registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

Article III. The purpose of the Company is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. Article IV. This corporation is authorized to issue two classes of stock to be designated respectively Preferred Stock ("Preferred") and Common Stock ("Common"). This Corporation is authorized to issue 20,000,000 shares of Common, $0.001 par value. This corporation is authorized to issue three series of Preferred which shall be known as Series A Preferred Stock (the "Series A Preferred") consisting of 4,635,548 shares, $0.001 par value, Series B Preferred Stock (the "Series B Preferred") consisting of 3,250,000 shares, $0.001 par value, and Series C Preferred Stock (the "Series C Preferred") consisting of 1,500,000 shares, $0.001 par value. Except as specifically set forth herein, reference hereafter to "Preferred Stock" or "Preferred" shall mean the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock. Upon the automatic conversion of all outstanding shares of Preferred in accordance with the provisions of Article IV, Section 4(b) of this Restated Certificate of Incorporation (the "Automatic Conversion Event"), the Company shall immediately thereafter be authorized to issue two classes of stock to be designated, respectively, Common Stock and Preferred Stock. The total number of shares of Common Stock which the Company shall have the authority to issue shall be 50,000,000, $.001 par value, and the total number of shares of Preferred Stock the Company shall have the authority to issue shall be 5,000,000, $.001 par value. Immediately following any Automatic Conversion Event, the Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the Board of Directors (authority to do so being hereby expressly vested in the Board). The Board of Directors is further authorized to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The Board of Directors, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares in any such series then outstanding), the number of shares of any series subsequent to the issue of shares of that series. Immediately following any automatic Conversion Event, the Board of Directors of the Company is authorized, without the further consent or approval of the stockholders of the Company to amend and restate this Restated Certificate of Incorporation to show the authorized class of capital stock as set forth in the preceding paragraph and to eliminate all references in this Restated Certificate of Incorporation to the rights, preferences, privileges and restrictions of the Series of Preferred Stock including those set forth in this Article IV (and, in connection with any such amendment and restatement, to renumber the remaining Articles). -2-

The relative rights, preferences, privileges and restrictions granted to or imposed upon the respective classes of the shares of capital stock or the holders thereof are as set forth below. Section 1. Dividend Rights of Preferred. The holders of the Series A ---------- ---------------------------- Preferred, Series B Preferred and Series C Preferred shall be entitled to receive, prior and in preference to any distribution of dividends to the holders of the Common, when and as declared by the Board of Directors, out of any funds legally available therefor, dividends at the rate of $0.019, $0.096 and $0.64 per annum per share, respectively. No dividends shall be paid on any shares of Series A Preferred, Series B Preferred or Common during any fiscal year of the corporation until dividends in the total amount set forth above per share of Series C Preferred per annum on the shares of Series C Preferred shall have been paid or declared and set apart during that fiscal year. Dividends declared herein shall not be cumulative and no right to such dividends shall accrue to holders of Series A Preferred, Series B Preferred or Series C Preferred unless declared by the Board of Directors. Section 2. Liquidation Preference. In the event of any liquidation, ---------- ---------------------- dissolution or winding up of the corporation, either voluntary or involuntary, distributions to the shareholders of the corporation shall be made in the following manner: (a) In the event of any liquidation, dissolution or winding up of the corporation, the holders of Series C Preferred shall be entitled to receive, prior and in preference to any distribution of any assets or property of the corporation to the holders of the Series A Preferred, Series B Preferred and Common, an amount per share equal to $8.00 for each share of Series C Preferred then held by them, adjusted for any combinations, consolidations or stock distributions or dividends with respect to such shares and, in addition, an amount equal to all declared but unpaid dividends, if any, with respect to such shares. In the event the assets of the corporation are insufficient to pay the entire liquidation of the Series C Preferred, then the holders of the Series C Preferred will share ratably in such assets in proportion to the number of shares held. After payment of the full amount due the holders of Series C Preferred, the holders of the Series A Preferred and Series B Preferred shall be entitled to receive, prior to any distribution of any assets or property of the corporation to the holders of Common, an amount per share equal to $0.24 and $1.20, respectively, then held by them, adjusted for any combinations, consolidations or stock distributions or dividends with respect to such shares and, in addition, an amount equal to all declared but unpaid dividends, if any, with respect to such shares. In the event that the assets of the corporation are insufficient to pay the entire liquidation preference of the Series A Preferred and Series B Preferred, the holders of the Series A Preferred and Series B Preferred will share ratably in such assets in proportion to their respective per share liquidation preference and the number of shares held. After payment of the full amount due the holders of the Series A Preferred and Series B Preferred, the holders of the Common shall be entitled to receive, prior to any further distribution of any assets or property of the corporation, an amount per share equal to the quotient that results from dividing (i) $82,000 by (ii) the total number of shares of Common outstanding at the time of such distribution (excluding shares of Common then issuable upon conversion of the Preferred). In the event that the assets of the corporation are insufficient to pay the entire liquidation preference of the Common, the holders of the Common will share ratably in such assets in proportion to their respective per share liquidation preference and the number of shares held. After payment has been made to the holders -3-

of the Series A, Series B and Series C Preferred Stock and the holders of the Common of the full amounts to which they shall be entitled as aforesaid, any remaining assets shall be distributed ratably to the holders of the corporation's Preferred and Common, each share of Preferred being treated for such purpose as the number of shares of Common into which it could then be converted. (b) For purposes of this Section 2, a merger or consolidation of the corporation with or into any other corporation or corporations, or the merger of any other corporation or corporations into the corporation, in which consolidation or merger the shareholders of the corporation receive distributions in cash or securities of another corporation or corporations as a result of such consolidation or merger, or a sale of all or substantially all of the assets of the corporation (a "Liquidation Event"), shall be treated as a liquidation, dissolution or winding up, unless the shareholders of this corporation hold at least 50% of the outstanding voting equity securities of the surviving corporation; provided that nothing contained in this subsection (b) shall limit the right of a holder of Preferred to convert such shares into Common prior to the effective date of any such transaction. (c) Any securities to be delivered to the holders of the Preferred and/or Common pursuant to Section 2(b) above shall be valued as follows: (i) Securities not subject to investment letter or other similar restrictions on free marketability: (1) If traded on a securities exchange or the NASDAQ National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the 30-day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors of the corporation. The holders of more than 50% of the outstanding shares of Series C Preferred shall have the right to challenge any determination by the Board of fair market value pursuant to this Section 2(c)(i)(3), in which case the determination of fair market value shall be made by an independent appraiser selected jointly by the Board and the challenging parties, the cost of such appraisal to be borne equally by the corporation and the challenging parties. (ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability shall be to make an appropriate discount from the market value determined as above in (i)(1), (2) or (3) to reflect the approximate fair market value thereof, as determined in good faith by the Board of Directors of the corporation. Section 3. Redemption. The Preferred shall not be redeemable. ---------- ---------- -4-

Section 4. Conversion. The holders of the Series A Preferred, Series B ---------- ---------- Preferred and Series C Preferred shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Series A Preferred, Series B ---------------- Preferred and Series C Preferred shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the corporation or any transfer agent for the Preferred, into such number of fully paid and nonassessable shares of Common as is determined by dividing $0.24 in the case of the Series A Preferred, $1.20 in the case of the Series B Preferred and $8.00 in the case of the Series C Preferred, respectively, by the Conversion Price for such series, determined as hereinafter provided, in effect at the time of conversion. The price at which shares of Common shall be deliverable upon conversion of shares of Preferred (the "Conversion Price") shall initially be $0.24 in the case of the Series A Preferred, $1.20 in the case of the Series B Preferred, and $8.00 in the case of the Series C Preferred, respectively, per share of Common. Such initial Conversion Price shall be subject to adjustment as hereinafter provided. Upon conversion, all declared and unpaid dividends on the Preferred shall be paid either in cash or in shares of Common, at the election of the corporation, wherein the shares of Common shall be valued at the fair market value at the time of such conversion, as determined by the Board. (b) Automatic Conversion. Each share of Preferred shall -------------------- automatically be converted into shares of Common at the then effective Conversion Price for each such series upon (i) the closing of a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Act"), covering the offer and sale of Common for the account of the corporation to the public at an aggregate gross offering price of not less than Fifteen Million Dollars ($15,000,000) and a price per share to the public equal to or greater than Twelve Dollars ($12.00) if the public offering occurs within one year of the initial issuance of the Series C Preferred and Sixteen Dollars ($16.00) if the public offering occurs at any time thereafter, as adjusted for subsequent stock splits, stock dividends and combinations, or (ii) the receipt of the corporation of the affirmative vote at a duly noticed shareholders meeting or pursuant to a duly solicited written consent of the holders of more than a majority of the Series A Preferred, a majority of the Series B Preferred and a majority of the Series C Preferred, each voting as a separate series. In the event of the automatic conversion of the Preferred upon a public offering as aforesaid, the person(s) entitled to receive the Common Stock issuable upon such conversion of Preferred shall not be deemed to have converted such Preferred until immediately prior to the closing of such sale of securities. (c) Mechanics of Conversion. No fractional shares of Common shall be ----------------------- issued upon conversion of Preferred. In lieu of any fractional shares to which the holder would otherwise be entitled, the corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price for each Series of Preferred. Before any holder of Preferred shall be entitled to convert the same into full shares of Common, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the corporation or of any transfer agent for the Preferred, and shall give written notice to the corporation at such office that he elects to convert the same. The corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Preferred, a certificate or certificates for the number of shares of Common to which he shall be -5-

entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common. Except as set forth in Section 4(a) above, such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Preferred to be converted, and the person or persons entitled to receive the shares of Common issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common on such date. If the conversion is in connection with an underwritten offer of securities registered pursuant to the Act, the conversion may, at the option of any holder tendering Preferred for conversion, be conditioned upon the closing with the underwriter of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common issuable upon such conversion of the Preferred shall not be deemed to have converted such Preferred until immediately prior to the closing of such sale of securities. (d) Adjustments to Conversion Price. ------------------------------- (i) Special Definitions. For purposes of this subsection 4(d), ------------------- the following definitions shall apply: (A) "Option" shall mean rights, options or warrants to ------ subscribe for, purchase or otherwise acquire either Common or Convertible Securities. (B) "Convertible Securities" shall mean any evidences of ---------------------- indebtedness, shares or other securities convertible into or exchangeable for Common. (C) "Additional Shares of Common" shall mean all shares of --------------------------- Common issued (or, pursuant to Section 4(d)(iii), deemed to be issued) by this Corporation after the date on which the first share of Preferred was issued, other than shares of Common issued or issuable: (1) upon conversion of shares of Preferred; (2) as a dividend or distribution on Preferred or any event for which adjustment is made pursuant to subparagraphs 4(d)(vi), (vii) and (viii) hereof; (3) pursuant to equipment lease financing transactions approved by the Board of Directors; (4) shares of Common to directors and employees of, and consultants to, the corporation in a manner determined by the Board of Directors; (5) in connection with bona fide acquisitions, strategic licensing transactions, mergers or similar transactions, the terms of which are approved by the Board of Directors; or -6-

(6) by way of dividend or other distribution on shares of Common excluded from the definition of Additional Shares of Common by the foregoing clause(s) (A), (B), (C) (D), (E) or this clause (F). (ii) No Adjustment of Conversion Price. No adjustment in the number --------------------------------- of shares of Common into which any series of Preferred is convertible shall be made, by adjustment in the Conversion Price then in effect for such series in respect of the issuance of Additional Shares of Common or otherwise, unless the consideration per share for an Additional Share of Common issued or deemed to be issued by this corporation is less than the Conversion Price of such series of Preferred in effect on the date of, and immediately prior to, the issue of such Additional Share of Common. (iii) Deemed Issuances of Additional Shares of Common. ----------------------------------------------- (A) Options and Convertible Securities. In the event the ---------------------------------- corporation at any time or from time to time shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common issued as of the time of such issue or, in the case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Shares of Common shall not be deemed to have been issued with respect to an adjustment of the Conversion Price unless the consideration per share (determined pursuant to subsection 4(d)(v) hereof) of such Additional Shares of Common would be less than the Conversion Price in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and provided further that in any such case in which Additional Shares of Common are deemed to be issued: (1) no further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common upon the exercise of such Options or conversion or exchange of such Convertible Securities; (2) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the corporation, or decrease or increase in the number of shares of Common issuable, upon the exercise, conversion or exchange thereof, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; -7-

(3) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon shall, upon such expiration, be recomputed as if: (a) in the case of Convertible Securities or Options for Common only the Additional Shares of Common issued were the shares of Common, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the corporation for the issue of such exercised Options plus the consideration actually received by the corporation upon such exercise or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the corporation upon such conversion or exchange, and (b) in the case of Options for Convertible Securities only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the corporation for the Additional Shares of Common deemed to have been then issued was the consideration actually received by the corporation for the issue of such exercised Options, plus the consideration deemed to have been received by the corporation (determined pursuant to subsection 4(d)(v)) upon the issue of the Convertible Securities with respect to which such Options were actually exercised; (4) no readjustment pursuant to clause (B) or (C) above shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price on the original adjustment date, or (ii) the Conversion Price that would have resulted from any issuance of Additional Shares of Common between the original adjustment date and such readjustment date; (5) in the case of any Options which expire by their terms not more than 30 days after the date of issue thereof, no adjustment of the Conversion Price shall be made until the expiration or exercise of all such Options issued on the same date, whereupon such adjustment shall be made in the same manner provided in clause (C) above; and (6) if such record date shall have been fixed and such Options or Convertible Securities are not issued on the date fixed therefor, the adjustment previously made in the Conversion Price which became effective on such record date shall be canceled as of the close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this subsection 4(d)(iii) as of the actual date of their issuance. -8-

(B) Stock Dividends, Stock Distributions and Subdivisions. ----------------------------------------------------- In the event the corporation at any time or from time to time shall declare or pay any dividend or make any other distribution on the Common payable in Common, or effect a subdivision of the outstanding shares of Common (by reclassification or otherwise than by payment of a dividend in Common), then and in any such event, Additional Shares of Common shall be deemed to have been issued: (1) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend or distribution, or (2) in the case of any such subdivision, at the close of business on the date immediately prior to the date upon which such corporate action becomes effective. If such record date shall have been fixed and such dividend shall not have been paid on the date fixed therefor, the adjustment previously made in the Conversion Price which became effective on such record date shall be canceled as of the close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this subsection 4(d)(iii) as of the time of actual payment of such dividend. (iv) Adjustment of Conversion Price Upon Issuance of Additional ---------------------------------------------------------- Shares of Common. ---------------- (A) As to the Conversion Price of the Series C Preferred (but not the Series B Preferred), in the event the corporation shall issue, within two years of the initial issuance of Series C Preferred, Additional Shares of Common (including Additional Shares of Common deemed to be issued pursuant to subsection 4(d)(iii), but excluding Additional Shares of Common issued pursuant to subsection 4(d)(iii)(B), which event is dealt with in subsection 4(d)(vi) hereof), without consideration or for a consideration per share less than the Conversion Price of the Series C Preferred in effect on the date of and immediately prior to such issue, then and in such event, the Conversion Price of the Series C Preferred shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction (x) the numerator of which shall be the sum of (1) the aggregate consideration received by the corporation for the Series C Preferred, plus (2) the aggregate consideration received by the corporation for the Additional Shares of Common, and (y) the denominator of which shall be the sum of (1) the number of shares of Series C Preferred outstanding immediately prior to such issue plus (2) the number of such Additional Shares of Common so issued; provided that the Conversion Price of the Series C Preferred shall not be reduced below the Conversion Price of the Series B Preferred in effect at the time of such issuance. (B) As to the Conversion Price of the Series B Preferred and Series C Preferred, in the event that the corporation shall issue, at any time as to the Series B Preferred and more than two years after the initial issuance of Series C Preferred as to the Series C Preferred, Additional Shares of Common (including Additional Shares of Common deemed to be issued -9-

pursuant to subsection 4(d)(iii), but excluding Additional Shares of Common issued pursuant to subsection 4(d)(iii)(B), which event is dealt with in subsection 4(d)(vi) hereof), without consideration or for a consideration per share less than the Conversion Price of the Series B Preferred or Series C Preferred in effect on the date of and immediately prior to such issue, then and in such event, the Conversion Price of the Series B Preferred and/or Series C Preferred, as the case may be, shall be reduced, concurrently with such issue, to prices (calculated to the nearest cent) determined by multiplying each such Conversion Price by a fraction (x) the numerator of which shall be (1) the number of shares of Common outstanding immediately prior to such issue, plus (2) the number of shares of Common which the aggregate consideration received by the corporation for the total number of Additional Shares of Common so issued would purchase at that Conversion Price, and (y) the denominator of which shall be (1) the number of shares of Common outstanding immediately prior to such issue plus (2) the number of such Additional Shares of Common so issued. For the purposes of this subsection 4(d)(iv), all shares of Common issuable upon exercise, conversion or exchange of outstanding Options or Convertible Securities, as the case may be, shall be deemed to be outstanding, and immediately after any Additional Shares of Common are deemed issued pursuant to subsection 4(d)(iii) above, such Additional Shares of Common shall be deemed to be outstanding. The Conversion Price shall not be so reduced at such time if the amount of such reduction would be an amount less than $0.01, but any such amount shall be carried forward and reduction with respect thereto made at the time of and together with any subsequent reduction which, together with such amount and any other amount or amounts so carried forward, shall aggregate $0.01 or more. (v) Determination of Consideration. For purposes of this subsection ------------------------------ 4(d), the consideration received by the corporation for the issue of any Additional Shares of Common shall be computed as follows: (A) Cash and Property. Such consideration shall: ----------------- (1) insofar as it consists of cash, be computed at the aggregate amount of cash received by the corporation excluding amounts paid or payable for accrued interest or accrued dividends; (2) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board of Directors; and (3) in the event Additional Shares of Common are issued together with other shares or securities or other assets of the corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (A) and (B) above, as determined in good faith by the Board of Directors. (B) Options and Convertible Securities. The consideration per ---------------------------------- share received by the corporation for Additional Shares of Common deemed to have been issued -10-

pursuant to subsection 4(d)(iii)(A), relating to Options and Convertible Securities, shall be determined by dividing (1) the total amount, if any, received or receivable by the corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by (2) the maximum number of shares of Common (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities. (vi) Adjustments for Subdivisions, Combinations or Consolidation of -------------------------------------------------------------- Common. In the event the outstanding shares of Common shall be subdivided (by - ------ stock split or otherwise), into a greater number of shares of Common, the Conversion Price then in effect shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Common shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common, the Conversion Price then in effect shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. (vii) Adjustments for Other Distributions. In the event the ----------------------------------- corporation at any time or from time to time makes, or fixes a record date for the determination of holders of Common entitled to receive any distribution payable in securities of the corporation other than shares of Common Stock and other than as otherwise adjusted in this Section 4(d), then and in each such event provision shall be made so that the holders of Preferred shall receive upon conversion thereof, in addition to the number of shares of Common receivable thereupon, the amount of securities of the corporation which they would have received had their Preferred been converted into Common on the date of such event and had they thereafter, during the period from the date of such event to and including the date of conversion, retained such securities receivable by them as aforesaid during such period, subject to all other adjustments called for during such period under this Section 4 with respect to the rights of the holders of the Preferred. (viii) Adjustments for Reorganization, Reclassification, Exchange ----------------------------------------------------------- and Substitution. If the Common issuable upon conversion of the Preferred shall - ---------------- be changed into the same or a different number of shares of any other class or classes of stock or other securities or property, whether by reorganization (unless such reorganization is deemed a liquidation under Section 2(b) hereof), reclassification or otherwise (other than a subdivision or combination of shares provided for above), the Conversion Price then in effect shall, concurrently with the effectiveness -11-

of such reorganization or reclassification, be proportionately adjusted such that the Preferred shall be convertible into, in lieu of the number of shares of Common which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock or other securities or property equivalent to the number of shares of Common that would have been subject to receipt by the holders upon conversion of the Preferred immediately before such event; and, in any such case, appropriate adjustment shall be made in the application of the provisions herein set forth with respect to the rights and interest thereafter of the holders of the Preferred, to the end that the provisions set forth herein (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Preferred. (e) No Impairment. The corporation will not, by amendment of its ------------- Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the corporation but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Preferred against impairment. (f) Certificate as to Adjustments. Upon the occurrence of each ----------------------------- adjustment or readjustment of the Conversion Price pursuant to this Section 4, the corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The corporation shall, upon the written request at any time of any holder of Preferred, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect, and (iii) the number of shares of Common and the amount, if any, of other property which at the time would be received upon the conversion of Preferred. (g) Notices of Record Date. In the event that this corporation shall ---------------------- propose at any time: (i) to declare any dividend or distribution upon its Common shares, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; (ii) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (iii) to effect any reclassification or recapitalization of its Common shares outstanding involving a change in the Common shares; or (iv) to merge or consolidate with or into any other corporation, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up; -12-

then, in connection with each such event, this corporation shall send to the holders of the Preferred shares: (A) at least 20 days' prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common shares shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in (iii) and (iv) above; and (B) in the case of the matters referred to in (iii) and (iv) above, at least 20 days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common shares shall be entitled to exchange their Common shares for securities or other property deliverable upon the occurrence of such event). Each such written notice shall be delivered personally or given by first class mail, postage prepaid, addressed to the holders of Preferred shares at the address for each such holder as shown on the books of this corporation. Section 5. Voting Rights. ---------- ------------- (a) Each holder of shares of Series A Preferred, Series B Preferred and Series C Preferred shall be entitled to the number of votes equal to the number of shares of Common Stock into which such Series A Preferred, Series B Preferred or Series C Preferred could then be converted (with any fractional share determined on an aggregate conversion basis being rounded to the nearest whole share), and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock (except as otherwise expressly provided herein or as required by law, voting together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote), and shall be entitled, notwithstanding any provision hereof, to notice of any shareholder's meeting in accordance with the bylaws of the corporation. (b) The holders of Series C Preferred, voting together as a single class, shall be entitled to elect one (1) member of the corporation's board of directors. The holders of Series B Preferred, voting together as a single class, shall be entitled to elect two (2) members of the corporation's board of directors. The holders of the Common Stock (including the Series A Preferred on an as-converted basis) shall be entitled to elect the remaining members of the corporation's board of directors. (c) In the case of any vacancy in the office of a director occurring among the directors elected by the holders of Series C Preferred, Series B Preferred or the Common Stock and Series A Preferred pursuant to 5(b) hereof, the remaining director or directors so elected by the holders of the Series C Preferred, Series B Preferred or the Common Stock and Series A Preferred may, by affirmative vote of a majority thereof (or the remaining director so elected if there is but one, or if there is no such director remaining, by the affirmative vote of the holders of a majority of shares of that class) elect a successor or successors to hold the office for the unexpired term of the director -13-

or director whose place or places shall be vacant. Any director who shall have been elected by the holders of a majority of the Series C Preferred, Series B Preferred or the Common Stock and Series A Preferred or any director so elected as provided in the preceding sentence hereof, may be removed during the aforesaid term of office, whether with or without cause, only by the affirmative vote of the holders of a majority of the Series C Preferred, Series B Preferred or the Common Stock and Series A Preferred, as the case may be. Section 6. Protective Provisions. ---------- --------------------- (a) So long as any shares of Preferred are outstanding, the corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Preferred, voting as a separate class: (A) amend or repeal any provision of, or add any provision to, the corporation's Articles of Incorporation if such action would adversely alter or change the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Preferred; (B) authorize or issue any new class or series of stock having any preference or priority as to dividends or assets superior to any such preference or priority of the Preferred; (C) reclassify any shares of Common or any other shares of the corporation into shares having any preference or priority as to dividends or assets superior to any such preference or priority of the Preferred; or (D) engage in a merger, acquisition or sale of all or substantially all of the assets of the corporation, if such merger, acquisition or sale of assets would constitute a "reorganization" as that term is defined in Section 181 of the California Corporations Code. (b) So long as any shares of Series B Preferred are outstanding, the corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series B Preferred, voting as a separate class: (A) liquidate or dissolve the corporation; (B) create or issue any new class or series of stock or any other securities convertible into equity securities of the corporation (a) having preference over the Series B Preferred with respect to voting, dividends upon liquidation, or (b) having rights similar to any of the rights of the Series B Preferred under this Section 6(b); (C) amend or repeal any provision of, or add any provision to, this corporation's Articles of Incorporation if such action would adversely alter or change the rights, preferences or privileges or powers of, or the restrictions provided for the benefit of, the Series B -14-

Preferred; or (D) reclassify or recapitalize any of the corporation's outstanding capital stock. (c) So long as not less than 300,000 shares of Series C Preferred remain outstanding, the corporation shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of a majority of the then outstanding shares of Series C Preferred, voting as a separate class: (A) engage in a merger, acquisition or sale of all or substantially all of the assets of the corporation, if such merger, acquisition or sale of assets would constitute a "reorganization" as that term is defined in Section 181 of the California Corporations Code; (B) enter into any agreement that would restrict the corporation's ability to perform its obligations under the Series C Preferred Stock Purchase Agreement between the Company and the original purchasers of the Series C Preferred initially issued by the corporation, or any ancillary agreements attached as exhibits thereto; or (C) issue additional shares of Common, other than (1) shares of Common specified pursuant to Section 4(d)(i)(C)(4) of Article IV (2) shares issued in a transaction or a series of related transactions involving the issuance of no more than 20% of the shares of Common outstanding as of December 31, 1997 (including for such purposes all shares of Common reserved for issuance upon exercise of options outstanding at December 31, 1997 in the determination of outstanding shares) or (3) shares issued pursuant to the conversion of Preferred or in connection with an event provided for in Section 4(d)(vi) of Article IV. (d) So long as not less than 300,000 shares of Series C Preferred remain outstanding, the corporation shall not, without first obtaining the approval (by vote or written consent, as provided by law) of at least 75% of the directors constituting the Board of Directors of the corporation: (A) sell, convey or otherwise dispose of or encumber its property or business, except for sales or dispositions in the ordinary course of business, and encumbrances securing borrowings of less than $5 million; (B) borrow in excess of $5 million; (C) materially change the corporations's business model or focus; (D) create a non-wholly-owned subsidiary; (E) transact business with any affiliate of the corporation on terms less favorable than the corporation could obtain from an unrelated third party; or -15-

(F) amend or modify the corporation's bylaws. (e) The holders of Preferred shall vote separately on matters that by law are subject to a separate class or series vote. Section 7. Status of Converted Shares of Preferred. Any shares of ---------- --------------------------------------- Preferred converted into shares of Common shall revert to the status of authorized and unissued shares of Preferred of the same series as the converted shares, and may thereafter, in the discretion of the Board of Directors, be sold or reissued from time to time as part of such series, subject to the terms and conditions herein set forth. Section 8. Repurchase of Shares. In connection with repurchases by the ---------- -------------------- corporation of its Common Stock pursuant to its agreements with certain of the holders thereof providing for such repurchases in the event of the termination of the status of such holder as an employee, director or consultant to the Company, each holder of Preferred Stock shall be deemed to have consented, for purposes of Sections 502, 503 and 506 of the California General Corporation Law, to distributions made by the corporation with respect to such repurchases. Section 9. Residual Rights. All rights accruing to the outstanding shares --------- --------------- of this corporation not expressly provided for to the contrary herein shall be vested in the Common. Article V. The Company is to have perpetual existence. Article VI. Elections of directors need not be by written ballot unless a stockholder demands election by written ballot at the meeting and before voting begins or unless the Bylaws of the Company shall so provide. Article VII. The number of directors which constitute the whole Board of Directors of the Company shall be designated in the Bylaws of the Company. Article VIII. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Company. -16-

Article IX. (a) To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. (b) The Company shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer or employee of the Company or any predecessor of the Company, or serves or served at any other enterprise as a director, officer or employee at the request of the Company or any predecessor to the Company. (c) Neither any amendment nor repeal of this Article IX, nor the adoption of any provision of the Company's Certificate of Incorporation inconsistent with this Article IX, shall eliminate or reduce the effect of this Article IX, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article IX, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. Article X. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Company may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Company. Article XI. Vacancies created by the resignation of one or more members of the Board of Directors and newly created directorships, created in accordance with the Bylaws of this Company, may be filled by the vote of a majority, although less than a quorum, of the directors then in office, or by a sole remaining director. Article XII. Advance notice of new business and stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Company. -17-

Article XIII. Following the effectiveness of the registration of any class of securities of the Corporation pursuant to the requirements of the Securities Exchange Act of 1934, as amended, no action shall be taken by the stockholders of the Corporation except at an annual or special meeting of the stockholders called in accordance with the Bylaws and no action shall be taken by the stockholders by written consent. Article XIV. Stockholders shall be entitled to cumulative voting rights in the election of directors as set forth in this Article XIV and the Bylaws of the Company, but only until cumulative voting rights are not required under Section 2115 of the California Corporations Code. Subject to such limitation, at all elections of directors of the Company, each holder of stock or of any class or classes or of a series or series thereof shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) such stockholder would be entitled to cast for the election of directors with respect to such stockholder's shares of stock multiplied by the number of directors to be elected, and such stockholder may cast all of such votes for a single director or may distribute them among the number of directors to be voted for, or for any two or more of them as such stockholder may see fit. At such time as cumulative voting rights are not required under Section 2115 of the California Corporations Code, this Article XIII shall no longer be effective and may be deleted herefrom upon any restatement of this Certificate of Incorporation. Article XV. The Company reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. -18-

IN WITNESS WHEREOF, the Company has caused this Certificate of Incorporation to be signed by Peter Chen, its President and Chief Executive Officer, effective July 31, 1998. /s/ Peter Chen ------------------------------------------------- Peter Chen, President and Chief Executive Officer -19-

Exhibit 3.3 BYLAWS OF PC-TEL, INC. a Delaware Corporation

TABLE OF CONTENTS Page ---- ARTICLE I CORPORATE OFFICES................................................. 1 1.1 REGISTERED OFFICE................................................ 1 1.2 OTHER OFFICES.................................................... 1 ARTICLE II MEETINGS OF STOCKHOLDERS......................................... 1 2.1 PLACE OF MEETINGS................................................ 1 2.2 ANNUAL MEETING................................................... 1 2.3 SPECIAL MEETING.................................................. 1 2.4 NOTICE OF STOCKHOLDERS' MEETINGS................................. 2 2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS.. 2 2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE..................... 3 2.7 QUORUM........................................................... 3 2.8 ADJOURNED MEETING; NOTICE........................................ 4 2.9 VOTING........................................................... 4 2.10 WAIVER OF NOTICE................................................. 4 2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.......... 5 2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS...... 5 2.13 PROXIES.......................................................... 6 2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE............................ 6 2.15 CONDUCT OF BUSINESS.............................................. 6 ARTICLE III DIRECTORS....................................................... 7 3.1 POWERS.......................................................... 7 3.2 NUMBER.......................................................... 7 3.3 CLASSES OF DIRECTORS............................................ 7 3.4 RESIGNATION AND VACANCIES....................................... 7 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE........................ 8 3.6 REGULAR MEETINGS................................................ 9 3.7 SPECIAL MEETINGS; NOTICE........................................ 9 3.8 QUORUM.......................................................... 9 3.9 WAIVER OF NOTICE................................................ 9 3.10 ADJOURNED MEETING; NOTICE........................................ 10 3.11 CONDUCT OF BUSINESS.............................................. 10 3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................ 10 3.13 FEES AND COMPENSATION OF DIRECTORS............................... 10 3.14 REMOVAL OF DIRECTORS............................................. 10 -i-

TABLE OF CONTENTS (continued) Page ---- ARTICLE IV COMMITTEES....................................................... 11 4.1 COMMITTEES OF DIRECTORS.......................................... 11 4.2 COMMITTEE MINUTES................................................ 11 4.3 MEETINGS AND ACTION OF COMMITTEES................................ 11 ARTICLE V OFFICERS.......................................................... 12 5.1 OFFICERS......................................................... 12 5.2 APPOINTMENT OF OFFICERS.......................................... 12 5.3 REMOVAL AND RESIGNATION OF OFFICERS.............................. 12 5.4 CHAIRMAN OF THE BOARD............................................ 13 5.5 CHIEF EXECUTIVE OFFICER.......................................... 13 5.6 PRESIDENT........................................................ 13 5.7 VICE PRESIDENT................................................... 13 5.8 SECRETARY........................................................ 14 5.9 CHIEF FINANCIAL OFFICER.......................................... 14 5.10 ASSISTANT SECRETARY.............................................. 15 5.11 AUTHORITY AND DUTIES OF OFFICERS................................. 15 ARTICLE VI INDEMNITY........................................................ 15 6.1 THIRD PARTY ACTIONS.............................................. 15 6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.................... 16 6.3 SUCCESSFUL DEFENSE............................................... 17 6.4 DETERMINATION OF CONDUCT......................................... 17 6.5 PAYMENT OF EXPENSES IN ADVANCE................................... 17 6.6 INDEMNITY NOT EXCLUSIVE.......................................... 17 6.7 INSURANCE INDEMNIFICATION........................................ 18 6.8 THE CORPORATION.................................................. 18 6.9 EMPLOYEE BENEFIT PLANS........................................... 18 6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES...... 18 ARTICLE VII RECORDS AND REPORTS............................................. 19 7.1 MAINTENANCE AND INSPECTION OF RECORDS............................ 19 7.2 INSPECTION BY DIRECTORS.......................................... 19 7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS................... 19 ARTICLE VIII GENERAL MATTERS................................................ 20 8.1 CHECKS.......................................................... 20 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS................ 20 -ii-

TABLE OF CONTENTS (continued) Page ---- 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES........................... 20 8.4 SPECIAL DESIGNATION ON CERTIFICATES.............................. 21 8.5 LOST CERTIFICATES................................................ 21 8.6 CONSTRUCTION; DEFINITIONS........................................ 21 8.7 DIVIDENDS........................................................ 21 8.8 FISCAL YEAR...................................................... 22 8.9 SEAL............................................................. 22 8.10 TRANSFER OF STOCK................................................ 22 8.11 STOCK TRANSFER AGREEMENTS........................................ 22 8.12 REGISTERED STOCKHOLDERS.......................................... 22 ARTICLE IX AMENDMENTS....................................................... 23 ARTICLE X DISSOLUTION....................................................... 23 ARTICLE XI CUSTODIAN........................................................ 23 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES...................... 23 11.2 DUTIES OF CUSTODIAN.............................................. 24 ARTICLE XII LOANS TO OFFICERS............................................... 24 -iii-

BYLAWS ------ OF -- PC-TEL, INC. ------------ ARTICLE I CORPORATE OFFICES ----------------- 1.1 REGISTERED OFFICE ----------------- The registered office of the Corporation shall be 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware, 19801. The name of the registered agent of the Corporation at such location is The Corporation Trust Company. 1.2 OTHER OFFICES ------------- The board of directors may at any time establish other offices at any place or places where the Corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS ------------------------ 2.1 PLACE OF MEETINGS ----------------- Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the Corporation. 2.2 ANNUAL MEETING -------------- The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. At the meeting, directors shall be elected and any other proper business may be transacted. 2.3 SPECIAL MEETING --------------- A special meeting of the stockholders may be called at any time by the (i) board of directors, (ii) the chairman of the board, (iii) the president, or (iv) the chief executive officer. Prior to such time as a Registration Statement regarding the sale of the Corporation's Common Stock to the public is declared effective by the Securities and Exchange Commission, a

special meeting of the stockholders may be called at any time by one or more stockholders holding a majority of the outstanding voting shares. If a special meeting is called by any person other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president, or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons who called the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after the receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the board of directors may be held. 2.4 NOTICE OF STOCKHOLDERS' MEETINGS -------------------------------- All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.6 of these Bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS --------------------------------------------------------------- To be properly brought before an annual meeting or special meeting, nominations for the election of director or other business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a stockholder. For such nominations or other business to be considered properly brought before the meeting by a stockholder, such stockholder must have given timely written notice and in proper form of his intent to bring such business before such meeting. To be timely, such stockholder's notice must be delivered to or mailed and received by the secretary of the Corporation not less than one hundred twenty (120) days prior to the date of the Corporation's proxy statement released to stockholders in connection with the Corporation's previous year's annual meeting of stockholders. To be in proper form, a stockholder's notice to the secretary shall set forth: (i) the name and address of the stockholder who intends to make the nominations, propose the business, and, as the case may be, the name and address of the -2-

person or persons to be nominated or the nature of the business to be proposed; (ii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or introduce the business specified in the notice; (iii) if applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (iv) such other information regarding each nominee or each matter of business to be proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed by the board of directors; and (v) if applicable, the consent of each nominee to serve as director of the Corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure. 2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE -------------------------------------------- Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 2.7 QUORUM ------ The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairman of the meeting, or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or -3-

represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provisions of the statutes or of the Certificate of Incorporation, a different vote is required, in which case such express provision shall govern and control the decision of the question. 2.8 ADJOURNED MEETING; NOTICE ------------------------- When a meeting is adjourned to another time or place, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.9 VOTING ------ The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Sections 2.12 and 2.14 of these Bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Except as may be otherwise provided in the Certificate of Incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. 2.10 WAIVER OF NOTICE ---------------- Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws. -4-

2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING ------------------------------------------------------- Notwithstanding the following provisions of this Section 2.11, effective upon the listing of the Common Stock of the Corporation on the Nasdaq Stock Market and the registration of any class of securities of the Corporation pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the stockholders of the Corporation may not take action by written consent without a meeting but must take any such actions at a duly called annual or special meeting. Except as otherwise provided in this Section 2.11, any action required by this chapter to be taken at any annual or special meeting of stockholders of a Corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware. 2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS ----------------------------------------------------------- In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If the board of directors does not so fix a record date, the fixing of such record date shall be governed by the provisions of Section 213 of the General Corporation Law of Delaware. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. -5-

2.13 PROXIES ------- Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by a written proxy, signed by the stockholder and filed with the secretary of the Corporation, but no such proxy shall be voted or acted upon after 3 years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware. 2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE ------------------------------------- The officer who has charge of the stock ledger of a Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The stock ledger shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders and of the number of shares held by each such stockholder. 2.15 CONDUCT OF BUSINESS ------------------- Meetings of stockholders shall be presided over by the chairman of the board, if any, or in his absence by the president, or in his absence by a vice president, or in the absence of the foregoing persons by a chairman designated by the board of directors, or in the absence of such designation by a chairman chosen at the meeting. The secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The chairman of any meeting of stockholders shall determine the order of business and the procedures at the meeting, including such matters as the regulation of the manner of voting and conduct of business. -6-

ARTICLE III DIRECTORS --------- 3.1 POWERS ------ Subject to the provisions of the General Corporation Law of Delaware and any limitations in the Certificate of Incorporation or these Bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. 3.2 NUMBER ------ The authorized number of directors of the Corporation shall be eight (8). No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 3.3 CLASSES OF DIRECTORS -------------------- At such time as a Registration Statement regarding the sale of the Corporation's Common Stock to the public is declared effective by the Securities and Exchange Commission, the Directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class I Directors shall expire and Class I Directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class II Directors shall expire and Class II Directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class III Directors shall expire and Class III Directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, Directors shall be elected for a full term of three years to succeed the Directors of the class whose terms expire at such annual meeting. Notwithstanding the foregoing provisions of this Article, each Director shall serve until his successor is duly elected and qualified or until his earlier death, resignation or removal. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director. 3.4 RESIGNATION AND VACANCIES ------------------------- Any director may resign at any time upon written notice to the Corporation. Stockholders may remove directors with or without cause. Any vacancy occurring in the board of directors with or without cause may be filled by a majority of the remaining members of the board of directors, -7-

although such majority is less than a quorum, or by a plurality of the votes cast at a meeting of stockholders, and each director so elected shall hold office until the expiration of the term of office of the director whom he has replaced. Unless otherwise provided in the Certificate of Incorporation or these Bylaws: (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If at any time, by reason of death or resignation or other cause, the Corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware. If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable. 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ---------------------------------------- The board of directors of the Corporation may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. -8-

3.6 REGULAR MEETINGS ---------------- Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. 3.7 SPECIAL MEETINGS; NOTICE ------------------------ Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any two directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the Corporation. If the notice is mailed, it shall be deposited in the United States mail at least 4 days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, it shall be delivered personally or by telephone or to the telegraph company at least 48 hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the Corporation. 3.8 QUORUM ------ At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. 3.9 WAIVER OF NOTICE ---------------- Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws. -9-

3.10 ADJOURNED MEETING; NOTICE ------------------------- If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. 3.11 CONDUCT OF BUSINESS ------------------- Meetings of the board of directors shall be presided over by the chairman of the board, if any, or in his absence by the chief executive officer, or in their absence by a chairman chosen at the meeting. The secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The chairman of any meeting shall determine the order of business and the procedures at the meeting. 3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING ------------------------------------------------- Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee. 3.13 FEES AND COMPENSATION OF DIRECTORS ---------------------------------- Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. 3.14 REMOVAL OF DIRECTORS -------------------- Unless otherwise restricted by statute, by the Certificate of Incorporation or by these Bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. If at any time a class or series of shares is entitled to elect one or more directors, the provisions of this Article 3.14 shall apply to the vote of that class or series and not to the vote of the outstanding shares as a whole. -10-

ARTICLE IV COMMITTEES ---------- 4.1 COMMITTEES OF DIRECTORS ----------------------- The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in the Bylaws of the Corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, (iv) recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or (v) amend the Bylaws of the Corporation; and, unless the board resolution establishing the committee, the Bylaws or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. 4.2 COMMITTEE MINUTES ----------------- Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. 4.3 MEETINGS AND ACTION OF COMMITTEES --------------------------------- Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these Bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 -11-

(quorum), Section 3.9 (waiver of notice), Section 3.10 (adjournment and notice of adjournment), Section 3.11 (conduct of business) and 3.12 (action without a meeting), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws. ARTICLE V OFFICERS -------- 5.1 OFFICERS -------- The officers of the Corporation shall be a chief executive officer, one or more vice presidents, a secretary and a chief financial officer. The Corporation may also have, at the discretion of the board of directors, a chairman of the board, a president, a chief operating officer, one or more executive, senior or assistant vice presidents, assistant secretaries and any such other officers as may be appointed in accordance with the provisions of Section 5.2 of these Bylaws. Any number of offices may be held by the same person. 5.2 APPOINTMENT OF OFFICERS ----------------------- Except as otherwise provided in this Section 5.2, the officers of the Corporation shall be appointed by the board of directors, subject to the rights, if any, of an officer under any contract of employment. The board of directors may appoint, or empower an officer to appoint, such officers and agents of the business as the Corporation may require (whether or not such officer or agent is described in this Article V), each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the board of directors may from time to time determine. Any vacancy occurring in any office of the Corporation shall be filled by the board of directors or may be filled by the officer, if any, who appointed such officer. 5.3 REMOVAL AND RESIGNATION OF OFFICERS ----------------------------------- Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors or, in the case of an officer appointed by another officer, by such other officer. Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in -12-

that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party. 5.4 CHAIRMAN OF THE BOARD --------------------- The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these Bylaws. If there is no chief executive officer, then the chairman of the board shall also be the chief executive officer of the Corporation and shall have the powers and duties prescribed in Section 5.5 of these Bylaws. 5.5 CHIEF EXECUTIVE OFFICER ----------------------- The Chief Executive Officer of the Corporation shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and the officers of the Corporation. He or she shall preside at all meetings of the stockholders and, in the absence or nonexistence of a Chairman of the Board at all meetings of the Board of Directors. He or she shall have the general powers and duties of management usually vested in the chief executive officer of a Corporation, including general supervision, direction and control of the business and supervision of other officers of the Corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. The Chief Executive Officer shall, without limitation, have the authority to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. 5.6 PRESIDENT --------- Subject to such supervisory powers as may be given by these Bylaws or the Board of Directors to the Chairman of the Board or the Chief Executive Officer, if there be such officers, the president shall have general supervision, direction and control of the business and supervision of other officers of the Corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. In the event a Chief Executive Officer shall not be appointed, the President shall have the duties of such office. 5.7 VICE PRESIDENT -------------- In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the chief executive officer and when so acting shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer. The vice -13-

presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these Bylaws, the chief executive officer or the chairman of the board. 5.8 SECRETARY --------- The secretary shall keep or cause to be kept, at the principal executive office of the Corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these Bylaws. He shall keep the seal of the Corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these Bylaws. 5.9 CHIEF FINANCIAL OFFICER ----------------------- The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any director. The chief financial officer shall deposit all money and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the Corporation as may be ordered by the board of directors, shall render to the chief executive officer and directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these Bylaws. -14-

5.10 ASSISTANT SECRETARY ------------------- The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors or the stockholders may from time to time prescribe. 5.11 AUTHORITY AND DUTIES OF OFFICERS -------------------------------- In addition to the foregoing authority and duties, all officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the board of directors or the stockholders. ARTICLE VI INDEMNITY --------- 6.1 THIRD PARTY ACTIONS ------------------- The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by an agent of the Corporation), or is or was serving at the request of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, as a director or officer of another corporation, partnership, joint venture trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. The Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by an agent of the Corporation), or is or was serving at the request of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, as an employee or agent of another corporation, partnership, joint -15-

venture trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. 6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION --------------------------------------------- The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, or is or was serving at the request of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in manner he reasonably believed to be in or not opposed to the best interests of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. The Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, to procure a judgment in its favor by reason of the fact that he is or was an employee or agent of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, or is or was serving at the request of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in manner he reasonably believed to be in or not opposed to the best interests of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, and except that no -16-

indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. 6.3 SUCCESSFUL DEFENSE ------------------ To the extent that a director, officer, employee or agent of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. 6.4 DETERMINATION OF CONDUCT ------------------------ Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that the indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made (1) by the board of Directors or the Executive Committee by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) or if such quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. 6.5 PAYMENT OF EXPENSES IN ADVANCE ------------------------------ Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VI. 6.6 INDEMNITY NOT EXCLUSIVE ----------------------- The indemnification and advancement of expenses provided or granted pursuant to the other subsections of this section shall not be deemed exclusive of any other rights or limiting any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, certificate of incorporation, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another while holding such office. -17-

6.7 INSURANCE INDEMNIFICATION ------------------------- The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, any predecessor of the Corporation, or any subsidiary of the Corporation, or is or was serving at the request of the Corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VI. 6.8 THE CORPORATION --------------- For purposes of this Article VI, references to "the Corporation" shall include, in addition to the resulting Corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under and subject to the provisions of this Article VI (including, without limitation the provisions of Section 6.4) with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. 6.9 EMPLOYEE BENEFIT PLANS ---------------------- For purposes of this Article VI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VI. 6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES ----------------------------------------------------------- The indemnification and advanced of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. -18-

ARTICLE VII RECORDS AND REPORTS ------------------- 7.1 MAINTENANCE AND INSPECTION OF RECORDS ------------------------------------- The Corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal place of business. 7.2 INSPECTION BY DIRECTORS ----------------------- Any director shall have the right to examine the Corporation's stock ledger, a list of its stockholders and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the Corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ---------------------------------------------- The chairman of the board, the chief executive officer, any vice president, the chief financial officer, the secretary or assistant secretary of this Corporation, or any other person authorized by the board of directors or the chief executive officer or a vice president, is authorized to vote, represent, and exercise on behalf of this Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. -19-

ARTICLE VIII GENERAL MATTERS --------------- 8.1 CHECKS ------ From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the Corporation, and only the persons so authorized shall sign or endorse those instruments. 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS ------------------------------------------------ The board of directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES -------------------------------------- The shares of a corporation shall be represented by certificates, provided that the board of directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend -20-

on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 8.4 SPECIAL DESIGNATION ON CERTIFICATES ----------------------------------- If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 8.5 LOST CERTIFICATES ----------------- Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 8.6 CONSTRUCTION; DEFINITIONS ------------------------- Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a Corporation and a natural person. 8.7 DIVIDENDS --------- The directors of the Corporation, subject to any restrictions contained in the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock pursuant to the General Corporation Law of Delaware. Dividends may be paid in cash, in property, or in shares of the Corporation's capital stock. -21-

The directors of the Corporation may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies. 8.8 FISCAL YEAR ----------- The fiscal year of the Corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors. 8.9 SEAL ---- The Corporation may adopt a corporate seal, which may be altered at pleasure, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 8.10 TRANSFER OF STOCK ----------------- Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books. 8.11 STOCK TRANSFER AGREEMENTS ------------------------- The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. 8.12 REGISTERED STOCKHOLDERS ----------------------- The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. -22-

ARTICLE IX AMENDMENTS ---------- The original or other Bylaws of the Corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the Corporation may, in its Certificate of Incorporation, confer the power to adopt, amend or repeal Bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal Bylaws. ARTICLE X DISSOLUTION ----------- If it should be deemed advisable in the judgment of the board of directors of the Corporation that the Corporation should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution. At the meeting a vote shall be taken for and against the proposed dissolution. If a majority of the outstanding stock of the Corporation entitled to vote thereon votes for the proposed dissolution, then a certificate stating that the dissolution has been authorized in accordance with the provisions of Section 275 of the General Corporation Law of Delaware and setting forth the names and residences of the directors and officers shall be executed, acknowledged, and filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such certificate's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the Corporation shall be dissolved. ARTICLE XI CUSTODIAN --------- 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES ------------------------------------------- The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the Corporation is insolvent, to be receivers, of and for the Corporation when: (i) at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors; or -23-

(ii) the business of the Corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the Corporation that the required vote for action by the board of directors cannot be obtained and the stockholders are unable to terminate this division; or (iii) the Corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets. 11.2 DUTIES OF CUSTODIAN ------------------- The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the Corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware. ARTICLE XII LOANS TO OFFICERS ----------------- The Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or of its subsidiaries, including any officer or employee who is a Director of the Corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the Corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this Bylaw shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute. -24-

EXHIBIT 4.2 WARRANT TO PURCHASE SHARES OF SERIES C PREFERRED STOCK OF PC-TEL, INC. A Delaware Corporation THIS WARRANT HAS BEEN, AND THE SHARES OF SERIES C PREFERRED STOCK WHICH MAY BE PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") WILL BE, ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT OR THE WARRANT SHARES (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS. Warrant No.: C-1 Issuance Date: December 31, 1998 THIS CERTIFIES THAT, for value received, Pentech Financial Services, Inc., a California corporation (the "Holder") is entitled to subscribe for a purchase from PC-Tel, Inc., a Delaware Corporation (the "Company"), 190,000 fully paid and nonassessable shares (as adjusted pursuant to Section 2 hereof) (the "Warrant Shares") of Series C Preferred Stock of the Company ("Series C Preferred Stock") at the purchase price of $8.00 per share (as adjusted pursuant to Section 2 hereof) (the "Exercise Price"), upon the terms and subject to the conditions hereinafter set forth: 1. EXERCISE RIGHTS. ---------------- (a) Cash Exercise. The purchase rights represented by this Warrant may be ------------- exercised by the Holder at any time and from time to time during the term hereof, in whole or in part, by delivery to the principal offices of the Company of this Warrant and a completed and duly executed Notice of Cash Exercise, in the form attached as Exhibit A hereto, accompanied by payment to the Company of --------- an amount equal to the Exercise Price then in effect multiplied by the number of Warrant Shares to be purchased by the Holder in connection with such cash exercise of this Warrant, which amount may be paid, at the election of the Holder, by wire transfer or delivery of a certified check payable to the order of the Company. (b) Net Issue Exercise. ------------------ (i) In lieu of exercising the purchase rights represented by this Warrant on a cash basis pursuant to Section 1(a) hereof, the Holder may elect to exercise such rights represented

by this Warrant at any time and from time to time during the term hereof, in whole or in part, on a net-issue basis by electing to receive the number of Warrant Shares which are equal in value to the value of this Warrant (or any portion thereof to be canceled in connection with such net-issue exercise) at the time of any such net-issue exercise, by delivery to the principal offices of the Company of this Warrant and a completed and duly executed Notice of Net- Issue Exercise, in the form attached as Exhibit B hereto, properly marked to --------- indicate (A) the number of Warrant Shares to be delivered to the Holder in connection with such net-issue exercise, (B) the number of Warrant Shares with respect to which the Warrant is being surrendered in payment of the aggregate Exercise Price for the Warrant Shares to be delivered to the Holder in connection with such net-issue exercise, and (C) the number of Warrant Shares which remain subject to the Warrant after such net-issue exercise, if any (each as determined in accordance with Section 1(b)(ii) hereof). (ii) In the event that the Holder shall elect to exercise the rights represented by this Warrant in whole or in part on a net-issue basis pursuant to this Section 1(b) the Company shall issue to the Holder the number of Warrant Shares determined in accordance with the following formula: X = Y (A-B) ------- A X = the number of Warrant Shares to be issued to the Holder in connection with such net-issue exercise. Y = the number of Warrant Shares subject to this Warrant. A = the Fair Market Value of one share of Series C Preferred Stock. B = the Exercise Price in effect as of the date of such net-issue exercise (as adjusted pursuant to Section 2 hereof) (c) Fair Market Value. For purposes of this Section 1, the "Fair ----------------- Market Value" of the Series C Preferred Stock shall have the following meanings: (i) If the Series C Preferred Stock is not listed for trading on a national securities exchange or admitted for trading on a national market system, then the Fair Market Value of Series C Preferred Stock shall be deemed to be the fair market value of Series C Preferred Stock as determined in good faith from time to time by the Board of Directors of the Company (the "Board of Directors"), and receipt and acknowledgement of this Warrant by the Holder shall be deemed to be an acknowledgement and acceptance of any such determination of the fair market value of Series C Preferred Stock by the Board of Directors as the final and binding determination of such fair market value of purposes of this Warrant. (ii) If the Series C Preferred Stock is listed for trading on a national securities exchange or admitted for trading on a national market system, then the Fair Market Value of Series C Preferred Stock shall be deemed to be the closing price quoted on the principal securities -2-

exchange on which the Series C Preferred Stock is listed for trading, or if not so listed, the average of the closing bid and asked prices for Series C Preferred Stock quoted on the national market system on which Series C Preferred Stock is admitted for trading, each as published in the Western Edition of The Wall Street Journal, in each case for the ten (10) trading days prior to the date of determination of Fair Market Value for Series C Preferred Stock in accordance herewith. (d) Additional Conditions to Exercise of Warrant. Unless there is a -------------------------------------------- registration statement declared or ordered effective by the Securities and Exchange Commission (the "Commission") under the Securities Act which includes the Warrant Shares to be issued upon the exercise of the rights represented by this Warrant, such rights may not be exercised unless and until: (i) the Company shall have received an Investment Representation Statement in the form attached as Exhibit C hereto, certifying that, among other --------- things, the Warrant Shares to be issued upon the exercise of the rights represented by this Warrant are being acquired for investment and not with a view to any sale or distribution thereof; (ii) each certificate evidencing the Warrant Shares to be issued upon the exercise of the rights represented by this Warrant shall be stamped or imprinted with a legend substantially in the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE SECURITIES ACT. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT DECLARED OR ORDERED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT COVERING SUCH SECURITIES, OR (ii) IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF SUCH SECURITIES THAT SUCH REGISTRATION OR RULE 144 COMPLIANCE IS NOT REQUIRED UNDER THE SECURITIES ACT AS TO SUCH SALE, OFFER OF SALE, PLEDGE, HYPOTHECATION OR OTHER DISTRIBUTION. THIS CERTIFICATE MUST BE SURRENDERED TO THE ISSUER HEREOF OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE TRANSFER OF ANY INTEREST IN THE SECURITIES REPRESENTED HEREBY. (e) Fractional Shares. Upon the exercise of the rights ----------------- represented by this Warrant, the Company shall not be obligated to issue fractional shares of Series C Preferred Stock, and in lieu thereof, the Company shall pay to the Holder an amount in cash equal to the Fair Market -3-

Value per share of Series C Preferred Stock immediately prior to such exercise multiplied by such fraction (rounded to the nearest cent). (f) Record Ownership of Warrant Shares. The Warrant Shares shall be ---------------------------------- deemed to have been issued, and the person in whose name any certificate representing Warrant Shares shall be issuable upon the exercise of the rights represented by this Warrant (as indicated in the appropriate Notice of Exercise) shall be deemed to have become the holder of record of (and shall be treated for all purposes as the record holder of) the Warrant Shares represented thereby, immediately prior to the close of business on the date or dates upon which the rights represented by this Warrant are exercised in accordance with the terms hereof. (g) Stock Certificates. In the event of any exercise of the rights ------------------ represented by this Warrant, certificates for the Warrant Shares so purchased pursuant hereto shall be delivered to the Holder within a reasonable time and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the Warrant Shares with respect to which this Warrant shall not have been exercised shall also be issued to the Holder within such time. (h) Issue Taxes. The issuance of certificates for shares of Series C ----------- Preferred Stock upon the exercise of the rights represented by this Warrant shall be made without charge to the Holder for any issuance tax in respect thereof, provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Holder of the Warrant. 2. ADJUSTMENT RIGHTS. ----------------- (a) Right to Adjustment. The number of Warrant Shares purchasable upon ------------------- the exercise of the rights represented by this Warrant, and the Exercise Price therefor, shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (i) Reclassifications. In the event of a reclassification of the ----------------- Series C Preferred Stock other than by stock split, subdivision, consolidation or combination thereof, the Company shall execute a new Warrant, the terms of which provide that the holder of this Warrant shall have the right to exercise the rights represented by such new Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification by a holder of an equivalent number of shares of Series C Preferred Stock. Such new Warrant shall provide for adjustments which are as equivalent as practicable to the adjustments provided for in this Section 2. The provisions of this Section 2(a)(i) shall apply with equal force and effect to all successive reclassifications of the Series C Preferred Stock. (ii) Stock Splits, Dividends, Combinations and Consolidations. In -------------------------------------------------------- the event of a stock split, stock dividend or subdivision of or in respect of the outstanding shares of Series C Preferred Stock, the number of Warrant Shares issuable upon the exercise of the rights represented by this Warrant immediately prior to such stock split, stock dividend or subdivision shall be proportionately increased and the Exercise Price then in effect shall be proportionately decreased, effective at the close of business on the date of such stock split, stock dividend or subdivision, as the -4-

case may be. In the event of a reverse stock split, consolidation, combination or other similar event of or in respect of the outstanding shares of Series C Preferred Stock, the number of Warrant Shares issuable upon the exercise of the rights represented by this Warrant immediately prior to such reverse stock split, consolidation, combination or other similar event shall be proportionately decreased and the Exercise Price shall be proportionately increased, effective at the close of business on the date of such reverse stock split, consolidation, combination or other similar event, as the case may be. (iii) Mergers and Consolidations; Sales of Assets or Stock. In ---------------------------------------------------- the event of a merger or consolidation of the Company with or into another corporation, limited liability company, general or limited partnership, joint venture, association or other legal entity (other than (A) a merger or consolidation pursuant to which the Company is the surviving corporation and the shareholders of the Company immediately preceding such merger or consolidation continue to own at least fifty percent (50%) of the capital stock of the Company entitled to vote following the closing of such merger or consolidation and which does not result in any reclassification of the Warrant Shares issuable upon the exercise of the rights represented by this Warrant, or (B) the sale of all or substantially all of the assets or capital stock of the Company, the Company, or any successor corporation or other legal entity, as the case may be, shall execute a new Warrant, the terms of which provide that the holder of this Warrant shall have the right to exercise the rights represented by such new Warrant, and procure upon such exercise and payment of the same aggregate Exercise Price then in effect, in lieu of the shares of Series C Preferred Stock theretofore issuable upon exercise of the rights represented by this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such merger, consolidation or sale of assets or capital stock by a holder of an equivalent number of shares of Series C Preferred Stock. Such new Warrant shall provide for adjustments which are as equivalent as practicable to the adjustments provided for in this Section 2. The provisions of this Section 2(a)(iii) shall apply with equal force and effect to all successive mergers, consolidations and sales of assets and capital stock of the Series C Preferred Stock. (b) Adjustment Notices. Upon any adjustment of the Exercise Price, and ------------------ any increase or decrease in the number of Warrant Shares subject to this Warrant, in accordance with this Section 2, the Company, within sixty (60) days thereafter, shall give written notice thereof to the Holder at the address of such Holder as shown on the books of the Company, which notice shall state the Exercise price as adjusted and, if applicable, the increased or decreased number of Warrant Shares subject to this Warrant, setting forth in reasonable detail the method of calculation of each such adjustment. 3. TRANSFER OF WARRANT. ------------------- (a) This Warrant and the rights represented hereby are not transferable, except in accordance with the conditions set forth in Section 3. In order to effect any transfer of all or a portion of this Warrant or the Warrant Shares, the Holder hereof shall deliver to the Company a completed and duly executed Notice of Transfer, in the form attached as Exhibit D hereto. --------- -5-

(b) Additional Conditions to Transfer of Warrant. Unless there is a -------------------------------------------- registration statement declared or ordered effective by the commission under the Securities Act which includes this Warrant, the Warrant may not be transferred unless and until: (i) the Company shall have received an Investment Representation Statement, in the form attached as Exhibit E hereto, certifying that, among --------- other things, this Warrant is being acquired for investment and not with a view to any sale or distribution thereof, and (ii) the Company shall have received a written notice from the Holder which describes the manner and circumstances of the proposed transfer accompanied by a written opinion of Holder's legal counsel, in form and substance reasonably satisfactory to the Company, stating that such transfer is exempt from the registration and prospectus delivery requirements of the Securities Act and all applicable state securities laws. 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby --------------------------------------------- represents and warrants to the Holder as follows: (a) This Warrant has been duly authorized and validly executed and delivered by the Company and constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms. (b) The Warrant Shares have been duly and validly authorized and reserved for issuance by the Company upon the exercise of the rights represented by this Warrant and, when issued upon the exercise of such rights in accordance with the terms and conditions hereof, the Warrant Shares will be (A) duly authorized and validly issued, fully paid and nonassessable shares of Series C Preferred Stock, (B) free from all preemptive rights, rights of first refusal or first offer, taxes, liens, charges or other encumbrances with respect to the issuance thereof by the Company, and (C) free of any restrictions on the transfer thereof other than restrictions on transfer under applicable federal and state securities laws. At all times during the term hereof, the Company shall have authorized and reserved for issuance a sufficient number of shares of Series C Preferred Stock to provide for the exercise of the rights represented by this Warrant. (c) The due execution and delivery of this Warrant are not, and the issuance of the Warrant Shares upon the exercise of the rights represented by this Warrant in accordance with the terms hereof will not, conflict with the Articles of Incorporation or Bylaws of the Company, each as amended to the date of issuance hereof. 5. REPRESENTATION AND WARRANTIES OF THE HOLDER. The Holder hereby ------------------------------------------- represents and warrants to the Company as follows: (a) This Warrant is being acquired for such Holder's own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act. Upon the exercise of the rights represented by this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form reasonably -6-

satisfactory to the Company, that the Warrant Shares issuable upon the exercise of such rights are being acquired for investment and not with a view toward distribution or resale thereof. (b) The Holder understands that the Warrant and the Warrant Shares have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof, and that such Warrant and the Warrant Shares, as the case may be, must be held by the Holder indefinitely, and therefore, that the Holder must bear the economic risk of such investment, unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration requirements. The Holder further understands that the Warrant Shares have not been qualified under the California Securities Law of 1968 (the "California Law") by reason of their issuance in a transaction exempt from the qualification requirements of the California Law pursuant to Section 25102(f) thereof, which exemption depends upon, among other things, the bona fide nature of such Holder's investment intent expressed herein. (c) The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the Warrant Shares and of protecting its interests in connection therewith. (d) The Holder is able to bear the economic risk of the purchase of the Warrant Shares pursuant to the terms of this Warrant. 6. NO SHAREHOLDER RIGHTS. The Holder of this Warrant (and any transferee --------------------- hereof) shall not be entitled to vote on matters submitted for the approval of consent of the shareholders of the Company or to receive dividends declared on or in respect of shares of Series C Preferred Stock, or otherwise be deemed to be the holder of Series C Preferred Stock or any other capital stock or other securities of the Company which may at any time be issuable upon the exercise of the rights represented hereby for any purpose, nor shall anything contained herein be construed to confer upon the Holder (or any transferee hereof) any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted for the approval or consent of the shareholders, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, merger or consolidation, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Warrant Shares issuable upon the exercise of the rights represented hereby shall have become deliverable as provided herein. 7. INVESTOR RIGHTS. Subject to the requisite approval from the holders of --------------- Series B Preferred Stock and the Series C Preferred Stock, the Company agrees to grant the Holder those rights as set forth in the Amended and Restated Rights Agreement, dated December 31, 1997. 8. EXPIRATION OF WARRANT. This Warrant shall expire, and the rights --------------------- represented hereby may no longer be exercised on the close of business on the tenth anniversary of the date of issuance hereof. -7-

9. LOCK-UP AGREEMENT. The Holder hereby agrees that, upon request of the ----------------- Company or the managing underwriter of a public offering of any securities of the Company, such Holder shall not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of all or any portion of the Warrant Shares without the prior written consent of the Company or the managing underwriter, as the case may be, for such period of time (not to exceed one hundred eighty (180) days from the date upon which the registration statement relating to such public offering is declared or ordered effective by the Securities and Exchange Commission) as may be requested by the Company or the underwriters, as the case may be. 10. MISCELLANEOUS. ------------- (a) Governing Law. This Warrant is being delivered in the State of ------------- California, and shall be construed and enforced in accordance with and governed by the laws of such State. The parties expressly stipulate that any litigation under this Warrant shall be brought in the State courts of the County of Santa Clara, California, and in the United States District Court for the Northern District of California. The parties agree to submit to the jurisdiction and venue of such courts. (b) Notice Procedures. Any written notice by the Company required ----------------- hereunder shall be made by hand delivery or first class mail, postage prepaid, address to the Holder at the address set forth on the books of the Company. (c) Successors and Assigns. The terms of this Warrant shall be binding ---------------------- upon and shall inure to the benefit of any successors or assigns of the Company and of the Holder or Holders of this Warrant and the Warrant Shares issued or issuable upon the exercise of the rights represented by this Warrant. (d) Entire Agreement. This Warrant constitutes the full and entire ---------------- understanding and agreement between the parties with respect to the subject matter hereof and supersedes in their entirety any prior or contemporaneous agreements by and between the Company and the Holder with respect to such matters. (e) Further Assurances: No Impairment. The Company shall not, by --------------------------------- amendment of its Articles of Incorporation or through any other means, directly or indirectly, avoid or seek to avoid the observance or performance of any of the terms of this Warrant and shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. The Company shall at no time close its transfer books against the transfer of this Warrant or of any Warrant Shares issued or issuable upon the exercise of the rights represented by this Warrant in any manner which interferes with a timely exercise of such rights. The Company shall not, by any action, seek to avoid the observance or performance of any of the terms of this Warrant, but shall at all times in good faith seek to carry out all such terms and take all such actions as may be necessary or appropriate in order to protect the rights of the Holder under this Warrant against impairment. -8-

(f) Lost Warrant. Upon receipt of evidence reasonably satisfactory to ------------ the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company at the Holder's expense shall execute and deliver to the Holder, in lieu thereof, a new Warrant of like date and tenor. (g) Amendments. This Warrant and any provision hereof may be amended, ---------- waived or terminated (either generally or in a particular instance, retroactively or prospectively and for a specified period of time or indefinitely) only by a written instrument signed by the Company and the Holder, or, in the event of any partial transfer of the rights represented by this Warrant, the Holders of rights to purchase more than fifty percent (50%) of the Warrant Shares issuable upon exercise of the rights represented by this Warrant, and with the same consent the Company may enter into a supplementary agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Warrant or the Warrants, as the case may be, provided, however, that no such amendment, waiver, termination or supplemental agreement shall reduce the aforesaid percentage which is required for consent to any amendment, waiver, termination or supplemental agreement without the consent of all of the Holders of the rights represented by this Warrant. -9-

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. Issued this 31st day of December, 1998 PC-TEL, INC., a Delaware corporation By: /s/ Peter Chen ---------------------------- Name: Peter Chen -------------------------- Title: President & CEO ------------------------- By: ---------------------------- Name: -------------------------- Title: ------------------------- Acknowledged and Accepted: PENTECH FINANCIAL SERVICES, INC. A California corporation By: /s/ Benjamin E. Millerbis ------------------------------------ Name: Benjamin E. Millerbis --------------------------------- Title: President -------------------------------- Date: ---------------------------------- -10-

EXHIBIT A --------- NOTICE OF CASH EXERCISE To: PC-TEL, Inc. 70 Rio Robles San Jose, CA 95134 1. The undersigned hereby elects to purchase _______ shares of Series C Preferred Stock of PC-TEL, Inc., a Delaware corporation (the "Company"), pursuant to the terms of Warrant No. ____, issued on ________________, 199__, to and in the name of Pentech Financial Services, Inc., a copy of which is attached hereto (the "Warrant"), and tenders herewith full payment of the aggregate Exercise Price for such shares in accordance with the terms of the Warrant. 2. Please issue a certificate or certificates representing said shares of Series C Preferred Stock in such name or names as specified below: Pentech Financial Services, Inc. a California corporation 310 West Hamilton Avenue, Suite 202 Campbell, CA 95008 3. The undersigned hereby represents and warrants that the aforesaid shares of Series C Preferred Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in attached Warrant are true and correct as of the date hereof. In support thereof, the undersigned has executed an Investment Representation Statement, in the form attached as Exhibit C to the Warrant, concurrently herewith. Pentech Financial Services, Inc., a California corporation By: -------------------------------- Name: ------------------------------- Title: ------------------------------ Date: -------------------------------

EXHIBIT B --------- NOTICE OF NET-ISSUE EXERCISE To: PC-TEL, Inc. 70 Rio Robles San Jose, CA 95134 1. The undersigned hereby elects to purchase ____________ shares of Series C Preferred Stock of PC-TEL, Inc., a Delaware corporation (the "Company"), on a net-issue basis pursuant to the terms of Warrant No. _______________, issued on _______________, 199__, to ______________________ and in the name of Pentech Financial Services, Inc., a copy of which is attached hereto (the "Warrant"). 2. Net-Issue Information: (a) Number of Shares of Series C Preferred Stock to be Delivered: ______ (b) Number of Shares of Series C Preferred Stock Surrendered:___________ (c) Number of Shares Remaining Subject to Warrant: _____________________ 3. Please issue a certificate or certificates representing said shares of Series C Preferred Stock in such name or names as specified below: Pentech Financial Services, Inc. 310 West Hamilton Avenue, Suite 202 Campbell, CA 95008 4. The undersigned hereby represents and warrants that the aforesaid shares of Series C Preferred Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in attached Warrant are true and correct as of the date hereof. In support thereof, the undersigned has executed an Investment Representation Statement, in the form attached as Exhibit C to the Warrant, concurrently herewith. Pentech Financial Services, Inc., a California corporation By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Date: -------------------------------

Date:__________________ -2-

EXHIBIT C --------- INVESTMENT REPRESENTATION STATEMENT PURCHASER: Pentech Financial Services, Inc. SELLER: PC-TEL, Inc. COMPANY: PC-TEL, Inc. SECURITY: Series C Preferred Stock Issued Upon The Exercise Of Warrant No. _____________ Issued On _____________________, 199__. AMOUNT: _______________ SHARES DATE: __________________ The undersigned hereby represent and warrants to PC-TEL, Inc., a Delaware corporation (the "Company"), as follows: 1. I am aware of the business affairs, financial condition and results of operations of the Company and have acquired sufficient information about the Company to reach an informed and knowledgeable investment decision to acquire the Securities. I am purchasing the Securities for my own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). 2. I understand that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of my investment intent as expressed herein. I understand that, in the view of the Securities and Exchange Commission (the "Commission"), the statutory basis for such exemption may be unavailable if my representation was predicated solely upon a present intention to hold the Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. 3. I further understand that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. In addition, I understand that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. 4. I am familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of "restricted securities" acquired, directly or

indirectly, from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. 5. I further understand that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Pentech Financial Services, Inc. By: ------------------------------ Name: ---------------------------- Title: --------------------------- Date: ---------------------------- -2-

EXHIBIT D --------- NOTICE OF TRANSFER FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _________________________ the right represented by Warrant No. _______________, issued on _________________, 199__, to and in the name of ____________________________, to purchase ______________ shares of Series C Preferred Stock of PC-TEL, Inc., a Delaware corporation (the "Company"), a copy of which is attached hereto (the "Warrant"), and appoints ________________________________ as attorney-in-fact to transfer such right on the books of the Company with full power of substitution in the premises. Dated: _________________________ Pentech Financial Services, Inc., a California corporation By: ---------------------------- Name: -------------------------- Title: ------------------------- (Signature must conform in all respects to name of the Holder as set forth on the face of the Warrant) 310 West Hamilton Avenue, Suite 202 Campbell, CA 95008 Signed in the presence of: - ----------------------------------

EXHIBIT E --------- INVESTMENT REPRESENTATION STATEMENT PURCHASER: Pentech Financial Services, Inc., a California corporation ---------------------------------------------------------- TRANSFEROR: --------------------------- COMPANY: PC-TEL, Inc. SECURITY: WARRANT NO. ___________, ISSUED ON ______________, 199 . AMOUNT: ____________ SHARES DATE: __________________ The undersigned hereby represent and warrants to PC-TEL, Inc., a Delaware corporation (the "Company"), as follows: 1. I am aware of the business affairs, financial condition and results of operations of the Company and have acquired sufficient information about the Company to reach an informed and knowledgeable investment decision to acquire the Securities. I am purchasing the Securities for my own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). 2. I understand that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of my investment intent as expressed herein. I understand that, in the view of the Securities and Exchange Commission (the "Commission"), the statutory basis for such exemption may be unavailable if my representation was predicated solely upon a present intention to hold the Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. 3. I further understand that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. In addition, I understand that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. 4. I am familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. 5. I further understand that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other

registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Date: ___________________________ Pentech Financial Services, Inc., a California corporation By: ------------------------------ Name: ---------------------------- Title: --------------------------- Date: ---------------------------- -2-

EXHIBIT 4.3 WARRANT TO PURCHASE SHARES OF SERIES C PREFERRED STOCK OF PC-TEL, INC. A Delaware Corporation THIS WARRANT HAS BEEN, AND THE SHARES OF SERIES C PREFERRED STOCK WHICH MAY BE PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") WILL BE, ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT OR THE WARRANT SHARES (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS. Warrant No.: C-2 Issuance Date: December 31, 1998 THIS CERTIFIES THAT, for value received, PFF Bank and Trust, Inc., a California corporation (the "Holder") is entitled to subscribe for a purchase from PC-Tel, Inc., a Delaware Corporation (the "Company"), 10,000 fully paid and nonassessable shares (as adjusted pursuant to Section 2 hereof) (the "Warrant Shares") of Series C Preferred Stock of the Company ("Series C Preferred Stock") at the purchase price of $8.00 per share (as adjusted pursuant to Section 2 hereof) (the "Exercise Price"), upon the terms and subject to the conditions hereinafter set forth: 1. EXERCISE RIGHTS. --------------- (a) Cash Exercise. The purchase rights represented by this Warrant ------------- may be exercised by the Holder at any time and from time to time during the term hereof, in whole or in part, by delivery to the principal offices of the Company of this Warrant and a completed and duly executed Notice of Cash Exercise, in the form attached as Exhibit A hereto, accompanied by payment to the Company of --------- an amount equal to the Exercise Price then in effect multiplied by the number of Warrant Shares to be purchased by the Holder in connection with such cash exercise of this Warrant, which amount may be paid, at the election of the Holder, by wire transfer or delivery of a certified check payable to the order of the Company. (b) Net Issue Exercise. ------------------ (i) In lieu of exercising the purchase rights represented by this Warrant on a cash basis pursuant to Section 1(a) hereof, the Holder may elect to exercise such rights represented

by this Warrant at any time and from time to time during the term hereof, in whole or in part, on a net-issue basis by electing to receive the number of Warrant Shares which are equal in value to the value of this Warrant (or any portion thereof to be canceled in connection with such net-issue exercise) at the time of any such net-issue exercise, by delivery to the principal offices of the Company of this Warrant and a completed and duly executed Notice of Net- Issue Exercise, in the form attached as Exhibit B hereto, properly marked to --------- indicate (A) the number of Warrant Shares to be delivered to the Holder in connection with such net-issue exercise, (B) the number of Warrant Shares with respect to which the Warrant is being surrendered in payment of the aggregate Exercise Price for the Warrant Shares to be delivered to the Holder in connection with such net-issue exercise, and (C) the number of Warrant Shares which remain subject to the Warrant after such net-issue exercise, if any (each as determined in accordance with Section 1(b)(ii) hereof). (ii) In the event that the Holder shall elect to exercise the rights represented by this Warrant in whole or in part on a net-issue basis pursuant to this Section 1(b) the Company shall issue to the Holder the number of Warrant Shares determined in accordance with the following formula: X = Y (A-B) ------- A X = the number of Warrant Shares to be issued to the Holder in connection with such net-issue exercise. Y = the number of Warrant Shares subject to this Warrant. A = the Fair Market Value of one share of Series C Preferred Stock. B = the Exercise Price in effect as of the date of such net-issue exercise (as adjusted pursuant to Section 2 hereof) (c) Fair Market Value. For purposes of this Section 1, the "Fair ----------------- Market Value" of the Series C Preferred Stock shall have the following meanings: (i) If the Series C Preferred Stock is not listed for trading on a national securities exchange or admitted for trading on a national market system, then the Fair Market Value of Series C Preferred Stock shall be deemed to be the fair market value of Series C Preferred Stock as determined in good faith from time to time by the Board of Directors of the Company (the "Board of Directors"), and receipt and acknowledgement of this Warrant by the Holder shall be deemed to be an acknowledgement and acceptance of any such determination of the fair market value of Series C Preferred Stock by the Board of Directors as the final and binding determination of such fair market value of purposes of this Warrant. (ii) If the Series C Preferred Stock is listed for trading on a national securities exchange or admitted for trading on a national market system, then the Fair Market Value of Series C Preferred Stock shall be deemed to be the closing price quoted on the principal securities -2-

exchange on which the Series C Preferred Stock is listed for trading, or if not so listed, the average of the closing bid and asked prices for Series C Preferred Stock quoted on the national market system on which Series C Preferred Stock is admitted for trading, each as published in the Western Edition of The Wall Street Journal, in each case for the ten (10) trading days prior to the date of determination of Fair Market Value for Series C Preferred Stock in accordance herewith. (d) Additional Conditions to Exercise of Warrant. Unless there is a -------------------------------------------- registration statement declared or ordered effective by the Securities and Exchange Commission (the "Commission") under the Securities Act which includes the Warrant Shares to be issued upon the exercise of the rights represented by this Warrant, such rights may not be exercised unless and until: (i) the Company shall have received an Investment Representation Statement in the form attached as Exhibit C hereto, certifying --------- that, among other things, the Warrant Shares to be issued upon the exercise of the rights represented by this Warrant are being acquired for investment and not with a view to any sale or distribution thereof; (ii) each certificate evidencing the Warrant Shares to be issued upon the exercise of the rights represented by this Warrant shall be stamped or imprinted with a legend substantially in the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE SECURITIES ACT. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT DECLARED OR ORDERED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT COVERING SUCH SECURITIES, OR (ii) IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF SUCH SECURITIES THAT SUCH REGISTRATION OR RULE 144 COMPLIANCE IS NOT REQUIRED UNDER THE SECURITIES ACT AS TO SUCH SALE, OFFER OF SALE, PLEDGE, HYPOTHECATION OR OTHER DISTRIBUTION. THIS CERTIFICATE MUST BE SURRENDERED TO THE ISSUER HEREOF OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE TRANSFER OF ANY INTEREST IN THE SECURITIES REPRESENTED HEREBY. (e) Fractional Shares. Upon the exercise of the rights represented by ----------------- this Warrant, the Company shall not be obligated to issue fractional shares of Series C Preferred Stock, and in lieu thereof, the Company shall pay to the Holder an amount in cash equal to the Fair Market -3-

Value per share of Series C Preferred Stock immediately prior to such exercise multiplied by such fraction (rounded to the nearest cent). (f) Record Ownership of Warrant Shares. The Warrant Shares shall be ---------------------------------- deemed to have been issued, and the person in whose name any certificate representing Warrant Shares shall be issuable upon the exercise of the rights represented by this Warrant (as indicated in the appropriate Notice of Exercise) shall be deemed to have become the holder of record of (and shall be treated for all purposes as the record holder of) the Warrant Shares represented thereby, immediately prior to the close of business on the date or dates upon which the rights represented by this Warrant are exercised in accordance with the terms hereof. (g) Stock Certificates. In the event of any exercise of the rights ------------------ represented by this Warrant, certificates for the Warrant Shares so purchased pursuant hereto shall be delivered to the Holder within a reasonable time and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the Warrant Shares with respect to which this Warrant shall not have been exercised shall also be issued to the Holder within such time. (h) Issue Taxes. The issuance of certificates for shares of Series C ----------- Preferred Stock upon the exercise of the rights represented by this Warrant shall be made without charge to the Holder for any issuance tax in respect thereof, provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Holder of the Warrant. 2. ADJUSTMENT RIGHTS. ----------------- (a) Right to Adjustment. The number of Warrant Shares purchasable ------------------- upon the exercise of the rights represented by this Warrant, and the Exercise Price therefor, shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (i) Reclassifications. In the event of a reclassification of ----------------- the Series C Preferred Stock other than by stock split, subdivision, consolidation or combination thereof, the Company shall execute a new Warrant, the terms of which provide that the holder of this Warrant shall have the right to exercise the rights represented by such new Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification by a holder of an equivalent number of shares of Series C Preferred Stock. Such new Warrant shall provide for adjustments which are as equivalent as practicable to the adjustments provided for in this Section 2. The provisions of this Section 2(a)(i) shall apply with equal force and effect to all successive reclassifications of the Series C Preferred Stock. (ii) Stock Splits, Dividends, Combinations and Consolidations. -------------------------------------------------------- In the event of a stock split, stock dividend or subdivision of or in respect of the outstanding shares of Series C Preferred Stock, the number of Warrant Shares issuable upon the exercise of the rights represented by this Warrant immediately prior to such stock split, stock dividend or subdivision shall be proportionately increased and the Exercise Price then in effect shall be proportionately decreased, effective at the close of business on the date of such stock split, stock dividend or subdivision, as the -4-

case may be. In the event of a reverse stock split, consolidation, combination or other similar event of or in respect of the outstanding shares of Series C Preferred Stock, the number of Warrant Shares issuable upon the exercise of the rights represented by this Warrant immediately prior to such reverse stock split, consolidation, combination or other similar event shall be proportionately decreased and the Exercise Price shall be proportionately increased, effective at the close of business on the date of such reverse stock split, consolidation, combination or other similar event, as the case may be. (iii) Mergers and Consolidations; Sales of Assets or Stock. In ---------------------------------------------------- the event of a merger or consolidation of the Company with or into another corporation, limited liability company, general or limited partnership, joint venture, association or other legal entity (other than (A) a merger or consolidation pursuant to which the Company is the surviving corporation and the shareholders of the Company immediately preceding such merger or consolidation continue to own at least fifty percent (50%) of the capital stock of the Company entitled to vote following the closing of such merger or consolidation and which does not result in any reclassification of the Warrant Shares issuable upon the exercise of the rights represented by this Warrant, or (B) the sale of all or substantially all of the assets or capital stock of the Company, the Company, or any successor corporation or other legal entity, as the case may be, shall execute a new Warrant, the terms of which provide that the holder of this Warrant shall have the right to exercise the rights represented by such new Warrant, and procure upon such exercise and payment of the same aggregate Exercise Price then in effect, in lieu of the shares of Series C Preferred Stock theretofore issuable upon exercise of the rights represented by this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such merger, consolidation or sale of assets or capital stock by a holder of an equivalent number of shares of Series C Preferred Stock. Such new Warrant shall provide for adjustments which are as equivalent as practicable to the adjustments provided for in this Section 2. The provisions of this Section 2(a)(iii) shall apply with equal force and effect to all successive mergers, consolidations and sales of assets and capital stock of the Series C Preferred Stock. (b) Adjustment Notices. Upon any adjustment of the Exercise Price, ------------------ and any increase or decrease in the number of Warrant Shares subject to this Warrant, in accordance with this Section 2, the Company, within sixty (60) days thereafter, shall give written notice thereof to the Holder at the address of such Holder as shown on the books of the Company, which notice shall state the Exercise price as adjusted and, if applicable, the increased or decreased number of Warrant Shares subject to this Warrant, setting forth in reasonable detail the method of calculation of each such adjustment. 3. TRANSFER OF WARRANT. ------------------- (a) This Warrant and the rights represented hereby are not transferable, except accordance with the conditions set forth in Section 3. In order to effect any transfer of all or a portion of this Warrant or the Warrant Shares, the Holder hereof shall deliver to the Company a completed and duly executed Notice of Transfer, in the form attached as Exhibit D hereto. --------- -5-

(b) Additional Conditions to Transfer of Warrant. Unless there is a -------------------------------------------- registration statement declared or ordered effective by the commission under the Securities Act which includes this Warrant, the Warrant may not be transferred unless and until: (i) the Company shall have received an Investment Representation Statement, in the form attached as Exhibit E hereto, certifying --------- that, among other things, this Warrant is being acquired for investment and not with a view to any sale or distribution thereof, and (ii) the Company shall have received a written notice from the Holder which describes the manner and circumstances of the proposed transfer accompanied by a written opinion of Holder's legal counsel, in form and substance reasonably satisfactory to the Company, stating that such transfer is exempt from the registration and prospectus delivery requirements of the Securities Act and all applicable state securities laws. 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby --------------------------------------------- represents and warrants to the Holder as follows: (a) This Warrant has been duly authorized and validly executed and delivered by the Company and constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms. (b) The Warrant Shares have been duly and validly authorized and reserved for issuance by the Company upon the exercise of the rights represented by this Warrant and, when issued upon the exercise of such rights in accordance with the terms and conditions hereof, the Warrant Shares will be (A) duly authorized and validly issued, fully paid and nonassessable shares of Series C Preferred Stock, (B) free from all preemptive rights, rights of first refusal or first offer, taxes, liens, charges or other encumbrances with respect to the issuance thereof by the Company, and (C) free of any restrictions on the transfer thereof other than restrictions on transfer under applicable federal and state securities laws. At all times during the term hereof, the Company shall have authorized and reserved for issuance a sufficient number of shares of Series C Preferred Stock to provide for the exercise of the rights represented by this Warrant. (c) The due execution and delivery of this Warrant are not, and the issuance of the Warrant Shares upon the exercise of the rights represented by this Warrant in accordance with the terms hereof will not, conflict with the Articles of Incorporation or Bylaws of the Company, each as amended to the date of issuance hereof. 5. REPRESENTATION AND WARRANTIES OF THE HOLDER. The Holder hereby ------------------------------------------- represents and warrants to the Company as follows: (a) This Warrant is being acquired for such Holder's own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act. Upon the exercise of the rights represented by this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form reasonably -6-

satisfactory to the Company, that the Warrant Shares issuable upon the exercise of such rights are being acquired for investment and not with a view toward distribution or resale thereof. (b) The Holder understands that the Warrant and the Warrant Shares have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof, and that such Warrant and the Warrant Shares, as the case may be, must be held by the Holder indefinitely, and therefore, that the Holder must bear the economic risk of such investment, unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration requirements. The Holder further understands that the Warrant Shares have not been qualified under the California Securities Law of 1968 (the "California Law") by reason of their issuance in a transaction exempt from the qualification requirements of the California Law pursuant to Section 25102(f) thereof, which exemption depends upon, among other things, the bona fide nature of such Holder's investment intent expressed herein. (c) The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the Warrant Shares and of protecting its interests in connection therewith. (d) The Holder is able to bear the economic risk of the purchase of the Warrant Shares pursuant to the terms of this Warrant. 6. NO SHAREHOLDER RIGHTS. The Holder of this Warrant (and any transferee --------------------- hereof) shall not be entitled to vote on matters submitted for the approval of consent of the shareholders of the Company or to receive dividends declared on or in respect of shares of Series C Preferred Stock, or otherwise be deemed to be the holder of Series C Preferred Stock or any other capital stock or other securities of the Company which may at any time be issuable upon the exercise of the rights represented hereby for any purpose, nor shall anything contained herein be construed to confer upon the Holder (or any transferee hereof) any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted for the approval or consent of the shareholders, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, merger or consolidation, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Warrant Shares issuable upon the exercise of the rights represented hereby shall have become deliverable as provided herein. 7. INVESTOR RIGHTS. Subject to the requisite approval from the holders of --------------- Series B Preferred Stock and the Series C Preferred Stock, the Company agrees to grant the Holder those rights as set forth in the Amended and Restated Rights Agreement, dated December 31, 1997. 8. EXPIRATION OF WARRANT. This Warrant shall expire, and the rights --------------------- represented hereby may no longer be exercised on the close of business on the tenth anniversary of the date of issuance hereof. -7-

9. LOCK-UP AGREEMENT. The Holder hereby agrees that, upon request of the ----------------- Company or the managing underwriter of a public offering of any securities of the Company, such Holder shall not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of all or any portion of the Warrant Shares without the prior written consent of the Company or the managing underwriter, as the case may be, for such period of time (not to exceed one hundred eighty (180) days from the date upon which the registration statement relating to such public offering is declared or ordered effective by the Securities and Exchange Commission) as may be requested by the Company or the underwriters, as the case may be. 10. MISCELLANEOUS. ------------- (a) Governing Law. This Warrant is being delivered in the State of ------------- California, and shall be construed and enforced in accordance with and governed by the laws of such State. The parties expressly stipulate that any litigation under this Warrant shall be brought in the State courts of the County of Santa Clara, California, and in the United States District Court for the Northern District of California. The parties agree to submit to the jurisdiction and venue of such courts. (b) Notice Procedures. Any written notice by the Company required ----------------- hereunder shall be made by hand delivery or first class mail, postage prepaid, address to the Holder at the address set forth on the books of the Company. (c) Successors and Assigns. The terms of this Warrant shall be ---------------------- binding upon and shall inure to the benefit of any successors or assigns of the Company and of the Holder or Holders of this Warrant and the Warrant Shares issued or issuable upon the exercise of the rights represented by this Warrant. (d) Entire Agreement. This Warrant constitutes the full and entire ---------------- understanding and agreement between the parties with respect to the subject matter hereof and supersedes in their entirety any prior or contemporaneous agreements by and between the Company and the Holder with respect to such matters. (e) Further Assurances: No Impairment. The Company shall not, by --------------------------------- amendment of its Articles of Incorporation or through any other means, directly or indirectly, avoid or seek to avoid the observance or performance of any of the terms of this Warrant and shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. The Company shall at no time close its transfer books against the transfer of this Warrant or of any Warrant Shares issued or issuable upon the exercise of the rights represented by this Warrant in any manner which interferes with a timely exercise of such rights. The Company shall not, by any action, seek to avoid the observance or performance of any of the terms of this Warrant, but shall at all times in good faith seek to carry out all such terms and take all such actions as may be necessary or appropriate in order to protect the rights of the Holder under this Warrant against impairment. -8-

(f) Lost Warrant. Upon receipt of evidence reasonably satisfactory to ------------ the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company at the Holder's expense shall execute and deliver to the Holder, in lieu thereof, a new Warrant of like date and tenor. (g) Amendments. This Warrant and any provision hereof may be amended, ---------- waived or terminated (either generally or in a particular instance, retroactively or prospectively and for a specified period of time or indefinitely) only by a written instrument signed by the Company and the Holder, or, in the event of any partial transfer of the rights represented by this Warrant, the Holders of rights to purchase more than fifty percent (50%) of the Warrant Shares issuable upon exercise of the rights represented by this Warrant, and with the same consent the Company may enter into a supplementary agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Warrant or the Warrants, as the case may be, provided, however, that no such amendment, waiver, termination or supplemental agreement shall reduce the aforesaid percentage which is required for consent to any amendment, waiver, termination or supplemental agreement without the consent of all of the Holders of the rights represented by this Warrant. -9-

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. Issued this 31st day of December, 1998 PC-TEL, INC., a Delaware corporation By: /s/ Peter Chen -------------------------------------- Name: Peter Chen ------------------------------------ Title: President & CEO ----------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Acknowledged and Accepted: PFF BANK AND TRUST, INC. A California corporation By: /s/ Kenneth O. Wentzel ------------------------------- Name: Kenneth O. Wentzel ----------------------------- Title: Vice President ---------------------------- Date: March 26, 1999 ----------------------------- -10-

EXHIBIT A --------- NOTICE OF CASH EXERCISE To: PC-TEL, Inc. 70 Rio Robles San Jose, CA 95134 1. The undersigned hereby elects to purchase _______ shares of Series C Preferred Stock of PC-TEL, Inc., a Delaware corporation (the "Company"), pursuant to the terms of Warrant No. ____, issued on ________________, 199__, to and in the name of PFF Bank and Trust, Inc., a copy of which is attached hereto (the "Warrant"), and tenders herewith full payment of the aggregate Exercise Price for such shares in accordance with the terms of the Warrant. 2. Please issue a certificate or certificates representing said shares of Series C Preferred Stock in such name or names as specified below: PFF Bank and Trust, Inc. a California corporation The undersigned hereby represents and warrants that the aforesaid shares of Series C Preferred Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in attached Warrant are true and correct as of the date hereof. In support thereof, the undersigned has executed an Investment Representation Statement, in the form attached as Exhibit C to the Warrant, concurrently herewith. PFF Bank and Trust, Inc., a California corporation By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- Date: --------------------------------------

EXHIBIT B --------- NOTICE OF NET-ISSUE EXERCISE To: PC-TEL, Inc. 70 Rio Robles San Jose, CA 95134 1. The undersigned hereby elects to purchase ____________ shares of Series C Preferred Stock of PC-TEL, Inc., a Delaware corporation (the "Company"), on a net-issue basis pursuant to the terms of Warrant No. _______________, issued on _______________, 199__, to ______________________ and in the name of PFF Bank and Trust, Inc., a copy of which is attached hereto (the "Warrant"). 2. Net-Issue Information: (a) Number of Shares of Series C Preferred Stock to be Delivered: __________________ (b) Number of Shares of Series C Preferred Stock Surrendered: ____________________ (c) Number of Shares Remaining Subject to Warrant: ____________________________ 3. Please issue a certificate or certificates representing said shares of Series C Preferred Stock in such name or names as specified below: PFF Bank and Trust, Inc. 4. The undersigned hereby represents and warrants that the aforesaid shares of Series C Preferred Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in attached Warrant are true and correct as of the date hereof. In support thereof, the undersigned has executed an Investment Representation Statement, in the form attached as Exhibit C to the Warrant, concurrently herewith. PFF Bank and Trust, Inc., a California corporation By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- Date: --------------------------------------

EXHIBIT C --------- INVESTMENT REPRESENTATION STATEMENT PURCHASER: PFF Bank and Trust, Inc. SELLER: PC-TEL, Inc. COMPANY: PC-TEL, Inc. SECURITY: Series C Preferred Stock Issued Upon The Exercise Of Warrant No. _____________ Issued On _____________________, 199__. AMOUNT: _______________ SHARES DATE: __________________ The undersigned hereby represent and warrants to PC-TEL, Inc., a Delaware corporation (the "Company"), as follows: 1. I am aware of the business affairs, financial condition and results of operations of the Company and have acquired sufficient information about the Company to reach an informed and knowledgeable investment decision to acquire the Securities. I am purchasing the Securities for my own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). 2. I understand that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of my investment intent as expressed herein. I understand that, in the view of the Securities and Exchange Commission (the "Commission"), the statutory basis for such exemption may be unavailable if my representation was predicated solely upon a present intention to hold the Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. 3. I further understand that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. In addition, I understand that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. 4. I am familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of "restricted securities" acquired, directly or

indirectly, from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. 5. I further understand that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. PFF Bank and Trust, Inc. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Date: ------------------------------------- -2-

EXHIBIT D --------- NOTICE OF TRANSFER FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _________________________ the right represented by Warrant No. _______________, issued on _________________, 199__, to and in the name of ____________________________, to purchase ______________ shares of Series C Preferred Stock of PC-TEL, Inc., a Delaware corporation (the "Company"), a copy of which is attached hereto (the "Warrant"), and appoints ________________________________ as attorney-in-fact to transfer such right on the books of the Company with full power of substitution in the premises. Dated: _________________________ PFF Bank and Trust, Inc., a California corporation By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ (Signature must conform in all respects to name of the Holder as set forth on the face of the Warrant) Address: Signed in the presence of: - -----------------------------------

EXHIBIT E --------- INVESTMENT REPRESENTATION STATEMENT PURCHASER: PFF Bank and Trust, Inc. TRANSFEROR: --------------------------------- COMPANY: PC-TEL, Inc. SECURITY: WARRANT NO. ___________, ISSUED ON ______________, 199 . AMOUNT: _____________________SHARES DATE: --------------------------------- The undersigned hereby represent and warrants to PC-TEL, Inc., a Delaware corporation (the "Company"), as follows: 1. I am aware of the business affairs, financial condition and results of operations of the Company and have acquired sufficient information about the Company to reach an informed and knowledgeable investment decision to acquire the Securities. I am purchasing the Securities for my own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). 2. I understand that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of my investment intent as expressed herein. I understand that, in the view of the Securities and Exchange Commission (the "Commission"), the statutory basis for such exemption may be unavailable if my representation was predicated solely upon a present intention to hold the Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. 3. I further understand that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. In addition, I understand that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. 4. I am familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. 5. I further understand that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other

registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Date: PFF Bank and Trust, Inc., ------------------------------ a California corporation By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Date: ---------------------------------- -2-

EXHIBIT 4.4 THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. February 18, 1998 PC-Tel, Inc. a California corporation Common Stock Purchase Warrant THIS CERTIFIES THAT, for value received, Edward Gibstein (hereinafter, the "Holder"), is entitled, upon the terms and subject to the conditions hereinafter set forth, to purchase from PC-TEL, INC., a California corporation (the "Company"), that number of fully paid and nonassessable shares of the Company's Common Stock at the purchase price per share as determined in Section 1 below. Terms and Conditions of Warrant 1. Number of Shares; Exercise Price; Term. -------------------------------------- (a) Subject to the terms and conditions set forth herein, the Holder is entitled to purchase from the Company, at any time after the date hereof and on or before the date of termination of this Warrant provided for in Section 1(b) below, up to 750 fully paid and non-assessable shares of the Company's Common Stock (the "Shares") at an exercise price per share of $8.00 (the "Exercise Price"). (b) This Warrant (and the right to purchase securities upon exercise hereof) shall expire and cease to be exercisable if not exercised prior to the earliest to occur of (i) the acquisition of the Company by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation or sale of all or substantially all of the assets of the Company) in which, immediately after completion of such transaction, the shareholders of the Company prior to such transaction or series of related transactions own less than fifty percent (50%) of the voting power of the surviving entity after such transaction or series of transactions, and (ii) 5:00 p.m. (Pacific Time) on February 4, 2001 (the "Expiration Date"). The Company shall provide the Holder not less than 10 days' prior written notice of the completion of any transaction contemplated in (i) above. 2. Exercise of Warrant. ------------------- (a) This Warrant may be exercised by the Holder as to the whole or any lesser number of the Shares covered hereby, as set forth in Section 1 above, upon surrender of this Warrant to the Company at its principal executive offices together with the Notice of Exercise and Investment Representation Statement annexed hereto as Exhibits A and B, respectively, duly completed and executed by ---------- - the Holder, and payment to the Company in cash of the aggregate Exercise Price for the Shares to be purchased. Certificates for the Shares so purchased shall be delivered to the Holder within

a reasonable time after exercise of the stock purchase rights represented by this Warrant. The exercise of this Warrant shall be deemed to have been effected on the day on which the Holder surrenders this Warrant to the Company and satisfies all of the requirements of this Section 2. Upon such exercise, the Holder will be deemed a shareholder of record of those Shares for which the warrant has been exercised with all rights of a shareholder (including, without limitation, all voting rights with respect to such Shares and all rights to receive any dividends with respect to such Shares). If this Warrant is to be exercised in respect of less than all of the Shares covered hereby, the Holder shall be entitled to receive a new warrant covering the number of Shares in respect of which this Warrant shall not have been exercised and for which it remains subject to exercise. Such new warrant shall be in all other respects identical to this Warrant. (b) Notwithstanding the payment provisions set forth in Section 2(a) above, the Holder may elect to receive Shares equal to the value of this Warrant (or of any portion thereof remaining unexercised) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder that number of Shares computed using the following formula: X = Y*(A-B) ------- A Where: X = the number of Shares to be issued to the Holder; Y = the number of Shares purchasable under this Warrant (at the date of such calculation); A = the Fair Market Value of one Share; and B = the Exercise Price (at the date of such calculation). (c) For purposes of section 3(b) above, the Fair Market Value of one Share shall mean (i) if the Company's Common Stock is listed on any established stock exchange or national market system, including, without limitation, the National Market of The Nasdaq Stock Market, the closing sales price of one share of the Company's Common Stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in the Company's Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board of Directors of the Company may deem reliable; (ii) if the Company's Common Stock is quoted on The Nasdaq Stock Market (but not on the National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, the mean between the high and low asked prices for the Company's Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board of Directors of the Company may deem reliable; (iii) if exercised in connection with respect to a merger or consolidation of the Company or the sale of all or substantially all of the assets of the Company, the amount of cash or the value of securities actually received by the Company or its shareholders in such transaction for each share of the Company's Common Stock; or (iv) as otherwise determined by the Board of Directors of the Company, acting in good faith. 3. Covenants of the Company. The Company covenants and agrees that all ------------------------ Common Stock which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and -2-

payment therefor in accordance herewith, will be duly authorized, validly issued, fully paid, and nonassessable shares of Common Stock of the Company. The Company further covenants and agrees that, during the period within which the stock purchase rights represented by this Warrant may be exercised, the Company will at all times have duly authorized and duly reserved for issuance upon the exercise of the purchase rights evidenced by this Warrant a number of shares of Common Stock sufficient for such issuance. 4. Transfer, Exchange, Assignment, or Loss of Warrant. -------------------------------------------------- (a) This Warrant may not be assigned or transferred except as provided in this Section 4 and in accordance with and subject to the provisions of the Securities Act and the Rules and Regulations promulgated thereunder. Any purported transfer or assignment made other than in accordance with this Section 4 shall be null and void and of no force or effect. (b) Prior to any transfer of this Warrant, the Holder shall notify the Company of its intention to effect such transfer, indicating the circumstances of the proposed transfer and, upon request, furnish the Company with an opinion of its counsel, in form and substance satisfactory to counsel for the Company, to the effect that the proposed transfer may be made without registration under the Securities Act or qualification under any applicable state securities laws. The Company will promptly notify the Holder if the opinion of counsel furnished to the Company is satisfactory to counsel for the Company. Unless the Company notifies the Holder within ten (10) days after its receipt of such opinion that such opinion is not satisfactory to counsel for the Company, the Holder may proceed to effect the transfer. (c) Unless a registration statement under the Securities Act is effective with respect to the Shares or any other security issued upon exercise of this Warrant, the certificate representing such Shares or other securities shall bear the following legend, in addition to any legend imposed by applicable state securities laws: THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. (d) Any assignment permitted hereunder shall be made by surrender of this Warrant to the Company at its principal office with the Assignment Form attached hereto as Exhibit C duly executed. In such event, the Company shall, --------- without charge for any issuance or transfer tax or other cost incurred by the Company with respect to such transfer, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment, and this Warrant shall be promptly cancelled. This Warrant may be divided or combined with other Warrants which carry the same rights upon -3-

presentation thereof at the principal office of the Company, together with a written notice signed by the Holders thereof, specifying the name and denominations in which such new Warrants are to be issued. (e) Upon receipt by the Company of satisfactory evidence of loss, theft, destruction, or mutilation of this Warrant and of indemnity satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, or destroyed Warrant shall thereupon become void. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not the Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. 5. No Fractional Shares or Scrip. No fractional shares or scrip ----------------------------- representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which such holder would otherwise be entitled, such holder shall be entitled, at its option, to receive either (i) a cash payment equal to the excess of the Fair Market Value for such fractional share above the Exercise Price for such fractional share (as mutually determined by the Company and the Holder) or (ii) a whole share if the Holder tenders the Exercise Price for one whole share. 6. No Rights as Shareholders. This Warrant does not entitle the holder ------------------------- hereof to any voting rights, dividend rights, or other rights as a shareholder of the Company prior to the exercise hereof. 7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for --------------------------------- the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday or a Sunday or a legal holiday. 8. Adjustments. The Exercise Price per Share and the number of Shares ----------- purchasable hereunder shall be subject to adjustment from time to time as follows: (a) Merger. If at any time there shall be a merger or consolidation ------ of the Company with or into another corporation when the Company is not the surviving corporation, then, as a part of such merger or consolidation, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the aggregate Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such merger or consolidation, to which a holder of the stock deliverable upon exercise of this Warrant would have been entitled in such merger or consolidation if this Warrant had been exercised immediately before such merger or consolidation. In any such case, appropriate adjustment shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the merger or consolidation. (b) Reclassification, etc. If the Company shall, at any time, by --------------------- subdivision, combination, or reclassification of securities or otherwise, change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, the Exercise Price shall be adjusted such that this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such -4-

change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change. (c) Split, Subdivision or Combination of Shares. If the Company at ------------------------------------------- any time while this Warrant remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, the Exercise Price shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination. 9. Notice of Adjustments; Notices. Whenever the Exercise Price or number ------------------------------ of Shares issuable upon exercise hereof shall be adjusted pursuant to Section 8 hereof, the Company shall issue a certificate signed by its Chief Executive Officer or Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Warrant. 10. Miscellaneous. ------------- (a) Successors and Assigns. This Warrant shall be binding upon any ---------------------- successors or assigns of the Company. (b) Governing Law. This Warrant shall be governed by and construed in ------------- accordance with the laws of the State of California as applied to agreements between California residents entered and to be performed entirely within California. (c) Attorneys' Fees. In any litigation, arbitration, or court --------------- proceeding between the Company and the holder relating hereto, the prevailing party shall be entitled to reasonable attorneys' fees and expenses incurred in enforcing this Warrant. (d) Amendments. This Warrant may be amended and the observance of any ---------- term of this Warrant may be waived only with the written consent of the Company and the Holder, or in the event that this Warrant shall have been transferred in part, with the written consent of the Company and the holders of warrants representing a majority-in-interest of the Shares originally issuable hereunder. (e) Notice. Any notice required or permitted hereunder shall be ------ deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by certified mail, postage prepaid and addressed to the party to be notified at the address indicated below for such party, or at such other address as such other party may designate by ten-day advance written notice. [Remainder of Page Intentionally Left Blank] -5-

IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be executed by its officer thereunto duly authorized as of the date first above written. PC-TEL, INC. By: ----------------------------------------------- Name: --------------------------------------------- Title: -------------------------------------------- Acknowledged and Agreed: WARRANT HOLDER: - -------------------------------------------- Signature - -------------------------------------------- Print Name - -------------------------------------------- Street Address - -------------------------------------------- City State Zip Code [Warrant Signature Page] -6-

EXHIBIT A NOTICE OF EXERCISE

NOTICE OF EXERCISE STOCK PURCHASE WARRANT To: PC-TEL, INC. 1. The undersigned hereby elects to purchase _______ shares of ___________ ("Stock") of PC-Tel, Inc. (the "Company") pursuant to the terms of the attached Warrant, and tenders herewith payment of the aggregate exercise price therefor and any transfer taxes payable pursuant to the terms of the Warrant, together with an Investment Representation Statement in form and substance satisfactory to legal counsel to the Company. 2. The shares of Stock to be received by the undersigned upon exercise of the Warrant are being acquired for its own account, not as a nominee or agent, and not with a view to resale or distribution of any part thereof, and the undersigned has no present intention of selling, granting any participation in, or otherwise distributing the same. The undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to the Stock. The undersigned believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Stock. 3. The undersigned understands that the shares of Stock are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in transactions not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the "Act"), only in certain limited circumstances. In this connection, the undersigned represents that it is familiar with Rule 144 promulgated under the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 4. The undersigned covenants and agrees, in connection with any registration of the Company's initial public offering of Common Stock, upon request of the Company or the underwriters managing such offering, not to sell, make any short sale of, loan, grant any option for the purchase of or otherwise dispose of any securities of the Company for such period of time (not to exceed 180 days) from the effective date of the Company's registration statement filed with and declared effective by the Securities and Exchange Commission as the Company or the managing underwriters shall determine. The undersigned further covenants and agrees to enter into a customary form of "lock-up" agreement upon request of the Company or the underwriters managing such offering to the extent not inconsistent with the preceding sentence. 5. The undersigned understands the instruments evidencing the Stock may bear the following legend, in addition to any legend required by applicable state securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. 6. Please issue a certificate or certificates representing said shares of Stock in the name of the undersigned: Name: ---------------------------------------------- Address: ------------------------------------------- ------------------------------------------- ------------------------------------------- 7. Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned: Name: ---------------------------------------------- Address: ------------------------------------------- ------------------------------------------- ------------------------------------------- IN WITNESS WHEREOF, the Warrantholder has executed this Notice of Exercise effective this ___ day of ________, _____. WARRANTHOLDER ---------------------------------------------- By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- [NOTICE OF EXERCISE OF STOCK PURCHASE WARRANT] -2-

EXHIBIT B INVESTMENT REPRESENTATION STATEMENT

INVESTMENT REPRESENTATION STATEMENT PURCHASER : --------------------------- COMPANY : PC-TEL, INC. SECURITIES : --------------------------- DATE : --------------------------- In connection with the purchase of the above-listed Securities, the undersigned, the Purchaser represents to the Company the following: (a) The undersigned is sufficiently aware of the Company's business affairs and financial condition to reach an informed and knowledgeable decision to acquire the Securities. The undersigned is purchasing these Securities for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). (b) The undersigned understands that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of its investment intent as expressed herein. In this connection, the undersigned understands that, in the view of the Securities and Exchange Commission (the "SEC"), the statutory basis for such exemption may be unavailable if its representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) The undersigned further understands that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available (such as Rule 144 under the Securities Act). Moreover, the undersigned understands that the Company is under no obligation to register the Securities. In addition, the undersigned understands that the certificate evidencing the Securities may be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. (d) The undersigned is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, including, among other things: (1) The availability of certain public information about the Company; (2) the resale's occurring not less than one year after the party has purchased, and made full payment for, within the meaning of Rule 144, the securities to be

sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than two years (3) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker, as said term is defined under the Securities Exchange Act of 1934 (the "Exchange Act") and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein, if applicable. There can be no assurances that the requirements of Rule 144 will be met, or that the Securities will ever be saleable. (e) The undersigned further understands that at the time the undersigned wishes to sell the Securities there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144, and that, in such event, the undersigned would be precluded from selling the Securities under Rule 144 even if the applicable minimum holding period had been satisfied. (f) The undersigned further understands that in the event all of the applicable requirements of Rule 144 are not satisfied registration under the Securities Act, compliance with Regulation A, compliance with some other registration exemption or the notification to the Company of the proposed disposition by it and the furnishing to the Company of (i) detailed information regarding the disposition, and (ii) and opinion of its counsel to the effect that such disposition will not require registration (the undersigned understands such counsel's opinion shall concur with the opinion by counsel for the Company and the undersigned shall have been informed of such compliance) will be required and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Signature of Purchaser: By: --------------------------------- Name: ------------------------------- Title: ------------------------------ -2-

EXHIBIT C ASSIGNMENT FORM

ASSIGNMENT FORM (To assign the foregoing Common Stock Purchase Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to - ----------------------------------------------------- (Please Print) whose address is ------------------------------------------ (Please Print) . - ----------------------------------------------------- Dated: , 19 . ----------------------- ----- Holder's Signature: --------------------------- Holder's Address: ----------------------------- ----------------------------- Signature Guaranteed: ---------------------------------- NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EXHIBIT 4.5 THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. February 18, 1998 PC-Tel, Inc. a California corporation Common Stock Purchase Warrant THIS CERTIFIES THAT, for value received, Irving Minnaker (hereinafter, the "Holder"), is entitled, upon the terms and subject to the conditions hereinafter set forth, to purchase from PC-TEL, INC., a California corporation (the "Company"), that number of fully paid and nonassessable shares of the Company's Common Stock at the purchase price per share as determined in Section 1 below. Terms and Conditions of Warrant 1. Number of Shares; Exercise Price; Term. -------------------------------------- (a) Subject to the terms and conditions set forth herein, the Holder is entitled to purchase from the Company, at any time after the date hereof and on or before the date of termination of this Warrant provided for in Section 1(b) below, up to 558 fully paid and non-assessable shares of the Company's Common Stock (the "Shares") at an exercise price per share of $8.00 (the "Exercise Price"). (b) This Warrant (and the right to purchase securities upon exercise hereof) shall expire and cease to be exercisable if not exercised prior to the earliest to occur of (i) the acquisition of the Company by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation or sale of all or substantially all of the assets of the Company) in which, immediately after completion of such transaction, the shareholders of the Company prior to such transaction or series of related transactions own less than fifty percent (50%) of the voting power of the surviving entity after such transaction or series of transactions, and (ii) 5:00 p.m. (Pacific Time) on February 4, 2001 (the "Expiration Date"). The Company shall provide the Holder not less than 10 days' prior written notice of the completion of any transaction contemplated in (i) above. 2. Exercise of Warrant. ------------------- (a) This Warrant may be exercised by the Holder as to the whole or any lesser number of the Shares covered hereby, as set forth in Section 1 above, upon surrender of this Warrant to the Company at its principal executive offices together with the Notice of Exercise and Investment Representation Statement annexed hereto as Exhibits A and B, respectively, duly completed and executed by ---------- - the Holder, and payment to the Company in cash of the aggregate Exercise Price for the Shares to be purchased. Certificates for the Shares so purchased shall be delivered to the Holder within

a reasonable time after exercise of the stock purchase rights represented by this Warrant. The exercise of this Warrant shall be deemed to have been effected on the day on which the Holder surrenders this Warrant to the Company and satisfies all of the requirements of this Section 2. Upon such exercise, the Holder will be deemed a shareholder of record of those Shares for which the warrant has been exercised with all rights of a shareholder (including, without limitation, all voting rights with respect to such Shares and all rights to receive any dividends with respect to such Shares). If this Warrant is to be exercised in respect of less than all of the Shares covered hereby, the Holder shall be entitled to receive a new warrant covering the number of Shares in respect of which this Warrant shall not have been exercised and for which it remains subject to exercise. Such new warrant shall be in all other respects identical to this Warrant. (b) Notwithstanding the payment provisions set forth in Section 2(a) above, the Holder may elect to receive Shares equal to the value of this Warrant (or of any portion thereof remaining unexercised) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder that number of Shares computed using the following formula: X = Y*(A-B) ------- A Where: X = the number of Shares to be issued to the Holder; Y = the number of Shares purchasable under this Warrant (at the date of such calculation); A = the Fair Market Value of one Share; and B = the Exercise Price (at the date of such calculation). (c) For purposes of section 3(b) above, the Fair Market Value of one Share shall mean (i) if the Company's Common Stock is listed on any established stock exchange or national market system, including, without limitation, the National Market of The Nasdaq Stock Market, the closing sales price of one share of the Company's Common Stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in the Company's Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board of Directors of the Company may deem reliable; (ii) if the Company's Common Stock is quoted on The Nasdaq Stock Market (but not on the National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, the mean between the high and low asked prices for the Company's Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board of Directors of the Company may deem reliable; (iii) if exercised in connection with respect to a merger or consolidation of the Company or the sale of all or substantially all of the assets of the Company, the amount of cash or the value of securities actually received by the Company or its shareholders in such transaction for each share of the Company's Common Stock; or (iv) as otherwise determined by the Board of Directors of the Company, acting in good faith. 3. Covenants of the Company. The Company covenants and agrees that all ------------------------ Common Stock which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and -2-

payment therefor in accordance herewith, will be duly authorized, validly issued, fully paid, and nonassessable shares of Common Stock of the Company. The Company further covenants and agrees that, during the period within which the stock purchase rights represented by this Warrant may be exercised, the Company will at all times have duly authorized and duly reserved for issuance upon the exercise of the purchase rights evidenced by this Warrant a number of shares of Common Stock sufficient for such issuance. 4. Transfer, Exchange, Assignment, or Loss of Warrant. -------------------------------------------------- (a) This Warrant may not be assigned or transferred except as provided in this Section 4 and in accordance with and subject to the provisions of the Securities Act and the Rules and Regulations promulgated thereunder. Any purported transfer or assignment made other than in accordance with this Section 4 shall be null and void and of no force or effect. (b) Prior to any transfer of this Warrant, the Holder shall notify the Company of its intention to effect such transfer, indicating the circumstances of the proposed transfer and, upon request, furnish the Company with an opinion of its counsel, in form and substance satisfactory to counsel for the Company, to the effect that the proposed transfer may be made without registration under the Securities Act or qualification under any applicable state securities laws. The Company will promptly notify the Holder if the opinion of counsel furnished to the Company is satisfactory to counsel for the Company. Unless the Company notifies the Holder within ten (10) days after its receipt of such opinion that such opinion is not satisfactory to counsel for the Company, the Holder may proceed to effect the transfer. (c) Unless a registration statement under the Securities Act is effective with respect to the Shares or any other security issued upon exercise of this Warrant, the certificate representing such Shares or other securities shall bear the following legend, in addition to any legend imposed by applicable state securities laws: THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. (d) Any assignment permitted hereunder shall be made by surrender of this Warrant to the Company at its principal office with the Assignment Form attached hereto as Exhibit C duly executed. In such event, the Company shall, --------- without charge for any issuance or transfer tax or other cost incurred by the Company with respect to such transfer, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment, and this Warrant shall be promptly cancelled. This Warrant may be divided or combined with other Warrants which carry the same rights upon -3-

presentation thereof at the principal office of the Company, together with a written notice signed by the Holders thereof, specifying the name and denominations in which such new Warrants are to be issued. (e) Upon receipt by the Company of satisfactory evidence of loss, theft, destruction, or mutilation of this Warrant and of indemnity satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, or destroyed Warrant shall thereupon become void. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not the Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. 5. No Fractional Shares or Scrip. No fractional shares or scrip ----------------------------- representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which such holder would otherwise be entitled, such holder shall be entitled, at its option, to receive either (i) a cash payment equal to the excess of the Fair Market Value for such fractional share above the Exercise Price for such fractional share (as mutually determined by the Company and the Holder) or (ii) a whole share if the Holder tenders the Exercise Price for one whole share. 6. No Rights as Shareholders. This Warrant does not entitle the holder ------------------------- hereof to any voting rights, dividend rights, or other rights as a shareholder of the Company prior to the exercise hereof. 7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for --------------------------------- the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday or a Sunday or a legal holiday. 8. Adjustments. The Exercise Price per Share and the number of Shares ----------- purchasable hereunder shall be subject to adjustment from time to time as follows: (a) Merger. If at any time there shall be a merger or consolidation ------ of the Company with or into another corporation when the Company is not the surviving corporation, then, as a part of such merger or consolidation, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the aggregate Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such merger or consolidation, to which a holder of the stock deliverable upon exercise of this Warrant would have been entitled in such merger or consolidation if this Warrant had been exercised immediately before such merger or consolidation. In any such case, appropriate adjustment shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the merger or consolidation. (b) Reclassification, etc. If the Company shall, at any time, by --------------------- subdivision, combination, or reclassification of securities or otherwise, change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, the Exercise Price shall be adjusted such that this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such -4-

change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change. (c) Split, Subdivision or Combination of Shares. If the Company at ------------------------------------------- any time while this Warrant remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, the Exercise Price shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination. 9. Notice of Adjustments; Notices. Whenever the Exercise Price or number ------------------------------ of Shares issuable upon exercise hereof shall be adjusted pursuant to Section 8 hereof, the Company shall issue a certificate signed by its Chief Executive Officer or Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Warrant. 10. Miscellaneous. ------------- (a) Successors and Assigns. This Warrant shall be binding upon any ---------------------- successors or assigns of the Company. (b) Governing Law. This Warrant shall be governed by and construed in ------------- accordance with the laws of the State of California as applied to agreements between California residents entered and to be performed entirely within California. (c) Attorneys' Fees. In any litigation, arbitration, or court --------------- proceeding between the Company and the holder relating hereto, the prevailing party shall be entitled to reasonable attorneys' fees and expenses incurred in enforcing this Warrant. (d) Amendments. This Warrant may be amended and the observance of any ---------- term of this Warrant may be waived only with the written consent of the Company and the Holder, or in the event that this Warrant shall have been transferred in part, with the written consent of the Company and the holders of warrants representing a majority-in-interest of the Shares originally issuable hereunder. (e) Notice. Any notice required or permitted hereunder shall be ------ deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by certified mail, postage prepaid and addressed to the party to be notified at the address indicated below for such party, or at such other address as such other party may designate by ten-day advance written notice. [Remainder of Page Intentionally Left Blank] -5-

IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be executed by its officer thereunto duly authorized as of the date first above written. PC-TEL, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Acknowledged and Agreed: WARRANT HOLDER: - --------------------------------------------------------------- Signature - --------------------------------------------------------------- Print Name - --------------------------------------------------------------- Street Address - --------------------------------------------------------------- City State Zip Code [Warrant Signature Page] -6-

EXHIBIT A NOTICE OF EXERCISE

NOTICE OF EXERCISE STOCK PURCHASE WARRANT To: PC-TEL, INC. 1. The undersigned hereby elects to purchase _______ shares of ___________ ("Stock") of PC-Tel, Inc. (the "Company") pursuant to the terms of the attached Warrant, and tenders herewith payment of the aggregate exercise price therefor and any transfer taxes payable pursuant to the terms of the Warrant, together with an Investment Representation Statement in form and substance satisfactory to legal counsel to the Company. 2. The shares of Stock to be received by the undersigned upon exercise of the Warrant are being acquired for its own account, not as a nominee or agent, and not with a view to resale or distribution of any part thereof, and the undersigned has no present intention of selling, granting any participation in, or otherwise distributing the same. The undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to the Stock. The undersigned believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Stock. 3. The undersigned understands that the shares of Stock are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in transactions not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the "Act"), only in certain limited circumstances. In this connection, the undersigned represents that it is familiar with Rule 144 promulgated under the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 4. The undersigned covenants and agrees, in connection with any registration of the Company's initial public offering of Common Stock, upon request of the Company or the underwriters managing such offering, not to sell, make any short sale of, loan, grant any option for the purchase of or otherwise dispose of any securities of the Company for such period of time (not to exceed 180 days) from the effective date of the Company's registration statement filed with and declared effective by the Securities and Exchange Commission as the Company or the managing underwriters shall determine. The undersigned further covenants and agrees to enter into a customary form of "lock-up" agreement upon request of the Company or the underwriters managing such offering to the extent not inconsistent with the preceding sentence. 5. The undersigned understands the instruments evidencing the Stock may bear the following legend, in addition to any legend required by applicable state securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. 6. Please issue a certificate or certificates representing said shares of Stock in the name of the undersigned: Name: ----------------------------------------------- Address: -------------------------------------------- -------------------------------------------- -------------------------------------------- 7. Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned: Name: ----------------------------------------------- Address: -------------------------------------------- -------------------------------------------- -------------------------------------------- IN WITNESS WHEREOF, the Warrantholder has executed this Notice of Exercise effective this ___ day of ________, _____. WARRANTHOLDER -------------------------------- By: ----------------------------- Name: ---------------------------- Title: -------------------------- [NOTICE OF EXERCISE OF STOCK PURCHASE WARRANT] -2-

EXHIBIT B INVESTMENT REPRESENTATION STATEMENT

INVESTMENT REPRESENTATION STATEMENT PURCHASER : -------------------- COMPANY : PC-TEL, INC. SECURITIES : -------------------- DATE : -------------------- In connection with the purchase of the above-listed Securities, the undersigned, the Purchaser represents to the Company the following: (a) The undersigned is sufficiently aware of the Company's business affairs and financial condition to reach an informed and knowledgeable decision to acquire the Securities. The undersigned is purchasing these Securities for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). (b) The undersigned understands that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of its investment intent as expressed herein. In this connection, the undersigned understands that, in the view of the Securities and Exchange Commission (the "SEC"), the statutory basis for such exemption may be unavailable if its representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) The undersigned further understands that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available (such as Rule 144 under the Securities Act). Moreover, the undersigned understands that the Company is under no obligation to register the Securities. In addition, the undersigned understands that the certificate evidencing the Securities may be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. (d) The undersigned is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, including, among other things: (1) The availability of certain public information about the Company; (2) the resale's occurring not less than one year after the party has purchased, and made full payment for, within the meaning of Rule 144, the securities to be

sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than two years (3) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker, as said term is defined under the Securities Exchange Act of 1934 (the "Exchange Act") and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein, if applicable. There can be no assurances that the requirements of Rule 144 will be met, or that the Securities will ever be saleable. (e) The undersigned further understands that at the time the undersigned wishes to sell the Securities there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144, and that, in such event, the undersigned would be precluded from selling the Securities under Rule 144 even if the applicable minimum holding period had been satisfied. (f) The undersigned further understands that in the event all of the applicable requirements of Rule 144 are not satisfied registration under the Securities Act, compliance with Regulation A, compliance with some other registration exemption or the notification to the Company of the proposed disposition by it and the furnishing to the Company of (i) detailed information regarding the disposition, and (ii) and opinion of its counsel to the effect that such disposition will not require registration (the undersigned understands such counsel's opinion shall concur with the opinion by counsel for the Company and the undersigned shall have been informed of such compliance) will be required and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Signature of Purchaser: By: ----------------------------- Name: --------------------------- Title: -------------------------- -2-

EXHIBIT C ASSIGNMENT FORM

ASSIGNMENT FORM (To assign the foregoing Common Stock Purchase Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to - -------------------------------------------------------------------- (Please Print) whose address is --------------------------------------------------- (Please Print) . - -------------------------------------------------------------------- Dated: , 19 . ---------------------- ------- Holder's Signature: ------------------------------------- Holder's Address: ------------------------------------- ------------------------------------- Signature Guaranteed: ------------------------------------------ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EXHIBIT 4.6 THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. February 18, 1998 PC-Tel, Inc. a California corporation Common Stock Purchase Warrant THIS CERTIFIES THAT, for value received, Mitchell Segal (hereinafter, the "Holder"), is entitled, upon the terms and subject to the conditions hereinafter set forth, to purchase from PC-TEL, INC., a California corporation (the "Company"), that number of fully paid and nonassessable shares of the Company's Common Stock at the purchase price per share as determined in Section 1 below. Terms and Conditions of Warrant 1. Number of Shares; Exercise Price; Term. -------------------------------------- (a) Subject to the terms and conditions set forth herein, the Holder is entitled to purchase from the Company, at any time after the date hereof and on or before the date of termination of this Warrant provided for in Section 1(b) below, up to 505 fully paid and non-assessable shares of the Company's Common Stock (the "Shares") at an exercise price per share of $8.00 (the "Exercise Price"). (b) This Warrant (and the right to purchase securities upon exercise hereof) shall expire and cease to be exercisable if not exercised prior to the earliest to occur of (i) the acquisition of the Company by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation or sale of all or substantially all of the assets of the Company) in which, immediately after completion of such transaction, the shareholders of the Company prior to such transaction or series of related transactions own less than fifty percent (50%) of the voting power of the surviving entity after such transaction or series of transactions, and (ii) 5:00 p.m. (Pacific Time) on February 4, 2001 (the "Expiration Date"). The Company shall provide the Holder not less than 10 days' prior written notice of the completion of any transaction contemplated in (i) above. 2. Exercise of Warrant. ------------------- (a) This Warrant may be exercised by the Holder as to the whole or any lesser number of the Shares covered hereby, as set forth in Section 1 above, upon surrender of this Warrant to the Company at its principal executive offices together with the Notice of Exercise and Investment Representation Statement annexed hereto as Exhibits A and B, respectively, duly completed and executed by ---------- - the Holder, and payment to the Company in cash of the aggregate Exercise Price for the Shares to be purchased. Certificates for the Shares so purchased shall be delivered to the Holder within

a reasonable time after exercise of the stock purchase rights represented by this Warrant. The exercise of this Warrant shall be deemed to have been effected on the day on which the Holder surrenders this Warrant to the Company and satisfies all of the requirements of this Section 2. Upon such exercise, the Holder will be deemed a shareholder of record of those Shares for which the warrant has been exercised with all rights of a shareholder (including, without limitation, all voting rights with respect to such Shares and all rights to receive any dividends with respect to such Shares). If this Warrant is to be exercised in respect of less than all of the Shares covered hereby, the Holder shall be entitled to receive a new warrant covering the number of Shares in respect of which this Warrant shall not have been exercised and for which it remains subject to exercise. Such new warrant shall be in all other respects identical to this Warrant. (b) Notwithstanding the payment provisions set forth in Section 2(a) above, the Holder may elect to receive Shares equal to the value of this Warrant (or of any portion thereof remaining unexercised) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder that number of Shares computed using the following formula: X = Y*(A-B) ------- A Where: X = the number of Shares to be issued to the Holder; Y = the number of Shares purchasable under this Warrant (at the date of such calculation); A = the Fair Market Value of one Share; and B = the Exercise Price (at the date of such calculation). (c) For purposes of section 3(b) above, the Fair Market Value of one Share shall mean (i) if the Company's Common Stock is listed on any established stock exchange or national market system, including, without limitation, the National Market of The Nasdaq Stock Market, the closing sales price of one share of the Company's Common Stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in the Company's Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board of Directors of the Company may deem reliable; (ii) if the Company's Common Stock is quoted on The Nasdaq Stock Market (but not on the National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, the mean between the high and low asked prices for the Company's Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board of Directors of the Company may deem reliable; (iii) if exercised in connection with respect to a merger or consolidation of the Company or the sale of all or substantially all of the assets of the Company, the amount of cash or the value of securities actually received by the Company or its shareholders in such transaction for each share of the Company's Common Stock; or (iv) as otherwise determined by the Board of Directors of the Company, acting in good faith. 3. Covenants of the Company. The Company covenants and agrees that all ------------------------ Common Stock which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and -2-

payment therefor in accordance herewith, will be duly authorized, validly issued, fully paid, and nonassessable shares of Common Stock of the Company. The Company further covenants and agrees that, during the period within which the stock purchase rights represented by this Warrant may be exercised, the Company will at all times have duly authorized and duly reserved for issuance upon the exercise of the purchase rights evidenced by this Warrant a number of shares of Common Stock sufficient for such issuance. 4. Transfer, Exchange, Assignment, or Loss of Warrant. -------------------------------------------------- (a) This Warrant may not be assigned or transferred except as provided in this Section 4 and in accordance with and subject to the provisions of the Securities Act and the Rules and Regulations promulgated thereunder. Any purported transfer or assignment made other than in accordance with this Section 4 shall be null and void and of no force or effect. (b) Prior to any transfer of this Warrant, the Holder shall notify the Company of its intention to effect such transfer, indicating the circumstances of the proposed transfer and, upon request, furnish the Company with an opinion of its counsel, in form and substance satisfactory to counsel for the Company, to the effect that the proposed transfer may be made without registration under the Securities Act or qualification under any applicable state securities laws. The Company will promptly notify the Holder if the opinion of counsel furnished to the Company is satisfactory to counsel for the Company. Unless the Company notifies the Holder within ten (10) days after its receipt of such opinion that such opinion is not satisfactory to counsel for the Company, the Holder may proceed to effect the transfer. (c) Unless a registration statement under the Securities Act is effective with respect to the Shares or any other security issued upon exercise of this Warrant, the certificate representing such Shares or other securities shall bear the following legend, in addition to any legend imposed by applicable state securities laws: THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. (d) Any assignment permitted hereunder shall be made by surrender of this Warrant to the Company at its principal office with the Assignment Form attached hereto as Exhibit C duly executed. In such event, the Company shall, --------- without charge for any issuance or transfer tax or other cost incurred by the Company with respect to such transfer, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment, and this Warrant shall be promptly cancelled. This Warrant may be divided or combined with other Warrants which carry the same rights upon -3-

presentation thereof at the principal office of the Company, together with a written notice signed by the Holders thereof, specifying the name and denominations in which such new Warrants are to be issued. (e) Upon receipt by the Company of satisfactory evidence of loss, theft, destruction, or mutilation of this Warrant and of indemnity satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, or destroyed Warrant shall thereupon become void. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not the Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. 5. No Fractional Shares or Scrip. No fractional shares or scrip ----------------------------- representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which such holder would otherwise be entitled, such holder shall be entitled, at its option, to receive either (i) a cash payment equal to the excess of the Fair Market Value for such fractional share above the Exercise Price for such fractional share (as mutually determined by the Company and the Holder) or (ii) a whole share if the Holder tenders the Exercise Price for one whole share. 6. No Rights as Shareholders. This Warrant does not entitle the holder ------------------------- hereof to any voting rights, dividend rights, or other rights as a shareholder of the Company prior to the exercise hereof. 7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for --------------------------------- the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday or a Sunday or a legal holiday. 8. Adjustments. The Exercise Price per Share and the number of Shares ----------- purchasable hereunder shall be subject to adjustment from time to time as follows: (a) Merger. If at any time there shall be a merger or consolidation ------ of the Company with or into another corporation when the Company is not the surviving corporation, then, as a part of such merger or consolidation, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the aggregate Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such merger or consolidation, to which a holder of the stock deliverable upon exercise of this Warrant would have been entitled in such merger or consolidation if this Warrant had been exercised immediately before such merger or consolidation. In any such case, appropriate adjustment shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the merger or consolidation. (b) Reclassification, etc. If the Company shall, at any time, by --------------------- subdivision, combination, or reclassification of securities or otherwise, change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, the Exercise Price shall be adjusted such that this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such -4-

change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change. (c) Split, Subdivision or Combination of Shares. If the Company at ------------------------------------------- any time while this Warrant remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, the Exercise Price shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination. 9. Notice of Adjustments; Notices. Whenever the Exercise Price or number ------------------------------ of Shares issuable upon exercise hereof shall be adjusted pursuant to Section 8 hereof, the Company shall issue a certificate signed by its Chief Executive Officer or Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Warrant. 10. Miscellaneous. ------------- (a) Successors and Assigns. This Warrant shall be binding upon any ---------------------- successors or assigns of the Company. (b) Governing Law. This Warrant shall be governed by and construed in ------------- accordance with the laws of the State of California as applied to agreements between California residents entered and to be performed entirely within California. (c) Attorneys' Fees. In any litigation, arbitration, or court --------------- proceeding between the Company and the holder relating hereto, the prevailing party shall be entitled to reasonable attorneys' fees and expenses incurred in enforcing this Warrant. (d) Amendments. This Warrant may be amended and the observance of any ---------- term of this Warrant may be waived only with the written consent of the Company and the Holder, or in the event that this Warrant shall have been transferred in part, with the written consent of the Company and the holders of warrants representing a majority-in-interest of the Shares originally issuable hereunder. (e) Notice. Any notice required or permitted hereunder shall be ------ deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by certified mail, postage prepaid and addressed to the party to be notified at the address indicated below for such party, or at such other address as such other party may designate by ten-day advance written notice. [Remainder of Page Intentionally Left Blank] -5-

IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be executed by its officer thereunto duly authorized as of the date first above written. PC-TEL, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- Acknowledged and Agreed: WARRANT HOLDER: - ------------------------------------------------ Signature - ------------------------------------------------ Print Name - ------------------------------------------------ Street Address - ------------------------------------------------ City State Zip Code [Warrant Signature Page] -6-

EXHIBIT A NOTICE OF EXERCISE

NOTICE OF EXERCISE STOCK PURCHASE WARRANT To: PC-TEL, INC. 1. The undersigned hereby elects to purchase _______ shares of ___________ ("Stock") of PC-Tel, Inc. (the "Company") pursuant to the terms of the attached Warrant, and tenders herewith payment of the aggregate exercise price therefor and any transfer taxes payable pursuant to the terms of the Warrant, together with an Investment Representation Statement in form and substance satisfactory to legal counsel to the Company. 2. The shares of Stock to be received by the undersigned upon exercise of the Warrant are being acquired for its own account, not as a nominee or agent, and not with a view to resale or distribution of any part thereof, and the undersigned has no present intention of selling, granting any participation in, or otherwise distributing the same. The undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to the Stock. The undersigned believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Stock. 3. The undersigned understands that the shares of Stock are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in transactions not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the "Act"), only in certain limited circumstances. In this connection, the undersigned represents that it is familiar with Rule 144 promulgated under the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 4. The undersigned covenants and agrees, in connection with any registration of the Company's initial public offering of Common Stock, upon request of the Company or the underwriters managing such offering, not to sell, make any short sale of, loan, grant any option for the purchase of or otherwise dispose of any securities of the Company for such period of time (not to exceed 180 days) from the effective date of the Company's registration statement filed with and declared effective by the Securities and Exchange Commission as the Company or the managing underwriters shall determine. The undersigned further covenants and agrees to enter into a customary form of "lock-up" agreement upon request of the Company or the underwriters managing such offering to the extent not inconsistent with the preceding sentence. 5. The undersigned understands the instruments evidencing the Stock may bear the following legend, in addition to any legend required by applicable state securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. 6. Please issue a certificate or certificates representing said shares of Stock in the name of the undersigned: Name: ------------------------------------------------ Address: --------------------------------------------- --------------------------------------------- --------------------------------------------- 7. Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned: Name: ------------------------------------------------ Address: --------------------------------------------- --------------------------------------------- --------------------------------------------- IN WITNESS WHEREOF, the Warrantholder has executed this Notice of Exercise effective this ___ day of ________, _____. WARRANTHOLDER --------------------------------------------- By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- [NOTICE OF EXERCISE OF STOCK PURCHASE WARRANT] -2-

EXHIBIT B INVESTMENT REPRESENTATION STATEMENT

INVESTMENT REPRESENTATION STATEMENT PURCHASER : --------------------------- COMPANY : PC-TEL, INC. SECURITIES : --------------------------- DATE : --------------------------- In connection with the purchase of the above-listed Securities, the undersigned, the Purchaser represents to the Company the following: (a) The undersigned is sufficiently aware of the Company's business affairs and financial condition to reach an informed and knowledgeable decision to acquire the Securities. The undersigned is purchasing these Securities for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). (b) The undersigned understands that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of its investment intent as expressed herein. In this connection, the undersigned understands that, in the view of the Securities and Exchange Commission (the "SEC"), the statutory basis for such exemption may be unavailable if its representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) The undersigned further understands that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available (such as Rule 144 under the Securities Act). Moreover, the undersigned understands that the Company is under no obligation to register the Securities. In addition, the undersigned understands that the certificate evidencing the Securities may be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. (d) The undersigned is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, including, among other things: (1) The availability of certain public information about the Company; (2) the resale's occurring not less than one year after the party has purchased, and made full payment for, within the meaning of Rule 144, the securities to be

sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than two years (3) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker, as said term is defined under the Securities Exchange Act of 1934 (the "Exchange Act") and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein, if applicable. There can be no assurances that the requirements of Rule 144 will be met, or that the Securities will ever be saleable. (e) The undersigned further understands that at the time the undersigned wishes to sell the Securities there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144, and that, in such event, the undersigned would be precluded from selling the Securities under Rule 144 even if the applicable minimum holding period had been satisfied. (f) The undersigned further understands that in the event all of the applicable requirements of Rule 144 are not satisfied registration under the Securities Act, compliance with Regulation A, compliance with some other registration exemption or the notification to the Company of the proposed disposition by it and the furnishing to the Company of (i) detailed information regarding the disposition, and (ii) and opinion of its counsel to the effect that such disposition will not require registration (the undersigned understands such counsel's opinion shall concur with the opinion by counsel for the Company and the undersigned shall have been informed of such compliance) will be required and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Signature of Purchaser: By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- -2-

EXHIBIT C ASSIGNMENT FORM

ASSIGNMENT FORM (To assign the foregoing Common Stock Purchase Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to - -------------------------------------------------------------- (Please Print) whose address is ----------------------------------------------------- (Please Print) . - --------------------------------------------------------------- Dated: , 19 . -------------------- ---- Holder's Signature: ----------------------------------- Holder's Address: ------------------------------------- ------------------------------------- Signature Guaranteed: -------------------------------------- NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EXHIBIT 4.7 THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. February 18, 1998 PC-Tel, Inc. a California corporation Common Stock Purchase Warrant THIS CERTIFIES THAT, for value received, State Street Securities, Inc. (hereinafter, the "Holder"), is entitled, upon the terms and subject to the conditions hereinafter set forth, to purchase from PC-TEL, INC., a California corporation (the "Company"), that number of fully paid and nonassessable shares of the Company's Common Stock at the purchase price per share as determined in Section 1 below. Terms and Conditions of Warrant 1. Number of Shares; Exercise Price; Term. -------------------------------------- (a) Subject to the terms and conditions set forth herein, the Holder is entitled to purchase from the Company, at any time after the date hereof and on or before the date of termination of this Warrant provided for in Section 1(b) below, up to 604 fully paid and non-assessable shares of the Company's Common Stock (the "Shares") at an exercise price per share of $8.00 (the "Exercise Price"). (b) This Warrant (and the right to purchase securities upon exercise hereof) shall expire and cease to be exercisable if not exercised prior to the earliest to occur of (i) the acquisition of the Company by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation or sale of all or substantially all of the assets of the Company) in which, immediately after completion of such transaction, the shareholders of the Company prior to such transaction or series of related transactions own less than fifty percent (50%) of the voting power of the surviving entity after such transaction or series of transactions, and (ii) 5:00 p.m. (Pacific Time) on February 4, 2001 (the "Expiration Date"). The Company shall provide the Holder not less than 10 days' prior written notice of the completion of any transaction contemplated in (i) above.

2. Exercise of Warrant. ------------------- (a) This Warrant may be exercised by the Holder as to the whole or any lesser number of the Shares covered hereby, as set forth in Section 1 above, upon surrender of this Warrant to the Company at its principal executive offices together with the Notice of Exercise and Investment Representation Statement annexed hereto as Exhibits A and B, respectively, duly completed and executed by ---------- - the Holder, and payment to the Company in cash of the aggregate Exercise Price for the Shares to be purchased. Certificates for the Shares so purchased shall be delivered to the Holder within a reasonable time after exercise of the stock purchase rights represented by this Warrant. The exercise of this Warrant shall be deemed to have been effected on the day on which the Holder surrenders this Warrant to the Company and satisfies all of the requirements of this Section 2. Upon such exercise, the Holder will be deemed a shareholder of record of those Shares for which the warrant has been exercised with all rights of a shareholder (including, without limitation, all voting rights with respect to such Shares and all rights to receive any dividends with respect to such Shares). If this Warrant is to be exercised in respect of less than all of the Shares covered hereby, the Holder shall be entitled to receive a new warrant covering the number of Shares in respect of which this Warrant shall not have been exercised and for which it remains subject to exercise. Such new warrant shall be in all other respects identical to this Warrant. (b) Notwithstanding the payment provisions set forth in Section 2(a) above, the Holder may elect to receive Shares equal to the value of this Warrant (or of any portion thereof remaining unexercised) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder that number of Shares computed using the following formula: X = Y*(A-B) ------- A Where: X = the number of Shares to be issued to the Holder; Y = the number of Shares purchasable under this Warrant (at the date of such calculation); A = the Fair Market Value of one Share; and B = the Exercise Price (at the date of such calculation). (c) For purposes of section 3(b) above, the Fair Market Value of one Share shall mean (i) if the Company's Common Stock is listed on any established stock exchange or national market system, including, without limitation, the National Market of The Nasdaq Stock Market, the closing sales price of one share of the Company's Common Stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in the Company's Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board of Directors of the Company may deem reliable; (ii) if the Company's Common Stock is quoted on The Nasdaq Stock Market (but not on the National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, the mean between the high and low asked prices for the Company's Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other -2-

source as the Board of Directors of the Company may deem reliable; (iii) if exercised in connection with respect to a merger or consolidation of the Company or the sale of all or substantially all of the assets of the Company, the amount of cash or the value of securities actually received by the Company or its shareholders in such transaction for each share of the Company's Common Stock; or (iv) as otherwise determined by the Board of Directors of the Company, acting in good faith. 3. Covenants of the Company. The Company covenants and agrees that all ------------------------ Common Stock which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and payment therefor in accordance herewith, will be duly authorized, validly issued, fully paid, and nonassessable shares of Common Stock of the Company. The Company further covenants and agrees that, during the period within which the stock purchase rights represented by this Warrant may be exercised, the Company will at all times have duly authorized and duly reserved for issuance upon the exercise of the purchase rights evidenced by this Warrant a number of shares of Common Stock sufficient for such issuance. 4. Transfer, Exchange, Assignment, or Loss of Warrant. -------------------------------------------------- (a) This Warrant may not be assigned or transferred except as provided in this Section 4 and in accordance with and subject to the provisions of the Securities Act and the Rules and Regulations promulgated thereunder. Any purported transfer or assignment made other than in accordance with this Section 4 shall be null and void and of no force or effect. (b) Prior to any transfer of this Warrant, the Holder shall notify the Company of its intention to effect such transfer, indicating the circumstances of the proposed transfer and, upon request, furnish the Company with an opinion of its counsel, in form and substance satisfactory to counsel for the Company, to the effect that the proposed transfer may be made without registration under the Securities Act or qualification under any applicable state securities laws. The Company will promptly notify the Holder if the opinion of counsel furnished to the Company is satisfactory to counsel for the Company. Unless the Company notifies the Holder within ten (10) days after its receipt of such opinion that such opinion is not satisfactory to counsel for the Company, the Holder may proceed to effect the transfer. (c) Unless a registration statement under the Securities Act is effective with respect to the Shares or any other security issued upon exercise of this Warrant, the certificate representing such Shares or other securities shall bear the following legend, in addition to any legend imposed by applicable state securities laws: THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. -3-

(d) Any assignment permitted hereunder shall be made by surrender of this Warrant to the Company at its principal office with the Assignment Form attached hereto as Exhibit C duly executed. In such event, the Company shall, --------- without charge for any issuance or transfer tax or other cost incurred by the Company with respect to such transfer, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment, and this Warrant shall be promptly cancelled. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation thereof at the principal office of the Company, together with a written notice signed by the Holders thereof, specifying the name and denominations in which such new Warrants are to be issued. (e) Upon receipt by the Company of satisfactory evidence of loss, theft, destruction, or mutilation of this Warrant and of indemnity satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, or destroyed Warrant shall thereupon become void. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not the Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. 5. No Fractional Shares or Scrip. No fractional shares or scrip ----------------------------- representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which such holder would otherwise be entitled, such holder shall be entitled, at its option, to receive either (i) a cash payment equal to the excess of the Fair Market Value for such fractional share above the Exercise Price for such fractional share (as mutually determined by the Company and the Holder) or (ii) a whole share if the Holder tenders the Exercise Price for one whole share. 6. No Rights as Shareholders. This Warrant does not entitle the holder ------------------------- hereof to any voting rights, dividend rights, or other rights as a shareholder of the Company prior to the exercise hereof. 7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for --------------------------------- the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday or a Sunday or a legal holiday. 8. Adjustments. The Exercise Price per Share and the number of Shares ----------- purchasable hereunder shall be subject to adjustment from time to time as follows: (a) Merger. If at any time there shall be a merger or consolidation ------ of the Company with or into another corporation when the Company is not the surviving corporation, then, as a part of such merger or consolidation, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the aggregate Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such merger or consolidation, to which a holder of the stock deliverable upon exercise of this Warrant would have been entitled in such merger or consolidation if this Warrant had been exercised immediately before such merger or consolidation. In any such case, appropriate adjustment shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the merger or consolidation. -4-

(b) Reclassification, etc. If the Company shall, at any time, by --------------------- subdivision, combination, or reclassification of securities or otherwise, change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, the Exercise Price shall be adjusted such that this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change. (c) Split, Subdivision or Combination of Shares. If the Company at ------------------------------------------- any time while this Warrant remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, the Exercise Price shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination. 9. Notice of Adjustments; Notices. Whenever the Exercise Price or number ------------------------------ of Shares issuable upon exercise hereof shall be adjusted pursuant to Section 8 hereof, the Company shall issue a certificate signed by its Chief Executive Officer or Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Warrant. 10. Miscellaneous. ------------- (a) Successors and Assigns. This Warrant shall be binding upon any ---------------------- successors or assigns of the Company. (b) Governing Law. This Warrant shall be governed by and construed in ------------- accordance with the laws of the State of California as applied to agreements between California residents entered and to be performed entirely within California. (c) Attorneys' Fees. In any litigation, arbitration, or court --------------- proceeding between the Company and the holder relating hereto, the prevailing party shall be entitled to reasonable attorneys' fees and expenses incurred in enforcing this Warrant. (d) Amendments. This Warrant may be amended and the observance of any ---------- term of this Warrant may be waived only with the written consent of the Company and the Holder, or in the event that this Warrant shall have been transferred in part, with the written consent of the Company and the holders of warrants representing a majority-in-interest of the Shares originally issuable hereunder. (e) Notice. Any notice required or permitted hereunder shall be ------ deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by certified mail, postage prepaid and addressed to the party to be notified at the address indicated below for such party, or at such other address as such other party may designate by ten-day advance written notice. [Remainder of Page Intentionally Left Blank] -5-

IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be executed by its officer thereunto duly authorized as of the date first above written. PC-TEL, INC. By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- Acknowledged and Agreed: WARRANT HOLDER: - ---------------------------------------------- Signature - ---------------------------------------------- Print Name - ---------------------------------------------- Street Address - ---------------------------------------------- City State Zip Code [Warrant Signature Page] -6-

EXHIBIT A NOTICE OF EXERCISE

NOTICE OF EXERCISE STOCK PURCHASE WARRANT To: PC-TEL, INC. 1. The undersigned hereby elects to purchase _______ shares of ___________ ("Stock") of PC-Tel, Inc. (the "Company") pursuant to the terms of the attached Warrant, and tenders herewith payment of the aggregate exercise price therefor and any transfer taxes payable pursuant to the terms of the Warrant, together with an Investment Representation Statement in form and substance satisfactory to legal counsel to the Company. 2. The shares of Stock to be received by the undersigned upon exercise of the Warrant are being acquired for its own account, not as a nominee or agent, and not with a view to resale or distribution of any part thereof, and the undersigned has no present intention of selling, granting any participation in, or otherwise distributing the same. The undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to the Stock. The undersigned believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Stock. 3. The undersigned understands that the shares of Stock are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in transactions not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the "Act"), only in certain limited circumstances. In this connection, the undersigned represents that it is familiar with Rule 144 promulgated under the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 4. The undersigned covenants and agrees, in connection with any registration of the Company's initial public offering of Common Stock, upon request of the Company or the underwriters managing such offering, not to sell, make any short sale of, loan, grant any option for the purchase of or otherwise dispose of any securities of the Company for such period of time (not to exceed 180 days) from the effective date of the Company's registration statement filed with and declared effective by the Securities and Exchange Commission as the Company or the managing underwriters shall determine. The undersigned further covenants and agrees to enter into a customary form of "lock-up" agreement upon request of the Company or the underwriters managing such offering to the extent not inconsistent with the preceding sentence. 5. The undersigned understands the instruments evidencing the Stock may bear the following legend, in addition to any legend required by applicable state securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. 6. Please issue a certificate or certificates representing said shares of Stock in the name of the undersigned: Name: ------------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- 7. Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned: Name: ------------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- IN WITNESS WHEREOF, the Warrantholder has executed this Notice of Exercise effective this ___ day of ________, _____. WARRANTHOLDER ------------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [NOTICE OF EXERCISE OF STOCK PURCHASE WARRANT] -2-

EXHIBIT B INVESTMENT REPRESENTATION STATEMENT

INVESTMENT REPRESENTATION STATEMENT PURCHASER : ----------------------- COMPANY : PC-TEL, INC. SECURITIES : ----------------------- DATE : ----------------------- In connection with the purchase of the above-listed Securities, the undersigned, the Purchaser represents to the Company the following: (a) The undersigned is sufficiently aware of the Company's business affairs and financial condition to reach an informed and knowledgeable decision to acquire the Securities. The undersigned is purchasing these Securities for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). (b) The undersigned understands that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of its investment intent as expressed herein. In this connection, the undersigned understands that, in the view of the Securities and Exchange Commission (the "SEC"), the statutory basis for such exemption may be unavailable if its representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) The undersigned further understands that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available (such as Rule 144 under the Securities Act). Moreover, the undersigned understands that the Company is under no obligation to register the Securities. In addition, the undersigned understands that the certificate evidencing the Securities may be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. (d) The undersigned is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, including, among other things: (1) The availability of certain public information about the Company; (2) the resale's occurring not less than one year after the party has purchased, and made full payment for, within the meaning of Rule 144, the securities to be

sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than two years (3) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker, as said term is defined under the Securities Exchange Act of 1934 (the "Exchange Act") and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein, if applicable. There can be no assurances that the requirements of Rule 144 will be met, or that the Securities will ever be saleable. (e) The undersigned further understands that at the time the undersigned wishes to sell the Securities there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144, and that, in such event, the undersigned would be precluded from selling the Securities under Rule 144 even if the applicable minimum holding period had been satisfied. (f) The undersigned further understands that in the event all of the applicable requirements of Rule 144 are not satisfied registration under the Securities Act, compliance with Regulation A, compliance with some other registration exemption or the notification to the Company of the proposed disposition by it and the furnishing to the Company of (i) detailed information regarding the disposition, and (ii) and opinion of its counsel to the effect that such disposition will not require registration (the undersigned understands such counsel's opinion shall concur with the opinion by counsel for the Company and the undersigned shall have been informed of such compliance) will be required and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Signature of Purchaser: By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- -2-

EXHIBIT C ASSIGNMENT FORM

ASSIGNMENT FORM (To assign the foregoing Common Stock Purchase Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to - --------------------------------------------------------- (Please Print) whose address is --------------------------------------------- (Please Print) . - --------------------------------------------------------- Dated: , 19 . ---------------------- ---- Holder's Signature: ------------------------------- Holder's Address: -------------------------------- -------------------------------- Signature Guaranteed: ----------------------------------- NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EXHIBIT 4.8 PC-TEL, INC. AMENDED AND RESTATED RIGHTS AGREEMENT THIS AMENDED AND RESTATED RIGHTS AGREEMENT (the "Agreement") is made as of December 31, 1997 by and among PC-Tel, Inc., a California corporation (the "Company"), having its principal executive offices located at 630 Alder Drive, Suite 202, Milpitas, California 95035, and each of the persons and entities who have purchased shares of the Company's Series B Preferred Stock ("Series B Preferred") and Series C Preferred Stock ("Series C Preferred"). RECITALS The Company and holders of the Company's Series B Preferred Stock (the "Prior Rights Holders") desire to amend and restate the Rights Agreement dated as of October 18, 1995 (the "Prior Agreement") to permit the grant of registration and other rights as described herein to purchasers of the Series C Preferred Stock of the Company. NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows: SECTION 1. Restrictions on Transferability, Registration Rights 1.1 Certain Definitions. As used in this Agreement, the following terms ------------------- shall have the following respective meanings: "Commission" shall mean the Securities and Exchange Commission or any ---------- successor agency. "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended. "Holder" shall mean each Purchaser and any transferee of Registrable ------ Securities who pursuant to Section 1.15 below is entitled to registration rights hereunder. "Holder of Series B Preferred" shall mean a Holder of shares of Series ---------------------------- B Preferred or shares of the Company's Common Stock issued upon the conversion of shares of Series B Preferred. "Holder of Series C Preferred" shall mean a Holder of shares of Series ---------------------------- C Preferred or shares of the Company's Common Stock issued upon the conversion of shares of Series C Preferred.

"Preferred" shall mean shares of Series B Preferred and Series C --------- Preferred Stock of the Company. "Purchaser" shall mean each person or entity who has acquired shares --------- of Preferred and any related securities pursuant to a stock purchase agreement between such person or entity and the Company and who is a signatory to this Agreement. "Registrable Securities" shall mean (i) shares of the Company's Common ---------------------- Stock issued or issuable upon the conversion of the Preferred; (ii) any Common Stock of the Company or other securities issued or issuable in respect of shares of the Preferred; (iii) any Common Stock of the Company or other securities issued or issuable upon exercise or conversion of any related securities; and (iv) shares of the Company's Common Stock or other securities issued or issuable upon any conversion of the Preferred or exercise or conversion of any related securities upon any stock split, stock dividend, recapitalization, or similar event; provided, however, that any shares described in clauses (i) through (iv) -------- ------- above which have been resold to the public shall cease to be Registrable Securities upon such resale. The terms "register," "registered" and "registration" refer to a -------- ---------- ------------ registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. "Registration Expenses" shall mean all expenses incurred by the --------------------- Company in complying with Sections 1.5, 1.6, and 1.7 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, fees and disbursements of one special counsel to the Holders, blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration but excluding all Selling Expenses. "Restricted Securities" shall mean the securities of the Company --------------------- required to bear the legend set forth in Section 1.3 hereof (or any similar legend). "Securities Act" shall mean the Securities Act of 1933, as amended. -------------- "Selling Expenses" shall mean all underwriting discounts, selling ---------------- commissions and stock transfer taxes applicable to the securities registered by the Holders and any fees of counsel to any Holder. 1.2 Restrictions on Transferability. The Restricted Securities shall not ------------------------------- be transferable except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. In no event shall Restricted Securities be transferred to any entity (or any affiliate thereof) which is engaged in the development, marketing or sale of products that are, in the Company's judgment, the same or similar to those of the Company, and any such attempted transfer shall be void ab initio. Each holder of Restricted Securities will cause any proposed transferee of the Restricted Securities held by such holder to agree to take and -2-

hold such Restricted Securities subject to the provisions and upon the conditions specified in this Agreement. 1.3 Restrictive Legend. Each certificate representing (i) the Preferred, ------------------ (ii) shares of the Company's Common Stock issued upon conversion of the Preferred, and (iii) any other securities issued in respect of the Preferred (or Common Stock issued upon conversion of the Preferred) upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of Section 1.4 below) be stamped or otherwise imprinted with a legend in substantially the following form (in addition to any legend required under applicable state securities laws): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES. Each Purchaser and Holder consents to the Company making a notation on its records and giving instructions to any transfer agent of the Preferred or the Common Stock in order to implement the restrictions on transfer established in this Section. 1.4 Notice of Proposed Transfers. The holder of each certificate ---------------------------- representing Restricted Securities by acceptance thereof agrees to comply in all respects with the provisions of this Section. Prior to any proposed transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice to the Company of such Holder's intention to effect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer in sufficient detail, and shall, if the Company so requests, be accompanied by either (i) a written opinion of legal counsel, who shall be reasonably satisfactory to the Company, addressed to the Company and reasonably satisfactory in form and substance to the Company's counsel, to the effect that the Proposed transfer of the Restricted Securities may be effected without registration under the Securities Act, or (ii) a "No Action" letter from the Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the holder to the Company; provided, however, that no opinion or No Action letter need be obtained -------- ------- with respect to a transfer to (A) a partner, active or retired, of a holder of Restricted Securities, (B) the estate of any such partner, (C) the spouse, children, grandchildren or spouse of such children or grandchildren of any holder or to trusts for the benefit of any holder or such persons, or (D) a parent or subsidiary -3-

corporation of a holder, or a corporation which has the same parent corporation as a holder, provided that in such cases the transferee agrees in writing to be subject to the terms hereof. Each certificate evidencing the Restricted Securities transferred as above provided shall bear the appropriate restrictive legends described above, except that such certificate shall not bear any such restrictive legend if in the opinion of counsel for the Company such legend is not required. 1.5 Requested Registration. ---------------------- (a) Requested for Registration. If at any time after the first to -------------------------- occur of (i) November 30, 1999 or (ii) the closing of the Company's initial registered public offering, the Company shall receive from any Holder or group of Holders of Registrable Securities, representing not less than 30% of the Registrable Securities then outstanding (assuming conversion of all shares of the Preferred then outstanding), a written request that the Company effect any registration, qualification or compliance with respect to all or a part of the Registrable Securities, the anticipated gross offering price of which would exceed $15,000,000, the Company will: (x) promptly give written notice of the proposed registration, qualification, or compliance to all other Holders; and (y) as soon as practicable, use its best efforts to effect, following receipt of such request, such registration, qualification or compliance (including, without limitation, the execution of an undertaking to file post- effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within 15 days after receipt of such written notice from the Company; provided, however, that -------- ------- the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section: (A) for so long as any shares of Series C Preferred are outstanding, unless such request is first approved in writing by at least two- thirds of the shares of the then outstanding Series C Preferred; (B) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; (C) prior to 90 days immediately following the effective date of any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan); -4-

(D) after the Company has effected two (2) such registrations pursuant to this Section, such registrations have been declared or ordered effective and the securities offered pursuant to such registrations have been sold. Subject to the foregoing clauses, the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of any Holder or Holders. If, however, the Company shall furnish to the Holder or Holders requesting a registration statement pursuant to this Section a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period of not more than 90 days after receipt of the request of the Holder or Holders requesting such registration; provided, however, that the Company may not utilize this -------- ------- right more than once in any 12-month period. (b) Underwriting. If the Holders intend to distribute the Registrable ------------ Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request and the Company shall include such information in its written notice to the other Holders. The right of any Holder to registration pursuant to this Section shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Holders of a majority of the Registrable Securities proposed by such Holders to be distributed through such underwriting. Notwithstanding any other provision of this Section, if the managing underwriter advises the Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then, subject to the provisions of Section 1.5(a), the Company shall so advise all Holders and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated first among all Holders of Series C Preferred requesting inclusion in the registration on a pro rata basis, and then, to the extent all such shares have not been fully allocated to the Holders of Series C Preferred, among any holders of Series B Preferred requesting inclusion in the registration in proportion, as nearly as practicable, to the respective amounts of Registrable Securities originally requested by such Holders of Series B Preferred to be included in the registration statement. No Registrable Securities excluded from the underwriting by reason of the managing underwriter's marketing limitation shall be included in such registration. If the managing underwriter has not limited the number of Registrable Securities to be underwritten, the Company may include securities for its own account or for the account of others in such registration if the underwriter so agrees and if the number of Registrable Securities which would otherwise have been included in such registration and underwriting will not thereby be limited, and provided that the Company or the other selling shareholders shall bear an equitable share of the Registration Expenses in connection with such registration and underwriting. -5-

If any Holder of Registrable Securities disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the other Holders. The Registrable Securities and/or other securities so withdrawn shall also be withdrawn from registration; provided, however, that if by the withdrawal of such Registrable -------- ------- Securities a greater number of Registrable Securities held by other Holders may be included in such registration (up to the maximum of any limitation imposed by the underwriters), then the Company shall offer to all Holders who have included Registrable Securities in the registration the right to include additional Registrable Securities in the same proportion used in determining the underwriter limitation in this Section. If the registration does not become effective due to the withdrawal of Registrable Securities, then either (1) the Holders requesting registration shall reimburse the Company for expenses incurred in complying with the request, or (2) the aborted registration shall be treated as effected for purposes of Section 1.5(a)(D). 1.6 Company Registration. -------------------- (a) Notice of Registration. If the Company shall determine to ---------------------- register any of its securities, either for its own account or the account of a security holder or holders exercising their respective demand registration rights, other than: (i) the Company's initial registered public offering of shares for its own account; (ii) a registration relating solely to employee benefit plans; or (iii) a registration relating solely to a transaction pursuant to Rule 145 promulgated under the Securities Act; the company will: (x) promptly give to each Holder written notice thereof; and (y) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within 15 days after receipt of such written notice from the Company, by and Holder or Holders; provided, however, that the Company's -------- ------- obligation under this Section 1.6 shall terminate after the Company has effected two (2) such registrations pursuant to which the Holders have been provided with the opportunity to register their Registrable Securities under this Section, such registrations have been declared or ordered effective and the securities offered pursuant to such registrations have been sold. (b) Cut-back and Allocation. Notwithstanding any other provision of ----------------------- this Section, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit the number of Registrable Securities to be included in the registration and underwriting; provided, however, that any such limitation shall -------- ------- not prevent the Holders of Registrable Securities requesting to be included in such registration from including Registrable Securities representing up to 20% of the total number of shares and provided, further, that any such limitation -------- ------- shall be applied to all other selling shareholders prior to application to the Holders. In such event, the Company shall so advise all Holders of Registrable Securities which would otherwise be registered and underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated first among the Holders of Series C Preferred on a pro rata basis, and then, to the extent all such -6-

shares have not been fully allocated to the Holders of Series C Preferred, to the Holders of Series B Preferred on a pro rata basis. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. (c) The Company shall have the right to terminate or withdraw any registration initiated by it under this Section prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. 1.7 Registration on Form S-3. The Company shall use its best efforts to ------------------------ qualify for registration on Form S-3, and to that end, the Company shall comply with the reporting requirements of the Exchange Act. After the Company has qualified for the use of Form S-3, each Holder shall have the right to request an unlimited number of registrations on Form S-3 (such requests shall be in writing and shall state the number of shares of Registrable Securities to be disposed of and the intended method of disposition of such shares by each such Holder), subject to the following limitations: (i) the Company shall not be obligated to cause a registration on Form S-3 to become effective prior to 90 days following the effective date of a Company-initiated registration (other than a registration effected solely to qualify an employee benefit plan or to effect a business combination pursuant to Rule 145); (ii) the Company shall not be obligated to cause a registration on Form S-3 to become effective prior to expiration of 90 days following the effective date of the most recent registration pursuant to a request under Section 5 of this Agreement or pursuant to a request by a holder of registration rights under any other agreement of the Company granting Form S-3 demand registration rights; (iii) the Company shall not be required to effect a registration on Form S-3 unless the Holder or Holders requesting registration propose to dispose of shares of Registrable Securities having an aggregate disposition price (before deduction of underwriting discounts and expenses of sale) of at least $1,000,000; and (iv) the Company shall not be required to maintain and keep any such registration on Form S-3 effective for a period equal to the shorter of (x) 30 days, or (y) that time reasonably necessary to permit the disposition of the Registrable Securities subject to such registration. The Company shall give notice to all Holders of the receipt of a request for registration pursuant to this Section and shall provide a reasonable opportunity for all such other Holders, to participate in the registration. Subject to the foregoing, the Company will use its best efforts to effect promptly the registration of all shares of Registrable Securities on Form S-3 to the extent requested by the Holder or Holders thereof for purposes of disposition. -7-

1.8 Expenses of Registration. All Registration Expenses incurred in ------------------------ connection with any registration, qualification or compliance pursuant to Section 1.5, Section 1.6, or Section 1.7 shall be borne by the Company. All Selling Expenses relating to securities registered by the Holders shall be borne by the Holders of such securities pro rata on the basis of the number of shares so registered. Notwithstanding the foregoing, the Company shall not be required to pay for Registration Expenses pursuant to Section 1.5 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (which Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.5; provided, however, that if at the time of such withdrawal, the holders have - -------- ------- learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request, then the Holders shall not be required to pay any of such Registration Expenses and shall retain their rights pursuant to Section 1.5. 1.9 Registration Procedures. In the case of each registration, ----------------------- qualification or compliance effected by the Company pursuant to this Agreement, the Company will keep each Holder advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. At its expense the Company will furnish such number of prospectuses and other documents incident thereto as a Holder from time to time may reasonably request. 1.10 Termination of Registration Rights. The registration rights granted ---------------------------------- pursuant to this Agreement shall terminate as to any Holder of less than 100,000 shares of Registrable Securities, at such time after the Company's initial public offering as the Registrable Securities held by such Holder may be sold within any three month period pursuant to Rule 144(k); and as to any Holder of 100,000 or more shares of Registrable Securities, on the third anniversary of the date on which the Company first becomes subject to the reporting requirements under Section 12 of the Securities Exchange Act of 1934, as amended. 1.11 Lock-up Agreement. In consideration for the Company agreeing to its ----------------- obligations under this Agreement, each Holder of Registrable Securities and each transferee pursuant to Section 1.15 hereof agrees (but only if each officer and director of the Company also agrees), in connection with the first registration of the Company's securities, upon request of the Company or the underwriters managing any underwritten offering of the Company's securities, not to sell, make any short sale of, loan, grant any option for the purchase of or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as the Company or the underwriters may specify. Each Holder agrees that the Company may instruct its transfer agent to place stop-transfer notations in its records to enforce the provisions of this Section. This Section 1.11 shall supersede any conflicting provision of Section 1.5 or Section 1.7 above. -8-

1.12 Indemnification. --------------- (a) The Company will indemnify each Holder, each of its officers, directors and partners and such Holder's legal counsel and independent accountants, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Act or the Exchange Act or securities act of any state or any rule or regulation thereunder, and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each such Holder, each of its officers, directors and partners and such Holder's legal counsel and independent accountants, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder or underwriter and stated to be specifically for use therein; and provided, further, that the Company will not -------- ------- be liable to any such person or entity with respect to any such untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus that is corrected in the final prospectus filed with the Commission pursuant to Rule 424(b) promulgated under the Securities Act (or any amendment or supplement to such prospectus) if the person asserting any such loss, claim, damage or liability purchased securities but was not sent or given a copy of the prospectus (as amended or supplemented) at or prior to the written confirmation of the sale of such securities to such person in any case where such delivery of the prospectus (as amended or supplemented) was a result of the Company's failure to provide such prospectus (as amended or supplemented). (b) Each Holder will, severally and not jointly, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers and its legal counsel and independent accountants, each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers, directors and partners and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) -9-

arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such Holders, such directors, officers, legal counsel, independent accountants, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder and stated to be specifically for use therein; provided, however, that the -------- ------- obligations of such Holders hereunder shall be limited to an amount equal to the proceeds, net of underwriting discounts and commissions but not expenses, to each such Holder of Registrable Securities sold as contemplated herein. (c) Each party entitled to indemnification under this Section (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party's expense, and provided further that the failure of any Indemnified Party -------- ------- to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, except to the extent, but only to the extent, that the Indemnifying Party's ability to defend against such claim or litigation is impaired as a result of such failure to give notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. (d) If the indemnification provided for in this Section 1.12 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. In no event shall any contribution by a Holder -10-

under this Section 1.12(d) exceed the proceeds, net of underwriting discounts and commissions but not expenses, from the offering received by such Holder. 1.13 Information by Holder. The Holder or Holders of Registrable --------------------- Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders and the distribution proposed by such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement. 1.14 Rule 144 Reporting. With a view to making available the benefits of ------------------ certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Securities to the public without registration, after such time as a public market exists for the Common Stock of the Company, the Company agrees to use its best efforts to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 promulgated under the Securities Act, at all times after the effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and (c) furnish to Holders upon request a written statement as to its compliance with the reporting requirements of Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration. 1.15 Transfer of Rights. Provided that the Company is given prior written ------------------ notice of such assignment, the rights granted hereunder to cause the Company to register securities may be assigned to (i) a transferee or assignee who acquires at least 50,000 shares of Registrable Securities (appropriately adjusted for stock splits, recapitalizations and like after the date hereof) and (ii) any affiliate or constituent partner of a Purchaser. SECTION 2. Information Rights ------------------ 2.1 Financial Statements and Reports to Shareholders. The Company will ------------------------------------------------ maintain true books and records of accounts in which full and correct entries will be made of all its business -11-

transactions pursuant to a system of accounting established and administered in accordance with generally accepted accounting principles consistently applied, and will set aside on its books all such proper accruals and reserves as shall be required under generally accepted accounting principles consistently applied. A Holder of 125,000 shares of the Company's originally issued Series C Preferred Stock shall be entitled to receive such interim financial statements as are prepared for the Company's Board of Directors. As long as a Holder of Series B Preferred (together with any affiliate thereof) or a transferee permitted under Section 1.15 hereof holds not less than 500,000 shares of the Company's originally issued Series B Preferred or Common Stock issued upon conversion thereof, or as long as a Holder of Series C Preferred (together with any affiliate thereof) or a transferee permitted under Section 1.15 hereof holds not less than 62,500 shares of the Company's originally issued Series C Preferred or Common Stock issued upon conversion thereof, the Company will deliver to such Purchasers: (a) As soon as practicable after the end of each fiscal year of the Company, and in any event within 90 days thereafter, an audited consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of such year and audited consolidated statements of income, shareholders' equity and cash flows for such year, which year-end financial reports shall be in reasonable detail prepared in accordance with generally accepted accounting procedures and shall be accompanied by the opinion of independent public accountants of recognized national standing selected by the Company; and (b) As soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company and in any event within 45 days thereafter, (i) a consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of each such quarterly period, (ii) consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such period and for the current fiscal year to date, all prepared in accordance with generally accepted accounting principles, all in reasonable detail, subject to changes resulting from year-end audit adjustments, and signed by the principal financial or accounting officer of the Company. (c) Each Holder agrees that any information obtained by the Holder pursuant to this Section which is reasonably perceived to be proprietary to the Company or otherwise confidential will not, unless such Holder shall otherwise be required by law or the rules of any national securities exchange or association, be disclosed without the prior written consent of the Company. Each Holder further acknowledges and understands that any information will not be utilized by the Holder in connection with purchases and sales of the Company's securities except in compliance with applicable state and federal antifraud statutes. 2.2 Use of Information; Termination of Covenants. No Holder shall enter -------------------------------------------- into any transaction for the purchase or sale of any securities of the Company with any other person unless such Holder has made any material information actually obtained by such Holder pursuant to this Section 2 available to such other person. The covenants of the Company and the Holders set forth in this Section 2 shall be terminated and be of no further force or effect upon the earlier of (a) the date when a Registration Statement filed by the Company under the Securities Act, in connection with the -12-

first public offering of its securities (other than either a public offering limited solely to employees of the Company or an offering pursuant to Rule 145 under the Securities Act) becomes effective and (b) the date the Company registers any securities under the Securities Exchange Act of 1934 (the "1934 Act"), and such covenants shall terminate as to any Holder as of the date such Holder no longer holds any shares of the capital stock of the Company. SECTION 3. Right of Participation ---------------------- 3.1 Purchasers' Right of Participation. ---------------------------------- (a) Right of Participation. Subject to the terms and conditions ---------------------- contained in this Section 3.1, the Company hereby grants to each holder of not less than 500,000 shares of the Company's originally issued Series B Preferred or Common Stock issued upon conversion thereof and each holder of Series C Preferred or Common Stock issued upon conversion thereof (each a "Major Purchaser") the right of participation to purchase its Pro Rata Portion of any New Securities (as defined in subsection 3.1(b)) which the Company may, from time to time, propose to sell and issue. A Major Purchaser's "Pro Rata Portion" for purposes of this Section 3.1 is the ratio that (x) the sum of the number of shares of the Company's Common Stock then held by such Major Purchaser and the number of shares of the Company's Common Stock issuable upon conversion of the Preferred Stock then held by such Major Holder, bears to (y) the sum of the total number of shares of the Company's Common Stock then outstanding, the number of shares of the Company's Common Stock issuable upon the exercise of any issued and outstanding rights, options or warrants, and the number of shares of the Company's Common Stock issuable upon conversion of the then outstanding Preferred Stock. (b) Definition of New Securities. Except as set forth below, "New ---------------------------- Securities" shall mean any shares of capital stock of the Company, including Common Stock and Preferred Stock, whether authorized or not, and rights, options or warrants to purchase said shares of Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may become, convertible into said shares of Common Stock or Preferred Stock. Notwithstanding the foregoing, "New Securities" does not include (i) the Common Shares or the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock or any shares of Common Stock issued upon conversion thereof, (ii) securities offered to the public generally pursuant to a registration statement under the Securities Act, (iii) securities issued pursuant to the acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or shares or other reorganization whereby the Company or its shareholders own not less than a majority of the voting power of the surviving or successor corporation, (iv) shares of the Company's Common Stock or related options or warrants convertible into or exercisable for such Common Stock issued to employees, officers and directors of, and consultants to, the Company, pursuant to any arrangement approved by the Board of Directors of the Company, (v) shares of the Company's Common Stock or related options convertible into or exercisable for such Common Stock issued to banks, commercial lenders, lessors and other -13-

financial institutions in connection with the borrowing of money or the leasing of equipment by the Company, (vi) stock issued pursuant to any rights or agreements, including, without limitation, convertible securities, options and warrants, provided that the Company shall have complied with the rights of participation established by this Section 3.1 with respect to the initial sale or grant by the Company of such rights or agreements, or (vii) stock issued in connection with any stock split, stock dividend or recapitalization by the Company. (c) Notice of Right. In the event the Company proposes to undertake --------------- an issuance of New Securities, it shall give each Major Purchaser written notice of its intention, describing the type of New Securities and the price and terms upon which the Company proposes to issue the same. Each Major Purchaser shall have twenty (20) days from the date of receipt of any such notice to agree to purchase shares of such New Securities (up to the amount referred to in subsection 3.1(a)), for the price and upon the terms specified in the notice, by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. (d) Exercise of Right. If any Major Purchaser exercises its right of ----------------- participation under this Agreement, the closing of the purchase of the New Securities with respect to which such right has been exercised shall take place within fifteen (15) calendar days after the Major Purchaser gives notice of such exercise, which period of time shall be extended in order to comply with applicable laws and regulations. Upon exercise of such right of participation, the Company and the Major Purchaser shall be legally obligated to consummate the purchase contemplated thereby and shall use their best efforts to secure any approvals required in connection therewith. (e) Lapse and Reinstatement of Right. In the event a Major Purchaser -------------------------------- fails to exercise the right of participation provided in this Section 3.1 within said twenty (20) day period, the Company shall have ninety (90) days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within sixty (60) days from the date of said agreement) to sell the New Securities not elected to be purchased by such Major Purchaser at the price and upon the terms no more favorable to the Major Purchasers of such securities than specified in the Company's notice. In the event the Company has not sold the New Securities or entered into an agreement to sell the New Securities within said ninety (90) day period (or sold and issued New Securities in accordance with the foregoing within sixty (60) days from the date of said agreement), the Company shall not thereafter issue or sell any New Securities without first offering such securities to the Major Purchasers in the manner provided above. (f) Assignment. The right of the Major Purchasers to purchase any ---------- part of the New Securities may be assigned in whole or in part to any partner, subsidiary, affiliate or shareholder of a Major Purchaser, or other persons or organizations who acquire the lesser of (i) 50,000 or more shares of Restricted Securities (as adjusted for stock splits and the like) or (ii) all of the Restricted Securities then owned by such Major Purchaser. (g) Termination of Participation Right. The rights of participation ---------------------------------- granted under Section 3.1 of this Agreement shall terminate on and be of no further force or effect upon the earlier of (i) the consummation of the Company's sale of its Common Stock in an underwritten public -14-

offering pursuant to an effective registration statement filed under the Securities Act immediately subsequent to which the Company shall be obligated to file annual and quarterly reports with the Commission pursuant to Section 13 or 1.5(d) of the Exchange Act or (ii) the registration by the Company of a class of its equity securities under Section 12(b) or 12(g) of the Exchange Act. 4. Governing Law. This Agreement shall be governed by and interpreted in ------------- accordance with the laws of the State of California, without regard to choice of law provisions. The parties hereto agree to submit to the jurisdiction of the federal and state courts of the State of California with respect to the breach or interpretation of this Agreement or the enforcement of any and all rights, duties, liabilities, obligations, powers and other relations between the parties arising under this Agreement. 5. Entire Agreement. This Agreement constitutes the full and entire ---------------- understanding among the parties regarding the subject matter herein. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 6. Notices, etc. All notices and other communications required or permitted ------------ hereunder shall be in writing and shall be deemed effectively given upon delivery to the party to be notified in person or by courier service or five (5) days after deposit with the United States mail, by registered or certified mail, postage prepaid, addressed (a) if to a holder of any Registrable Securities, to such address as such holder shall have furnished the Company in writing, or, until any such holder so furnishes an address to the company, then to and at the address of the last holder of such securities who has so furnished an address to the Company, or (b) if to the Company, to its address set forth on the first page of this Agreement and addressed to the attention of the Chief Financial Officer, or at such other address as the Company shall have furnished to the Holders in writing. If such notice requires or solicits a response from such party, the notice shall include the time limit within which the response must be received and the consequences of not responding within such time limit. 7. Amendment. Any provision of this Agreement may be amended, waived or --------- modified upon the written consent of (i) the Company, (ii) holders of greater than 50% of the then outstanding shares of Series B Preferred or Common Stock issued upon conversion thereof, and (iii) holders of at least 66-2/3% of the then outstanding shares of Series C Preferred or Common Stock issued upon conversion thereof. Any Holder may waive any of his or her rights or the Company's obligations hereunder without obtaining the consent of any other person. 8. Limitations on Subsequent Registration Rights. From and after the date of --------------------------------------------- this Agreement, the Company shall not enter into any agreement granting any holder or prospective holder of any securities of the Company registration rights with respect to such securities without the prior written consent of (i) the Company, (ii) holders of greater than 50% of the then outstanding shares of Series B Preferred or Common Stock issued upon conversion thereof, and (iii) holders of at least 66-2/3% of the then outstanding shares of Series C Preferred or Common Stock issued upon conversion thereof unless (1) such new registration rights, including standoff obligations, are on a pari passu basis with those ---- ----- rights of the Holders hereunder, or (2) such new registration rights, including standoff obligations, are subordinate to the registration rights granted the Holders -15-

hereunder; provided, however, that the inclusion of such holder's securities -------- ------- shall not reduce the amount of Registrable Securities which are included in any registration for which the Holders hold registration rights pursuant to this Agreement. 9. Supersession of Prior Agreement. This Agreement shall supersede in its ------------------------------- entirety that certain Prior Agreement. By execution of this Agreement, each party to the Prior Agreement waives any rights of first refusal it may otherwise have had under Section 4 of the Prior Agreement (including any rights to prior notice) with respect to the Company's sale of up to 1,500,000 shares of its Series C Preferred Stock pursuant to that certain Series C Preferred Stock Purchase Agreement dated on or around the date hereof. This Agreement shall be effective at such time as Holders representing a majority in interest of the Series B Preferred Stock outstanding at the date of this Agreement shall have executed and delivered a signed counterpart of this Agreement. 10. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be an original and all of which together shall constitute one instrument. -16-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" AZTECH SYSTEMS LTD -------------------------------------- (name of entity) By: /s/ Michael Mun ------------------------------------- (signature) Michael Mun -------------------------------------- (print name) President/CEO ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: _____________________________________ (signature) _____________________________________ (print name) _______________________________________ (title) -17-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" WK Technology Fund ------------------------------------- (name of entity) By: /s/ Wen Chung Ko ------------------------------------- (signature) Wen Chung Ko ------------------------------------- (print name) Chairman ------------------------------------- (title) "PRIOR RIGHTS HOLDERS" WK Technology Fund ------------------------------------- (name of entity) By: /s/ Wen Chung Ko ------------------------------------- (signature) Wen Chung Ko ------------------------------------- (print name) Chairman ------------------------------------- (title) -18-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen -------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" WK Technology Fund II -------------------------------------- (name of entity) By: /s/ Wen Chung Ko -------------------------------------- (signature) Wen Chung Ko -------------------------------------- (print name) Chairman -------------------------------------- (title) "PRIOR RIGHTS HOLDERS" WK Technology Fund II -------------------------------------- (name of entity) By: /s/ Wen Chung Ko -------------------------------------- (signature) Wen Chung Ko -------------------------------------- (print name) Chairman -------------------------------------- (title) -19-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" WK Technology Fund III ------------------------------------- (name of entity) By: /s/ Wen Chung Ko ------------------------------------- (signature) Wen Chung Ko ------------------------------------- (print name) Chairman ------------------------------------- (title) "PRIOR RIGHTS HOLDERS" WK Technology Fund III ------------------------------------- (name of entity) By: /s/ Wen Chung Ko ------------------------------------- (signature) Wen Chung Ko ------------------------------------- (print name) Chairman ------------------------------------- (title) -20-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen -------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" POWER WORLD FUND, INC. -------------------------------------- (name of entity) By: /s/ Dr. Frank Huang -------------------------------------- (signature) Dr. Frank Huang -------------------------------------- (print name) Chairman -------------------------------------- (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: ______________________________________ (signature) ______________________________________ (print name) ______________________________________ (title) -21-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen -------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" E-Tech, Inc. -------------------------------------- (name of entity) By: /s/ Young-Lim Su -------------------------------------- (signature) Young-Lim Su -------------------------------------- (print name) Senior Vice President -------------------------------------- (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: ______________________________________ (signature) ______________________________________ (print name) ______________________________________ (title) -22-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" DYNALINK INTERNATIONAL CORP. -------------------------------------- (name of entity) By: /s/ Sing Long Du ------------------------------------- (signature) SING LONG DU -------------------------------------- (print name) Director -------------------------------------- (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: ______________________________________ (signature) _______________________________________ (print name) _______________________________________ (title) -23-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ Sing-Long Du ------------------------------------- (signature) Sing-Long Du -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: /s/ Sing-Long Du -------------------------------------- (signature) /s/ Sing-Long Du --------------------------------------- (print name) _______________________________________ (title) -24-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" _____________________________________ (name of entity) By: /s/ Cheng Kuei Lin ------------------------------------- (signature) Cheng Kuei Lin -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: /s/ Cheng Kuei Lin -------------------------------------- (signature) Cheng Kuei Lin --------------------------------------- (print name) _______________________________________ (title) -25-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" /s/ Chin-Ting Chiou -------------------------------------- (name of entity) By: /s/ Chin-Ting Chiou ------------------------------------- (signature) Chin-Ting Chiou -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: /s/ Chin-Ting Chiou -------------------------------------- (signature) Chin-Ting Chiou --------------------------------------- (print name) _______________________________________ (title) -26-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" /s/ Shiuh Luen Liu -------------------------------------- (name of entity) By: /s/ Shiuh Luen Liu ------------------------------------- (signature) Shiuh Luen Liu -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: /s/ Shiuh Luen Liu -------------------------------------- (signature) SHIUH LUEN LIU --------------------------------------- (print name) _______________________________________ (title) -27-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" ______________________________________ (name of entity) By: /s/ Lai Wang Shu Hsia ------------------------------------- (signature) Lai Wang Shu Hsia -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: ______________________________________ (signature) ______________________________________ (print name) _______________________________________ (title) -28-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" ______________________________________ (name of entity) By: /s/ Jeang Jiann-Cherng ----------------------------------- (signature) Jeang Jiann-Cherng ------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: /s/ Jeang Jiann-Cherng ---------------------------------- (signature) Jeang Jiann-Cherng -------------------------------------- (print name) ______________________________________ (title) -29-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" Norman Basmajian --------------------------------------- (name of entity) By: /s/ Norman Basmajian --------------------------------------- (signature) Norman Basmajian --------------------------------------- (print name) --------------------------------------- (title) "PRIOR RIGHTS HOLDERS" --------------------------------------- (name of entity) By: --------------------------------------- (signature) --------------------------------------- (print name) --------------------------------------- (title) -30-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ Barbara A. Campbell ------------------------------------- (signature) Barbara A. Campbell -------------------------------------- (print name) -------------------------------------- (title) "PRIOR RIGHTS HOLDERS" -------------------------------------- (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) --------------------------------------- (title) -31-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" ------------------------------------- (name of entity) By: /s/ Alan Carlson ------------------------------------- (signature) Alan Carlson ------------------------------------- (print name) ------------------------------------- (title) "PRIOR RIGHTS HOLDERS" ------------------------------------- (name of entity) By: -------------------------------------- (signature) -------------------------------------- (print name) -------------------------------------- (title) -32-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ Abraham Chu -------------------------------------- (signature) Abraham Chu -------------------------------------- (print name) -------------------------------------- (title) "PRIOR RIGHTS HOLDERS" -------------------------------------- (name of entity) By: -------------------------------------- (signature) -------------------------------------- (print name) -------------------------------------- (title) -33-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" GANATERRA CORPORATION N.V. ------------------------------------- (name of entity) By: /s/ Russell S. Melina ------------------------------------- (signature) Russell S. Melina -------------------------------------- (print name) Attorney - in - Fact -------------------------------------- (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: ______________________________________ (signature) _______________________________________ (print name) _______________________________________ (title) -34-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" ______________________________________ (name of entity) By: /s/ Gerald T. Kennedy ------------------------------------- (signature) Gerald T. Kennedy -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: ______________________________________ (signature) _______________________________________ (print name) _______________________________________ (title) -35-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" ______________________________________ (name of entity) By: /s/ William C. Hardy ------------------------------------- (signature) William C. Hardy -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: ______________________________________ (signature) _______________________________________ (print name) _______________________________________ (title) -36-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" LEYCORP, INC. -------------------------------------- (name of entity) By: /s/ G.A. Leyendecker ------------------------------------- (signature) G.A. Leyendecker -------------------------------------- (print name) President ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) _______________________________________ (title) -37-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" ______________________________________ (name of entity) By: /s/ Mark A. Martin ------------------------------------- (signature) Mark A. Martin -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: ______________________________________ (signature) _______________________________________ (print name) _______________________________________ (title) -38-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ---------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" ________________________________________ (name of entity) By: /s/ Gaylen D. Miller/ Glenna R. Miller ---------------------------------------- (signature) Gaylen D. Miller/ Glenna R. Miller -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: ______________________________________ (signature) _______________________________________ (print name) _______________________________________ (title) -39-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" ______________________________________ (name of entity) By: /s/ Robert Moody ------------------------------------- (signature) Robert Moody -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: _____________________________________ (signature) _____________________________________ (print name) _______________________________________ (title) -40-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ William C. Ossie ------------------------------------- (signature) William C. Ossie -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) _______________________________________ (title) -41-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ James R. Ridings ------------------------------------- (signature) James R. Ridings -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) _______________________________________ (title) -42-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ Robert L. Rosenthal ------------------------------------- (signature) Robert L. Rosenthal -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) _______________________________________ (title) -43-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ Gregory D. Pikul ------------------------------------- (signature) Gregory D. Pikul -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) _______________________________________ (title) -44-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ Fernando Savati ------------------------------------- (signature) Fernando Savati -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) _______________________________________ (title) -45-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ James L. Schulze ------------------------------------- (signature) James L. Schulze -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) _______________________________________ (title) -46-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ Benet Stenbeck ------------------------------------- (signature) Benet Stenbeck -------------------------------------- (print name) President -------------------------------------- (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) _______________________________________ (title) -47-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ Quentin Villa ------------------------------------- (signature) Quentin Villa -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) _______________________________________ (title) -48-

[AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Registration Rights Agreement as of the date set forth above. "COMPANY" PC-TEL, INC. A California corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PURCHASERS OF SERIES C PREFERRED" -------------------------------------- (name of entity) By: /s/ Kirk A. Woloszyn ------------------------------------- (signature) Kirk A. Woloszyn -------------------------------------- (print name) ______________________________________ (title) "PRIOR RIGHTS HOLDERS" ______________________________________ (name of entity) By: -------------------------------------- (signature) --------------------------------------- (print name) _______________________________________ (title) -49-

Exhibit 4.9 PC-TEL, INC. ADDENDUM TO AMENDED AND RESTATED RIGHTS AGREEMENT This Addendum (the "Addendum") to the Amended and Restated Rights Agreement dated December 31, 1997 (the "Rights Agreement") is made as of February 1, 1999 by and between PC-Tel, Inc., a Delaware corporation (the "Company") and PFF Bank and Trust, Inc., a California corporation ("PFF"). RECITALS WHEREAS, in consideration for a loan to the Company, the Company has issued PFF a warrant to purchase 10,000 shares of Series C Preferred Stock of the Company at $8.00 per share ("Warrant") WHEREAS, in addition to the Warrant, the Company has agreed to grant PFF certain registration and other rights. WHEREAS, the Company and holders of the Company's Series B Preferred Stock and Series C Preferred Stock (the "Prior Rights Holders") previously entered into the Rights Agreement. NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows: 1. The Company agrees to grant PFF those rights as set forth in the Rights Agreement as attached as Exhibit A, under all of the terms and conditions --------- of the Rights Agreement. 2. In accordance with Section 8 of the Rights Agreement, the registration rights granted to PFF are on a pari passu basis with the rights of the Prior Rights Holders. Should the underwriters impose a limit to the number of Registrable Securities (as defined in the Rights Agreement) that may be included in a registration statement, PFF's registration rights shall be subordinate to the registration rights granted to the Prior Rights Holders. 3. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which together shall constitute one instrument.

[ADDENDUM TO AMENDED AND RESTATED RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the date set forth above. "COMPANY" PC-TEL, INC. A Delaware corporation By: /s/ Peter Chen ------------------------------------ Peter Chen, President & Chief Executive Officer "PFF" PFF Bank & Trust --------------------------------------- (name of entity) By: /s/ Kenneth O. Wentzel ------------------------------------ (signature) /s/ Kenneth O. Wentzel --------------------------------------- (print name) Vice President --------------------------------------- (title) -2-

Exhibit 4.10 PC-TEL, INC. ADDENDUM TO AMENDED AND RESTATED RIGHTS AGREEMENT This Addendum (the "Addendum") to the Amended and Restated Rights Agreement dated December 31, 1997 (the "Rights Agreement") is made as of February 1, 1999 by and between PC-Tel, Inc., a Delaware corporation (the "Company") and Pentech Financial Services, Inc., a California corporation ("Pentech"). RECITALS WHEREAS, in consideration for financial services rendered, the Company has issued Pentech a warrant to purchase 190,000 shares of Series C Preferred Stock of the Company at $8.00 per share ("Warrant") WHEREAS, in addition to the Warrant, the Company has agreed to grant Pentech certain registration and other rights. WHEREAS, the Company and holders of the Company's Series B Preferred Stock and Series C Preferred Stock (the "Prior Rights Holders") previously entered into the Rights Agreement. NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows: 1. The Company agrees to grant Pentech those rights as set forth in the Rights Agreement as attached as Exhibit A, under all of the terms and conditions --------- of the Rights Agreement. 2. In accordance with Section 8 of the Rights Agreement, the registration rights granted to Pentech are on a pari passu basis with the rights of the Prior Rights Holders. Should the underwriters impose a limit to the number of Registrable Securities (as defined in the Rights Agreement) that may be included in a registration statement, Pentech's registration rights shall be subordinate to the registration rights granted to the Prior Rights Holders. 3. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which together shall constitute one instrument.

[ADDENDUM TO AMENDED AND RESTATED RIGHTS AGREEMENT] IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the date set forth above. "COMPANY" PC-TEL, INC. A Delaware corporation By: /s/ Peter Chen ------------------------------------- Peter Chen, President & Chief Executive Officer "PENTECH" Pentech Financial Services, Inc. ---------------------------------------- (name of entity) By: /s/ Benjamin E. Millerbis ------------------------------------- (signature) Benjamin E. Millerbis ---------------------------------------- (print name) President & CEO ---------------------------------------- (title) -2-

EXHIBIT 10.1 PC-TEL, INC. INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement") is effective as of _______________, 1999, by and between PC-Tel, Inc., a Delaware corporation (the "Company"), and __________ ("Indemnitee"). WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company and its related entities; WHEREAS, in order to induce Indemnitee to continue to provide services to the Company, the Company wishes to provide for the indemnification of, and advancement of expenses to, Indemnitee to the maximum extent permitted by law; WHEREAS, Indemnitee does not regard the current protection available as adequate under the present circumstances, and the Indemnitee and other directors, officers, employees, agents and fiduciaries of the Company may not be willing to continue to serve in such capacities without additional protection; WHEREAS, the Company and Indemnitee recognize the continued difficulty in obtaining liability insurance for the Company's directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance; WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited; and WHEREAS, in view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified by the Company as set forth herein; NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below. 1. Certain Definitions. ------------------- (a) "Change in Control" shall mean, and shall be deemed to have occurred if, on or after the date of this Agreement, (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more

than 50% of the total voting power represented by the Company's then outstanding Voting Securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of related transactions) all or substantially all of the Company's assets. (b) "Claim" shall mean any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other. (c) References to the "Company" shall include, in addition to PC-Tel, Inc., any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which PC-Tel, Inc. (or any of its wholly owned subsidiaries) is a party which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued. (d) "Expenses" shall mean any and all expenses (including attorneys' fees and all other costs, expenses and obligations incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, to be a witness in or to participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) of any Claim regarding any Indemnifiable Event and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement. (e) "Expense Advance" shall mean an advance payment of Expenses to Indemnitee pursuant to Section 3(a). -2-

(f) "Indemnifiable Event" shall mean any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity. (g) "Independent Legal Counsel" shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 2(c) hereof, who shall not have otherwise performed services for the Company or Indemnitee within the last three years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements). (h) References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to "serving at the request of the Company" shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement. (i) "Reviewing Party" shall mean any appropriate person or body consisting of a member or members of the Company's Board of Directors or any other person or body appointed by the Board of Directors who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel. (j) "Voting Securities" shall mean any securities of the Company that vote generally in the election of directors. 2. Indemnification. --------------- (a) Indemnification of Expenses. The Company shall indemnify --------------------------- Indemnitee to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any Claim by reason of (or arising in part out of) any Indemnifiable Event against Expenses, including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses. Such payment of Expenses shall be made by the Company as soon as practicable but in any event no later than five (5) business days after written demand by Indemnitee therefor is presented to the Company. (b) Reviewing Party. Notwithstanding the foregoing, (i) the --------------- obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 2(c) hereof is involved) that Indemnitee would not be permitted to be indemnified under -3-

applicable law, and (ii) the obligation of the Company to make an Expense Advance shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or -------- ------- thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any Expense Advance shall be unsecured and no interest shall be charged thereon. If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. Absent such litigation, any determination by the Reviewing Party shall be conclusive and binding on the Company and Indemnitee. (c) Change in Control. The Company agrees that if there is a Change ----------------- in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters thereafter arising concerning the rights of Indemnitee to payments of Expenses and Expense Advances under this Agreement or any other agreement or under the Company's Certificate of Incorporation or Bylaws as now or hereafter in effect, Independent Legal Counsel, if desired by Indemnitee, shall be selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. Notwithstanding any other provision of this Agreement, the Company shall not be required to pay Expenses of more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless (i) the Company otherwise determines or (ii) any Indemnitee shall provide a written statement setting forth in detail a reasonable objection to such Independent Legal Counsel representing other Indemnitees. (d) Mandatory Payment of Expenses. Notwithstanding any other ----------------------------- provision of this Agreement other than Section 10 hereof, to the extent that Indemnitee has been successful on the -4-

merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any Claim regarding any Indemnifiable Event, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection therewith. 3. Expenses; Indemnification Procedure. ----------------------------------- (a) Advancement of Expenses. The Company shall advance all Expenses ----------------------- incurred by Indemnitee. The advances to be made hereunder shall be paid by the Company to Indemnitee as soon as practicable but in any event no later than five (5) business days after written demand by Indemnitee therefor to the Company. Expenses incurred in defending any proceeding may be advanced by the Company prior to the final disposition of the proceeding upon receipt of an undertaking by or on behalf of Indemnitee to repay the Expenses incurred, if it shall be determined ultimately that Indemnitee is not entitled to be indemnified. (b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a -------------------------------- condition precedent to Indemnitee's right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. (c) No Presumptions; Burden of Proof. For purposes of this Agreement, -------------------------------- the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its --------------- equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law, shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. (d) Notice to Insurers. If, at the time of the receipt by the Company ------------------ of a notice of a Claim pursuant to Section 3(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies. (e) Selection of Counsel. In the event the Company shall be obligated -------------------- hereunder to pay the Expenses of any Claim the Company, if appropriate, shall be entitled to assume the -5-

defense of such Claim with counsel approved by Indemnitee (not to be unreasonably withheld) upon the delivery to Indemnitee of written notice of the Company's election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitee's separate counsel in any such Claim at Indemnitee's expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee's separate counsel shall be at the expense of the Company. 4. Additional Indemnification Rights; Nonexclusivity. ------------------------------------------------- (a) Scope. The Company hereby agrees to indemnify the Indemnitee to ----- the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder except as set forth in Section 9(a) hereof. (b) Nonexclusivity. The indemnification provided by this Agreement -------------- shall be in addition to any rights to which Indemnitee may be entitled under the Company's Certificate of Incorporation, its Bylaws, any other agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity. 5. No Duplication of Payments. The Company shall not be liable under this -------------------------- Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, provision of the Company's Certificate of Incorporation, bylaw or otherwise) of the amounts otherwise indemnifiable hereunder. 6. Partial Indemnification. If Indemnitee is entitled under any provision ----------------------- of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled. -6-

7. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge --------------------- that in certain instances, federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, agents or fiduciaries under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee. 8. Liability Insurance. To the extent the Company maintains liability ------------------- insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company's directors, if Indemnitee is a director; or of the Company's officers, if Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary. 9. Exceptions. Notwithstanding any other provision of this Agreement, the ---------- Company shall not be obligated pursuant to the terms of this Agreement: (a) Excluded Action or Omissions. To indemnify Indemnitee for acts, ---------------------------- omissions or transactions from which Indemnitee may not be relieved of liability under applicable law. (b) Claims Initiated by Indemnitee. To indemnify or advance expenses ------------------------------ to Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, except (i) with respect to actions or proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement or insurance policy or under the Company's Certificate of Incorporation or Bylaws now or hereafter in effect relating to Claims for Indemnifiable Events, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such Claim, or (iii) as otherwise required under Section 145 of the Delaware General Corporation Law, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be. (c) Lack of Good Faith. To indemnify Indemnitee for any expenses ------------------ incurred by the Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous. (d) Claims Under Section 16(b). To indemnify Indemnitee for expenses -------------------------- and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute. 10. Period of Limitations. No legal action shall be brought and no cause --------------------- of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such -7-

two-year period; provided, however, that if any shorter period of limitations is -------- ------- otherwise applicable to any such cause of action, such shorter period shall govern. 11. Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall constitute an original. 12. Binding Effect; Successors and Assigns. This Agreement shall be -------------------------------------- binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect, and whether by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary (as applicable) of the Company or of any other enterprise at the Company's request. 13. Attorneys' Fees. In the event that any action is instituted by --------------- Indemnitee under this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee with respect to such action, regardless of whether Indemnitee is ultimately successful in such action, and shall be entitled to the advancement of Expenses with respect to such action, unless as a part of such action a court of competent jurisdiction over such action determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee in defense of such action (including costs and expenses incurred with respect to Indemnitee's counterclaims and cross-claims made in such action), and shall be entitled to the advancement of Expenses with respect to such action, unless as a part of such action a court having jurisdiction over such action determines that each of Indemnitee's material defenses to such action were made in bad faith or were frivolous. 14. Notice. All notices, requests, demands and other communications under ------ this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and signed for by the party addressed, on the date of such delivery, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice. 15. Consent to Jurisdiction. The Company and Indemnitee each hereby ----------------------- irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of -8-

Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim. 16. Severability. The provisions of this Agreement shall be severable in ------------ the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 17. Choice of Law. This Agreement shall be governed by and its provisions ------------- construed and enforced in accordance with the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within the State of Delaware. 18. Subrogation. In the event of payment under this Agreement, the Company ----------- shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights. 19. Amendment and Termination. No amendment, modification, termination or ------------------------- cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. 20. Integration and Entire Agreement. This Agreement sets forth the entire -------------------------------- understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto. 21. No Construction as Employment Agreement. Nothing contained in this --------------------------------------- Agreement shall be construed as giving Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries or affiliated entities. -9-

IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written. PC-TEL, INC. By: ----------------------------------- Title: -------------------------------- Address: 70 Rio Robles Drive San Jose, CA 95134 (408) 965-2194 AGREED TO AND ACCEPTED INDEMNITEE: -------------------------------------------- (signature) -------------------------------------------- (name of Indemnitee) -------------------------------------------- -------------------------------------------- (address) -10-

Exhibit 10.2 PC-TEL, INC. 1995 STOCK PLAN 1. Purposes of the Plan. The purposes of this Stock Plan are to attract and -------------------- retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants of the Company and its Subsidiaries and to promote the success of the Company's business. Options granted under the Plan may be incentive stock options (as defined under Section 422 of the Code) or non-statutory stock options, as determined by the Administrator at the time of grant of an option and subject to the applicable provisions of Section 422 of the Code, as amended, and the regulations promulgated thereunder. 2. Definitions. As used herein, the following definitions shall apply: ----------- (a) "Administrator" means the Board or any of its Committees appointed ------------- pursuant to Section 4 of the Plan. (b) "Board" means the Board of Directors of the Company. ----- (c) "Code" means the Internal Revenue Code of 1986, as amended. ---- (d) "Committee" means a Committee appointed by the Board of Directors in --------- accordance with Section 4 of the Plan. (e) "Common Stock" means the Common Stock of the Company. ------------ (f) "Company" means PC-Tel, Inc., a California corporation. ------- (g) "Consultant" means any person, including an advisor, who is engaged by ---------- the Company or any Parent or Subsidiary to render services and is compensated for such services, and any director of the Company whether compensated for such services or not provided that if and in the event the Company registers any class of any equity security pursuant to the Exchange Act, the term Consultant shall thereafter not include directors who are not compensated for their services or are paid only a director's fee by the Company. (h) "Continuous Status as an Employee or Consultant" means that the ---------------------------------------------- employment or consulting relationship is not interrupted or terminated by the Company, any Parent or Subsidiary. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of: (i) any leave of absence approved by the Company, including sick leave, military leave, or any other personal leave; provided, however, that for purposes of Incentive Stock Options, any such leave may not exceed ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract (including certain Company policies) or statute; provided, further, that on the ninety-first day of any such leave (where reemployment is not guaranteed by contract or statute) the Optionee's Incentive Stock Option shall automatically convert to a Nonstatutory Stock Option; or (ii) transfers between locations of the Company or between the Company, its Parent, its Subsidiaries or its successor (i) "Employee" means any person, including officers and directors, employed -------- by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company. (j) "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ (k) "Fair Market Value" means, as of any date, the value of Common Stock ----------------- determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system including without limitation the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales 1

price for such stock (or the closing bid, if no sales were reported, as quoted on such exchange or system for the last market trading day prior to the time of determination) as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock or (iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator (l) "Incentive Stock Option" means an Option intended to qualify as an ---------------------- incentive stock option within the meaning of Section 422 of the Code. (m) "Nonstatutory Stock Option" means an Option not intended to qualify as ------------------------- an Incentive Stock Option. (n) "Option" means a stock option granted pursuant to the Plan. ------ (o) "Optioned Stock" means the Common Stock subject to an Option. -------------- (p) "Optionee" means an Employee or Consultant who receives an Option. -------- (q) "Parent" means a "parent corporation", whether now or hereafter ------ existing, as defined in Section 424(e) of the Code. (r) "Plan" means this 1995 Stock Option Plan. ---- (s) "Share" means a share of the Common Stock, as adjusted in accordance ----- with Section 11 below. (t) "Subsidiary" means a "subsidiary corporation", whether now or hereafter ---------- existing, as defined in Section 424(f) of the Code. 3. Stock Subject to the Plan. Subject to the provisions of Section 11 of the ------------------------- Plan, the maximum aggregate number of shares which may be optioned and sold under the Plan is 4,800,000 shares of Common Stock. The shares may be authorized, but unissued, or reacquired Common Stock. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan. 4. Administration of the Plan. --------------------------- (a) Initial Plan Procedure. Prior to the date, if any, upon which the Company ---------------------- becomes subject to the Exchange Act, the Plan shall be administered by the Board or a committee appointed by the Board. (b) Plan Procedure After the Date. if any, Upon Which the Company Becomes --------------------------------------------------------------------- Subject to the Exchange Act. - ---------------------------- (i) Administration With Respect to Directors and Officers. With respect ----------------------------------------------------- to grants of Options to Employees who are also officers or directors of the Company, the Plan shall be administered by (A) the Board if the Board may administer the Plan in compliance with Rule 16b-3 promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with respect to a plan intended to qualify thereunder as a discretionary plan, or (B) a committee designated by the Board to administer the Plan, which committee shall be constituted in such a manner as to permit the Plan to comply with Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary plan. Once appointed, such Committee shall continue to * Adjust to "3,200,000" pursuing to 3 to 2 reverse stock split effect date Oct. 4, 1995. 2

serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary plan (ii) Multiple Administrative Bodies. If permitted by Rule 16b-3, the ------------------------------ Plan may be administered by different bodies with respect to directors, non- director officers and Employees who are neither directors nor officers. (iii) Administration With Respect to Consultants and Other Employees. -------------------------------------------------------------- With respect to grants of Options to Employees or Consultants who are neither directors nor officers of the Company, the Plan shall be administered by (A) the Board or (B) a committee designated by the Board, which committee shall be constituted in such a manner as to satisfy the legal requirements relating to the administration of incentive stock option plans, if any, of state corporate and securities laws, of the Code, and of any applicable stock exchange (the "Applicable Laws"). Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws. (c) Powers of the Administrator. Subject to the provisions of the Plan and in --------------------------- the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, including the approval, if required, of any stock exchange upon which the Common Stock is listed, the Administrator shall have the authority, in its discretion: (i) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(k) of the Plan; (ii) to select the Consultants and Employees to whom Options may from time to time be granted hereunder; (iii) to determine whether and to what extent Options are granted hereunder; (iv) to determine the number of shares of Common Stock to be covered by each such award granted hereunder; (v) to approve forms of agreement for use under the Plan; (vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (vii) to determine whether and under what circumstances an Option may be settled in cash under subsection 9(0 instead of Common Stock (viii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted; and (ix) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan. (d) Effect of Administrator's Decision. All decisions, determinations and ---------------------------------- interpretations of the Administrator shall be final and binding on all Optionees and any other holders of any Options. 5. Eligibility. ----------- (a) Nonstatutory Stock Options may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant who has been granted an Option may, if otherwise eligible, be granted additional Options. 3

(b) Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock Options. (c) For purposes of Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. (d) The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his or her right or the Company's right to terminate his or her employment or consulting relationship at any time, with or without cause. 6. Term of Plan. The Plan shall become effective upon the earlier to occur of ------------ its adoption by the Board of Directors or its approval by the shareholders of the Company as described in Section 17 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 13 of the Plan. 7. Term of Option. The term of each Option shall be the term stated in the -------------- Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. 8. Option Exercise Price and Consideration. --------------------------------------- (a) per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board, but shall be subject to the following: (i) In the case of an Incentive Stock Option (A) granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (B) granted to any Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option (A) ranted to a person who, at the time of the grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of the grant. (B) granted to any person, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant. (b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant) and may consist entirely of (1) cash, (2) check, (3) promissory note, 4

(4) other Shares which (x) in the case of Shares acquired upon exercise of an Option either have been owned by the Optionee for more than six months on the date of surrender or were not acquired, directly or indirectly, from the Company, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (5) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price, or (6) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Board shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. 9. Exercise of Option. ------------------- (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted ----------------------------------------------- hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 8(b) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 11 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Termination of Employment. In the event of termination of an Optionee's ------------------------- Continuous Status as an Employee or Consultant with the Company (but not in the event of a change of status from Employee to Consultant (in which case an Employee's Incentive Stock Option shall automatically convert to a Nonstatutory Stock Option on the ninety-first (91st) day following such change of status) or from Consultant to Employee), such Optionee may, but only within such period of time as is determined by the Administrator, of at least thirty (30) days, with such determination in the case of an Incentive Stock Option not exceeding three (3) months after the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise his or her Option to the extent that Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of such termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (c) Disability of Optionee. Notwithstanding the provisions of Section 9(b) ---------------------- above, in the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of his total and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (d) Death of Optionee. In the event of termination of an Optionee's Continuous ----------------- Status as an Employee or Consultant as a result of the death of an Optionee, the Option may be exercised, at any time within twelve 5

(12) months following the date of death (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death. To the extent that Optionee was not entitled to exercise the Option at the date of death, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (e) Rule 16b-3. Options granted to persons subject to Section 16(b) of the ---------- Exchange Act must comply with Rule 16b-3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. (f) Buyout Provisions. The Administrator may at any time offer to buy out for ----------------- a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. 10. Non-Transferability of Options. Options may not be sold, pledged, ------------------------------ assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 11. Adjustments Upon Changes in Capitalization or Merger. ----------------------------------------------------- (a) Changes in Capitalization. Subject to any required action by the ------------------------- shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. (b) Dissolution or Liquidation. In the event of the proposed dissolution or -------------------------- liquidation of the Company, the Board shall notify the Optionee at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the Option will terminate immediately prior to the consummation of such proposed action. (c) Merger. In the event of a merger of the Company with or into another ------ corporation, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation. If, in such event, the Option is not assumed or substituted, the Option shall terminate as of the date of the closing of the merger. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger, the option confers the right to purchase, for each Share of Optioned Stock subject to the Option immediately prior to the merger, the consideration (whether stock, cash, or other securities or property) received in the merger by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger was not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger. 6

12. Time of Granting Options. The date of grant of an Option shall, for all ------------------------ purposes, be the date on which the Administrator makes the determination granting such Option, or such other date as is determined by the Board. Notice of the determination shall be given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant. 13. Amendment and Termination of the Plan. -------------------------------------- (a) Amendment and Termination. The Board may at any time amend, alter, ------------------------- suspend or discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with Rule 16b-3 under the Exchange Act or with Section 422 of the Code (or any other applicable law or regulation, including the requirements of the NASD or an established stock exchange), the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required. (b) Effect of Amendment or Termination. Any such amendment or termination of ---------------------------------- the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company. 14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant ---------------------------------- to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. 15. Reservation of Shares. The Company, during the term of this Plan, will at --------------------- all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 16. Agreements. Options shall be evidenced by written agreements in such form ---------- as the Board shall approve from time to time. 17. Shareholder Approval. Continuance of the Plan shall be subject to -------------------- approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under applicable state and federal law and the rules of any stock exchange upon which the Common Stock is listed. 18. Information to Optionees and Purchasers. The Company shall provide to --------------------------------------- each Optionee and to each individual who acquired Shares pursuant to the Plan, during the period such Optionee or purchaser has one or more Options outstanding, and, in the case of an individual who acquired Shares pursuant to the Plan, during the period such individual owns such Shares, copies of annual financial statements. The Company shall not be required to provide such statements to key employees whose duties in connection with the Company assure their access to equivalent information. 7

PC-TEL, Inc. Stock Option Agreement PC-TEL, INC. 1995 STOCK PLAN STOCK OPTION AGREEMENT Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement. I. NOTICE OF STOCK OPTION GRANT - -- ---------------------------- You have been granted an option to purchase Common Stock of PC-Tel, Inc., a California corporation (the "Company"), subject to the terms and conditions of the Plan and this Option Agreement, as follows: Grant Number ------------- Date of Grant ------------- Vesting Commencement Date ------------- Exercise Price per Share $------------- Total Number of Shares Granted ------------- Total Exercise Price $------------- Type of Option: ----Incentive Stock Option ----Nonstatutory Stock Option Term/Expiration Date: ------------- Vesting Schedule: This Option may be exercised, in whole or in part, in ---------------- accordance with the following schedule: 12/48ths of the Shares subject to the Option will vest twelve (12) months after the Vesting Commencement Date, and an additional 1/48th of the Shares subject to the option will vest at the end of each month thereafter Termination Period: This Option may be exercised for 90 days after ------------------ termination of employment or consulting relationship, or such longer period as may be applicable upon death or Disability of Optionee as provided in the Plan, but in no event later than the Term/Expiration Date as provided above. 1

II. AGREEMENT --------- 1. Grant of Option. PC-Tel, Inc., a California corporation (the --------------- "Company"), hereby grants to the Optionee named in the Notice of Grant (the "Optionee"), an option (the "Option") to purchase a total number of shares of Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "Exercise Price") subject to the terms, definitions and provisions of the 1995 Stock Plan (the "Plan") adopted by the Company, which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option. If designated in the Notice of Grant as an Incentive Stock Option, this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory Stock option. 2. Exercise of Option. This Option shall be exercisable during its ------------------ term in accordance with the Exercise Schedule set out in the Notice of Grant and with the provisions of Section 9 of the Plan as follows: (i) Right to Exercise. ------------------ (a) This Option may not be exercised for a fraction of a share. (b) In the event of Optionee's death, disability or other termination of employment, the exercisability of the Option is governed by Sections 6, 7 and 8 below, subject to the limitation contained in subsection 2(i)(c). (c) In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in the Notice of Grant. (ii) Method of Exercise. This Option shall be exercisable by ------------------ written notice (in the form attached as Exhibit A) which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder's investment intent with respect to such shares of Common Stock as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price. No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. 3. Optionee's Representations. In the event the Shares purchasable -------------------------- pursuant to the exercise of this Option have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his Investment Representation Statement in the form attached hereto as Exhibit B, and shall read the applicable rules of the Commissioner of Corporations attached to such Investment Representation Statement, if applicable. 2

4. Method of Payment. Payment of the Exercise Price shall be by any of the ----------------- following, or a combination thereof, at the election of the Optionee: (i) cash; or (ii) check; or (iii) surrender of other shares of Common Stock of the Company which (A) in he case of Shares acquired pursuant to the exercise of a Company option, have been owned by he Optionee for more than six (6) months on the date of surrender, and (B) have a fair market value on the date of surrender equal to the Exercise Price of the Shares as to which the Option is being exercised; or (iv) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price. 5. Restrictions on Exercise. This Option may not be exercised until such ------------------------ time as the Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 6. Termination of Relationship. In the event of termination of Optionee's --------------------------- Continuous Status as an Employee or Consultant, Optionee may, to the extent otherwise so entitled at the date of such termination (the "Termination Date"), exercise this Option during the Termination Period set out in the Notice of Grant. To the extent that Optionee was not entitled to exercise this Option at the date of such termination, or if Optionee does not exercise this Option within the time specified herein, the Option shall terminate 7. Disability of Optionee. Notwithstanding the provisions of Section 6 ---------------------- above, in the event of termination of Optionee's Continuous Status as an Employee or Consultant as a result of total and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of termination of employment (but in no event later than the date of expiration of the term of this Option as set forth in Section 10 below), exercise the Option to the extent otherwise so entitled at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. 8. Death of Optionee. In the event of termination of Optionee's Continuous ----------------- Status as an Employee or Consultant as a result of the death of Optionee, the Option may be exercised at any time within twelve (12) months following the date of death (but in no event later than the date of expiration of the term of this Option as set forth in Section 10 below), by Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee could exercise the Option at the date of death. 9. Non-Transferability of Option. This Option may not be transferred in ----------------------------- any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 3

10. Term of Option. This Option may be exercised only within the term set -------------- out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option. The limitations set out in Section 7 of the Plan regarding Options designated as Incentive Stock Options and Options granted to more than ten percent (10%) shareholders shall apply to this Option. 11. Taxation Upon Exercise of Option. Optionee understands that, upon -------------------------------- exercising a nonstatutory Option, he or she will recognize income for tax purposes in an amount equal to the excess of the then fair market value of the Shares over the exercise price. However, the timing of this income recognition may be deferred for up to six months if Optionee is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the Optionee is an employee, the Company will be required to withhold from Optionee's compensation, or collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income. Additionally, the Optionee may at some point be required to satisfy tax withholding obligations with respect to the disqualifying disposition of an Incentive Stock Option. The Optionee shall satisfy his or her tax withholding obligation arising upon the exercise of this Option out of Optionee's compensation or by payment to the Company. 12. Tax Consequences. Set forth below is a brief summary as of the date of ---------------- this Option of some of the federal tax consequences of exercise of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THIS SUMMARY ALSO DOES NOT PURPORT TO DISCUSS ANY STATE TAX CONSEQUENCE AT ALL. OPTIONEE IS ADVISED TO CONSULT HIS OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. (i) Exercise of ISO. If this Option qualifies as an ISO, there will be --------------- no regular federal income tax liability or income tax liability upon the exercise of the Option, although the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price will be treated as an adjustment to the alternative minimum tax for federal tax purposes and may subject the Optionee to the alternative minimum tax in the year of exercise. (ii) Exercise of Nonstatutory Stock Option. There may be a regular ------------------------------------- federal income tax liability upon the exercise of a Nonstatutory Stock Option. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price. If Optionee is an employee, the Company will be required to withhold from Optionee's compensation or collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise. (iii) Disposition of Shares. In the case of an NSO, if Shares are --------------------- held for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. In the case of an ISO, if Shares transferred pursuant to the Option are held for at least one year after exercise and are disposed of at least two years after the Date of Grant, any gain realized on disposition of the Shares will also be treated as long-term capital gain for federal income tax purposes. If Shares purchased under an ISO are disposed of within such one-year period or within two years after the Date of Grant, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price and the lesser of (1) the fair market value of the Shares on the date of exercise, or (2) the sale price of the Shares. (iv) Notice of Disqualifying Disposition of ISO Shares. If the Option ------------------------------------------------- granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, or (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee. 4

PC-TEL, Inc. Stock Option Agreement - --signature page to Stock Option Agreement-- PC-Tel, Inc. a California corporation By: ------------------------------- OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE. Optionee acknowledges receipt of a copy of the Plan and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Date: --------------------- ------------------------ Optionee 5

PC-TEL, Inc. Stock Option Agreement EXHIBIT A --------- 1995 STOCK PLAN EXERCISE NOTICE PC-Tel, Inc. - --------------------- - --------------------- Attention: Chief Financial Officer 1. Exercise of Option. Effective as of today, ,19 , the ------------------ ------------- -- undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase -------- shares of the Common Stock (the "Shares") of PC-Tel, Inc. (the "Company") under and pursuant to the 1995 Stock Plan, as amended (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated ---------------------- (the "Option Agreement"). ---------------- 2. Representations of Optionee. Optionee acknowledges that Optionee has --------------------------- received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. 3. Rights as Shareholder. Until the stock certificate evidencing such --------------------- Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 12 of the Plan. Thereafter, Optionee shall enjoy rights as a shareholder until such time as Optionee disposes of the Shares. 4. Company's Right of First Refusal. Not applicable. No right of first -------------------------------- refusal shall arise under this Agreement, and any reference to this Section 4 or to any such rights elsewhere in this Agreement should be disregarded. 5. Tax Consultation. Optionee understands that Optionee may suffer adverse ---------------- tax consequences as a result of Optionee's purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice. 6. Restrictive Legends and Stop-Transfer Orders -------------------------------------------- (a) Legends. Optionee understands and agrees that the Company shall ------- cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by state or federal securities laws: -A1-

PC-TEL, Inc. Stock Option Agreement THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES. If applicable: IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES Optionee understands that transfer of the Shares may be restricted by Section 260.141.11 of the Rules of the California Corporations Commissioner, a copy of which is attached to Exhibit B, the Investment Representation Statement. (b) Stop-Transfer Notices. Optionee agrees that, in order to ensure --------------------- compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. (c) Refusal to Transfer. The Company shall not be required (i) to ------------------- transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. 7. Successors end Assigns. The Company may assign any of its rights under ---------------------- this Agreement to single or multiple assignees, and this Agreement shell inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shell be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns. 8. Interpretation. Any dispute regarding the interpretation of this -------------- Agreement shall be submitted by Optionee or by the Company forthwith to the Company's Board of Directors or the committee thereof that administers the Plan, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Board or committee shall be final and binding on the Company and on Optionee. 9. Governing Law; Severability. This Agreement shall be governed by and --------------------------- construed in accordance with the laws of the State of California excluding that body of law pertaining to conflicts of -A2-

PC-TEL, Inc. Stock Option Agreement law. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. 10. Notices. Any notice required or permitted hereunder shall be given in ------- writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party. 11. Further Instruments. The parties agree to execute such further ------------------- instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement. 12. Delivery of Payment. Optionee herewith delivers to the Company the ------------------- full Exercise Price for the Shares. 13. Entire Agreement. The Plan and Notice of Grant/Option Agreement are ---------------- incorporated herein by reference. This Agreement, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and is governed by California law except for that body of law pertaining to conflict of laws. Submitted by: Accepted by: OPTIONEE: PC-Tel, Inc. a California corporation By: ---------------------------- Its: --------------------------- - ------------------------ (Signature) Address: Address: - ------- ------- - ----------------------- -------------------------- - ----------------------- -------------------------- -A3-

PC-TEL, Inc. Stock Option Agreement EXHIBIT B --------- INVESTMENT REPRESENTATION STATEMENT OPTIONEE : COMPANY : PC-TEL, INC. SECURITY : COMMON STOCK AMOUNT : DATE : In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following: (a) Optionee is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the securities. Optionee is acquiring these securities for investment for Optionee's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). (b) Optionee acknowledges and understands that the securities constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee's investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionee's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the securities. Optionee understands that the certificate evidencing the securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company, a legend prohibiting their transfer without the consent of the Commissioner of Corporations of the State of California (if so required) and any other legend required under applicable state securities laws. (c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. in the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. -B1-

PC-TEL, Inc. Stock Option Agreement In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than two years after the party has purchased, and made full payment for, within the meaning of Rule 144, the securities to be sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than three years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above. (d) Optionee hereby agrees that if so requested by the Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the 1933 Act, Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period following the effective date of a registration statement of the Company filed under the 1933 Act; provided, however, that such restriction shall only apply to the first registration statement of the Company to become effective under the 1933 Act which include securities to be sold on behalf of the Company to the public in an underwritten public offering under the 1933 Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such 180-day period. (e) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event. (f) Optionee understands that the certificate evidencing the Securities may (if so required) be imprinted with a legend which prohibits the transfer of the Securities without the consent of the Commissioner of Corporations of California. Optionee has read the applicable Commissioner's Rules with respect to such restriction, a copy of which is attached. Signature of Optionee: ------------------------------- Date: ,19 -------------------- -- -B2-

PC-TEL, Inc. Stock Option Agreement ATTACHMENT 1 STATE OF CALIFORNIA- CALIFORNIA ADMINISTRATIVE CODE Title 10. Investment- Chapter 3. Commissioner of Corporations 260.141.11: Restriction on Transfer. (a) The issuer of any security upon which a restriction on transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to be delivered to each issuee or transferee of such security at the time the certificate evidencing the security is delivered to the issuee or transferee. (b) It is unlawful for the holder of any such security to consummate a sale or transfer of such security, or any interest therein, without the prior written consent of the Commissioner (until this condition is removed pursuant to Section 260.141.12 of these rules), except: (1) to the issuer; (2) pursuant to the order or process of any court; (3) to any person described in Subdivision (i) of Section 25102 of the Code or Section 260.105.14 of these rules; (4) to the transferor's ancestors, descendants or spouse, or any custodian or trustee for the account of the transferrer or the transferror's ancestors, descendants, or spouse; or to a transferee by a trustee or custodian for the account of the transferee or the transferee's ancestors, descendants or spouse; (5) to holders of securities of the same class of the same issuer; (6) by way of gift or donation inter vivos or on death; (7) by or through a broker-dealer licensed under the Code (either acting as such or as a finder) to a resident of a foreign state, territory or country who is neither domiciled in this state to the knowledge of the broker-dealer, nor actually present in this state if the sale of such securities is not in violation of any securities law of the foreign state, territory or country concerned; (8) to a broker-dealer licensed under the Code in a principal transaction, or as an underwriter or member of an underwriting syndicate or selling group; (9) if the interest sold or transferred is a pledge or other lien given by the purchaser to the seller upon a sale of the security for which the Commissioner's written consent is obtained or under this rule not required; (10) by way of a sale qualified under Sections 25111, 25112, 25113 or 25121 of the Code, of the securities to be transferred, provided that no order under Section 25140 or subdivision (a) of Section 25143 is in effect with respect to such qualification; (11) by a corporation to a wholly owned subsidiary of such corporation, or by a wholly owned subsidiary of a corporation to such corporation; (12) by way of an exchange qualified under Section 25111, 25112 or 25113 of the Code, provided that no order under Section 25140 or subdivision (a) of Section 25143 is in effect with respect to such qualification; (13) between residents of foreign states, territories or countries who are neither domiciled nor actually present in this state; (14) to the State Controller pursuant to the Unclaimed Property Law or to the administrator of the unclaimed property law of another state; or (15) by the State Controller pursuant to the Unclaimed Property Law or by the administrator of the unclaimed property law of another state if, in either such case, such person (i) discloses to potential purchasers at the sale that transfer of the securities is restricted under this rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises the Commissioner of the name of each purchaser; (16) by a trustee to a successor trustee when such transfer does not involve a change in the beneficial ownership of the securities; (17) by way of an offer and sale of outstanding securities in an issuer transaction that is subject to the qualification requirement of Section 25110 of the Code but exempt from that qualification requirement by subdivision (f) of Section 25102; provided that any such transfer is on the condition that any certificate evidencing the security issued to such transferee shall contain the legend required by this section. (c) The certificates representing all such securities subject to such a restriction on transfer, whether upon initial issuance or upon any transfer thereof, shall bear on their face a legend, prominently stamped or printed thereon in capital letters of not less than 10-point size, reading as follows: "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA. EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."

EXHIBIT 10.3 PC-TEL, INC. 1997 STOCK PLAN (as amended and restated, August 3, 1999) 1. Purposes of the Plan. The purposes of this Stock Plan are: -------------------- . to attract and retain the best available personnel for positions of substantial responsibility, . to provide additional incentive to Employees, Directors and Consultants, and . to promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan. 2. Definitions. As used herein, the following definitions shall apply: ----------- (a) "Administrator" means the Board or any of its Committees as shall ------------- be administering the Plan, in accordance with Section 4 of the Plan. (b) "Applicable Laws" means the requirements relating to the --------------- administration of stock option plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are, or will be, granted under the Plan. (c) "Board" means the Board of Directors of the Company. ----- (d) "Code" means the Internal Revenue Code of 1986, as amended. ---- (e) "Committee" means a committee of Directors appointed by the Board --------- in accordance with Section 4 of the Plan. (f) "Common Stock" means the common stock of the Company. ------------ (g) "Company" means PC-Tel, Inc., a Delaware corporation. ------- (h) "Consultant" means any person, including an advisor, engaged by ---------- the Company or a Parent or Subsidiary to render services to such entity. (i) "Director" means a member of the Board. --------

(j) "Disability" means total and permanent disability as defined in ---------- Section 22(e)(3) of the Code. (k) "Employee" means any person, including Officers and Directors, -------- employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (l) "Exchange Act" means the Securities Exchange Act of 1934, as ------------ amended. (m) "Fair Market Value" means, as of any date, the value of Common ----------------- Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Gnostic SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator. (n) "Incentive Stock Option" means an Option intended to qualify as ---------------------- an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (o) "Nonstatutory Stock Option" means an Option not intended to ------------------------- qualify as an Incentive Stock Option. (p) "Notice of Grant" means a written or electronic notice evidencing --------------- certain terms and conditions of an individual Option or Stock Purchase Right grant. The Notice of Grant is part of the Option Agreement. -2-

(q) "Officer" means a person who is an officer of the Company within ------- the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (r) "Option" means a stock option granted pursuant to the Plan. ------ (s) Option Agreement" means an agreement between the Company and an ---------------- Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. (t) "Option Exchange Program" means a program whereby outstanding ----------------------- Options are surrendered in exchange for Options with a lower exercise price. (u) "Optioned Stock" means the Common Stock subject to an Option or -------------- Stock Purchase Right. (v) "Optionee" means the holder of an outstanding Option or Stock -------- Purchase Right granted under the Plan. (w) "Parent" means a "parent corporation," whether now or hereafter ------ existing, as defined in Section 424(e) of the Code. (x) "Plan" means this 1997 Stock Plan, as amended and restated. ---- (y) "Restricted Stock" means shares of Common Stock acquired pursuant ---------------- to a grant of Stock Purchase Rights under Section 11 of the Plan. (z) "Restricted Stock Purchase Agreement" means a written agreement ----------------------------------- between the Company and the Optionee evidencing the terms and restrictions applying to stock purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and the Notice of Grant. (aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any ---------- successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. (bb) "Section 16(b)" means Section 16(b) of the Exchange Act. ------------- (cc) "Service Provider" means an Employee, Director or Consultant. ---------------- (dd) "Share" means a share of the Common Stock, as adjusted in ----- accordance with Section 13 of the Plan. (ee) "Stock Purchase Right" means the right to purchase Common Stock -------------------- pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant. (ff) "Subsidiary" means a "subsidiary corporation", whether now or ---------- hereafter existing, as defined in Section 424(f) of the Code. -3-

3. Stock Subject to the Plan. Subject to the provisions of Section 13 of ------------------------- the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 5,500,000 Shares, plus an annual increase to be added on the first day of the Company's fiscal year equal to the lesser of (i) 700,000 Shares, (ii) 4% of the outstanding shares on such date or (iii) a lesser amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under -------- the Plan, whether upon exercise of an Option or Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan. 4. Administration of the Plan. -------------------------- (a) Procedure. --------- (i) Multiple Administrative Bodies. The Plan may be ------------------------------ administered by different Committees with respect to different groups of Service Providers. (ii) Section 162(m). To the extent that the Administrator -------------- determines it to be desirable to qualify Options granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more "outside directors" within the meaning of Section 162(m) of the Code. (iii) Rule 16b-3. To the extent desirable to qualify ---------- transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3. (iv) Other Administration. Other than as provided above, the -------------------- Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws. (b) Powers of the Administrator. Subject to the provisions of the --------------------------- Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion: (i) to determine the Fair Market Value; (ii) to select the Service Providers to whom Options and Stock Purchase Rights may be granted hereunder; (iii) to determine the number of shares of Common Stock to be covered by each Option and Stock Purchase Right granted hereunder; -4-

(iv) to approve forms of agreement for use under the Plan; (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; (vi) to reduce the exercise price of any Option or Stock Purchase Right to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or Stock Purchase Right shall have declined since the date the Option or Stock Purchase Right was granted; (vii) to institute an Option Exchange Program; (viii) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan; (ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws; (x) to modify or amend each Option or Stock Purchase Right (subject to Section 15(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan; (xi) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; (xii) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or Stock Purchase Right previously granted by the Administrator; (xiii) to make all other determinations deemed necessary or advisable for administering the Plan. (c) Effect of Administrator's Decision. The Administrator's ---------------------------------- decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options or Stock Purchase Rights. -5-

5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may ----------- be granted to Service Providers. Incentive Stock Options may be granted only to Employees. 6. Limitations. ----------- (a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. (b) Neither the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee any right with respect to continuing the Optionee's relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee's right or the Company's right to terminate such relationship at any time, with or without cause. (c) The following limitations shall apply to grants of Options: (i) No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than 300,000 Shares. (ii) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 300,000Shares which shall not count against the limit set forth in subsection (i) above. (iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 13. (iv) If an Option is canceled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 13), the canceled Option will be counted against the limits set forth in subsections (i) and (ii) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option. 7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become ------------ effective upon its adoption by the Board. It shall continue in effect until 2007 years unless terminated earlier under Section 15 of the Plan. 8. Term of Option. The term of each Option shall be stated in the Option -------------- Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock -6-

Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement. 9. Option Exercise Price and Consideration. --------------------------------------- (a) Exercise Price. The per share exercise price for the Shares to be -------------- issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following: (i) In the case of an Incentive Stock Option (A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction. (b) Waiting Period and Exercise Dates. At the time an Option is --------------------------------- granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised. (c) Form of Consideration. The Administrator shall determine the --------------------- acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (i) cash; (ii) check; (iii) promissory note; (iv) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and -7-

(B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised; (v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee's participation in any Company-sponsored deferred compensation program or arrangement; (vii) any combination of the foregoing methods of payment; or (viii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws. 10. Exercise of Option. ------------------ (a) Procedure for Exercise; Rights as a Shareholder. Any Option ----------------------------------------------- granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share. An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13 of the Plan. Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Termination of Relationship as a Service Provider. If an Optionee ------------------------------------------------- ceases to be a Service Provider, other than upon the Optionee's death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the -8-

Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (c) Disability of Optionee. If an Optionee ceases to be a Service ---------------------- Provider as a result of the Optionee's Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (d) Death of Optionee. If an Optionee dies while a Service Provider, ----------------- the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee's estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. The Option may be exercised by the executor or administrator of the Optionee's estate or, if none, by the person(s) entitled to exercise the Option under the Optionee's will or the laws of descent or distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (e) Buyout Provisions. The Administrator may at any time offer to buy ----------------- out for a payment in cash or Shares an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. 11. Stock Purchase Rights. --------------------- (a) Rights to Purchase. Stock Purchase Rights may be issued either ------------------ alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically, by means of a Notice of Grant, of the terms, conditions and restrictions related to the offer, including the number of Shares that the offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree must accept such offer. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator. -9-

(b) Repurchase Option. Unless the Administrator determines otherwise, ----------------- the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's service with the Company for any reason (including death or Disability). The purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at a rate determined by the Administrator. (c) Other Provisions. The Restricted Stock Purchase Agreement shall ---------------- contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. (d) Rights as a Shareholder. Once the Stock Purchase Right is ----------------------- exercised, the purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan. 12. Non-Transferability of Options and Stock Purchase Rights. Unless -------------------------------------------------------- determined otherwise by the Administrator, an