<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
TELXON CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TELXON CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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[TELXON LOGO]
3330 West Market Street
Akron, Ohio 44333
NOTICE OF 1995 ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
Notice is hereby given that the 1995 Annual Meeting of Stockholders (the
"Annual Meeting") of Telxon Corporation (the "Company") will be held at the
Akron West Hilton Inn, 3180 West Market Street, Akron, Ohio 44333, at 11:00
A.M., E.D.T., on Thursday, August 31, 1995, for the following purposes:
(1) To elect two directors of the Company to hold office until the
1998 annual meeting of stockholders or until their successors are elected
and qualified;
(2) To approve amendments to the Telxon Corporation 1990 Stock Option
Plan for employees;
(3) To approve amendments to the Telxon Corporation 1990 Stock Option
Plan for Non-Employee Directors;
(4) To approve the Telxon Corporation 1995 Employee Stock Purchase
Plan; and
(5) To transact such other business, including action on a stockholder
proposal if presented by the proponent, as may properly be brought before
the meeting or any adjournment thereof.
Only holders of record of the Common Stock of the Company at the close of
business on July 3, 1995 are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof.
Information relating to the matters to be considered at the Annual Meeting
is set out in the Proxy Statement accompanying this Notice.
By Order of the Board of Directors,
ROBERT A. GOODMAN
Secretary
July 31, 1995
PLEASE EXECUTE THE ENCLOSED PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING
<PAGE> 3
1995 ANNUAL MEETING OF STOCKHOLDERS
[TELXON LOGO]
3330 West Market Street
Akron, Ohio 44333
------------------
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Telxon Corporation, a Delaware corporation (the "Company"), for use at the 1995
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
at the Akron West Hilton Inn, 3180 West Market Street, Akron, Ohio 44333, at
11:00 A.M., E.D.T., on Thursday, August 31, 1995. Only holders of record of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), on July
3, 1995 (the "Record Date") are entitled to notice of and to vote at the Annual
Meeting. At the close of business on that date, the Company had 15,798,709
shares of Common Stock (each, a "Share") outstanding. This Proxy Statement and
the accompanying form of proxy are first being mailed to stockholders on or
about August 3, 1995.
VOTING RIGHTS AND REQUIREMENTS
The Company's Restated Certificate of Incorporation (the "Charter")
provides that stockholders are entitled to one vote for each Share held, except
that in the election of directors each stockholder has cumulative voting rights
and is entitled to as many votes as equal the number of Shares held multiplied
by the number of directors to be elected (two), all of which votes may be cast
for a single nominee or distributed among any or all of the nominees. All votes
represented by proxy will be cast for the two nominees named herein unless
authorization to do so is withheld by a stockholder. Proxies cannot be voted for
more nominees than the number of directors to be elected (two).
Any person signing a proxy in the form accompanying this Proxy Statement
has the power to revoke such proxy prior to the closing of the polls at the
Annual Meeting or any adjournment thereof. A proxy may be revoked by a writing
stating that the proxy is revoked, by a subsequent proxy, or by attendance at
the Annual Meeting and voting in person.
A majority of the outstanding Shares, represented in person or by proxy,
will constitute a quorum at the Annual Meeting. Abstentions, withheld votes and
broker non-votes are counted as present in determining whether the quorum
requirement is satisfied.
Directors are elected by a plurality of the votes cast in person or by
proxy at the Annual Meeting, provided a quorum is present. Votes that are
withheld with respect to the election of directors are excluded from the vote
and have no effect on the outcome.
As to matters other than the election of directors, Shares represented in
person or by proxy at the Annual Meeting that the holder or the holder's proxy
abstains from voting as to that matter are considered in determining the minimum
number of shares required to be affirmatively voted for approval of such matter.
As a result, an abstention from voting on such a matter has the same effect as a
negative vote on the matter. Broker non-votes are not counted for purposes of
determining the number of Shares represented at the meeting of stockholders with
respect to the particular matter for which voting instructions were not given by
the beneficial owner.
<PAGE> 4
The Board of Directors does not intend to bring any other business before
the meeting and knows of no other matters to be brought before the Annual
Meeting. However, as to any other business that properly may be brought before
the Annual Meeting, it is intended that proxies, in the form enclosed, will be
voted in accordance with the judgment of the persons holding such proxies. Any
such item of other business will require for its approval the affirmative vote
of the holders of a majority of the Shares represented in person or by proxy at
the Annual Meeting, provided a quorum is present, or such greater vote as may,
in the case of amendments to the Charter or other extraordinary subject matters,
be required under the Delaware General Corporation Law or the Charter.
1. ELECTION OF DIRECTORS
GENERAL
At the Annual Meeting, two directors are to be elected to hold office for
terms expiring at the 1998 annual meeting of stockholders. John H. Cribb and
Richard J. Bogomolny have been nominated by the Board of Directors for election
as such directors. The terms of the remaining five directors of the Company will
continue after the Annual Meeting. The nominees elected at the Annual Meeting
shall hold office until their successors have been elected and qualified. The
Shares represented by the enclosed proxy will be voted for the election of each
of Messrs. Cribb and Bogomolny unless the proxy is marked so as to withhold
authority to vote for such nominees. The Company does not know of any reason
that the nominees will be unable to serve. If either of the nominees is unable
to serve, then the proxies may be voted for such substitute(s) as may be
nominated by the Board of Directors.
INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS
Set forth below as to each nominee and each continuing director are their
respective principal occupations and business experience during the past five
years and all positions held with the Company, including the year each incumbent
first became a director of the Company.
The following persons have been nominated for election by the stockholders
as the class of directors whose term expires in 1998:
John H. Cribb, age 61, has been Vice Chairman of the Company's Board
of Directors and Chairman, Telxon International since January 1995. From
January 1993 to January 1995 he served the Company as President,
International and from January 1990 to January 1993 as Senior Vice
President, International Operations. Mr. Cribb was a Vice President of the
Company and Managing Director of Telxon Limited, the Company's United
Kingdom subsidiary, from 1982 to 1990. He has been a director of the
Company since January 1995.
Richard J. Bogomolny, age 60, retired as Chairman of the Board and
Chief Executive Officer of First National Supermarkets, Inc., in January
1992, positions which he held since June 1975. Since May of 1992, Mr.
Bogomolny has been a member of the Supervisory Board (board of directors)
of Royal Ahold n.v., the Netherland's largest food retailer with operations
also in the United States (Finast, BI-LO, Giant, Tops, Edwards), Portugal,
Spain and the Czech Republic. For ten years prior to his retirement he was
a board member of the Food Marketing Institute, the industry's
international trade association.
The other members of the Board of Directors whose terms of office will
continue after the Annual Meeting are the following:
Robert F. Meyerson, age 58, has been the Chief Executive Officer of
the Company since October 1992, Chairman of the Board of Directors of the
Company since November 1981 and a director of the Company since November
1977. He was the Company's Chief Executive Officer from August 1978 to May
1985 and its President from August 1978 to November 1981. Mr. Meyerson was
Chairman of the Board of Basicomputer Corporation (reseller and
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servicer of personal computers) from January 1984 until it was acquired by
The Future Now, Inc. in September 1993. From June 1985 through October
1992, he was Chief Executive Officer of Accipiter Corporation (consulting
firm). His current term as a director expires at the 1996 annual meeting.
Norton W. Rose, age 66, has been President and principal/owner of
Norton W. Rose & Co., Cleveland, Ohio (consulting firm) since August 1990,
Chairman of the Board of Premier Travel (formerly Prescott Travel) since
July 1991, Vice Chairman of Blue Coral, Inc. (consumer chemicals
manufacturer) since March 1992 and Executive Vice President of Creative Art
Activities, Inc. (craft kit manufacturer) since January 1994. He was Vice
Chairman of Progressive Casualty Insurance Company from February 1988 to
July 1990 and Senior Vice President - Human Resources of Progressive
Casualty Insurance Company from 1985 to 1988. Mr. Rose has served as a
director of LDI Corporation (equipment leasing and related services for
computers, other high-technology equipment and short-term personal computer
rentals) since March 1994. He has also served as a director of Specialty
Chemical Resources, Inc. (aerosol packaging of specialty chemicals) since
May 1989 and of Cohesant Technologies Inc. (manufacturer of specialty
chemicals and application equipment) since July 1994. Mr. Rose has been a
director of the Company since October 1990. His current term expires at the
1996 annual meeting.
William J. Murphy, age 61, has been President and Chief Operating
Officer of the Company since January 1995. He was President, North America
Division of the Company from January 1994 to January 1995 and Executive
Vice President, North American Operations from January 1993 to January
1994. Mr. Murphy also served the Company as Area Vice President, East from
November 1992 to January 1993, as a District Manager from September 1989 to
November 1992 and as Area Vice President, North Eastern Region from May
1989 to August 1989. He has been a director of the Company since January
1995. His current term expires at the 1997 annual meeting.
Robert A. Goodman, age 60, has been the Company's General Counsel
since 1979 and Secretary since 1983. He has been senior partner of Goodman
Weiss Miller Freedman, a Cleveland, Ohio law firm, since 1986. Mr. Goodman
has been a director of the Company since October 1991. His current term
expires at the 1997 annual meeting.
Raj Reddy, age 58, has been Dean of the School of Computer Science,
and Herbert A. Simon University Professor, at Carnegie Mellon University
since July 1992. Since 1984 he had held the rank of University Professor
and for eleven years prior to that time held the rank of Professor of
Computer Science. He has been the Director of The Robotics Institute at
Carnegie Mellon since 1980. He also serves as a consultant in the area of
computer science, robotics and related disciplines. Dr. Reddy has been a
director of the Company since April 1987. His current term expires at the
1997 annual meeting.
INFORMATION RELATING TO THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company met seven times during the fiscal
year ended March 31, 1995 ("Fiscal 1995"). Each incumbent director attended at
least 75 percent of the aggregate of all meetings of the Board of Directors and
the committees on which he served that were held during the year or, in the
cases of Messrs. Murphy and Cribb, during the portion of the year that each
served on the Board of Directors. The Board of Directors has an Audit Committee,
a Compensation and Organization Committee and a Nominating Committee. The
Compensation and Organization Committee has a subcommittee, the Stock Option and
Restricted Stock Committee, which administers certain stock option and
restricted stock plans of the Company. The general function of each committee,
the identity of each committee's members and the number of meetings held by each
committee during Fiscal 1995 are set forth below.
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Audit Committee. The Audit Committee held four meetings during Fiscal
1995. The primary functions of the Committee are to evaluate the performance and
fees of the Company's independent auditors, review the scope and results of the
annual audit with the independent auditors, review the results of the audit with
management, consult with management and the independent auditors with respect to
the Company's internal accounting control systems, review all related party
transactions on an ongoing basis and review potential conflict of interest
situations where appropriate. The current members of the Audit Committee are J.
Robert Anderson, Walter J. Salmon, Messrs. Goodman and Rose and Dr. Reddy.
Compensation and Organization Committee. The Compensation and Organization
Committee held five meetings during Fiscal 1995. The primary functions of the
Committee are to evaluate and improve the Company's organizational structure and
staffing and to review the remuneration arrangements of the Company's senior
management. During Fiscal 1995, the Stock Option and Restricted Stock Committee
was reconstituted as a subcommittee of the Compensation and Organization
Committee. The current members of the Compensation and Organization Committee
are Messrs. Anderson, Goodman and Rose and Drs. Reddy and Salmon.
Nominating Committee. The Nominating Committee held two meetings during
Fiscal 1995. The primary function of the Committee is to advise the Company's
Board of Directors as to nominees for election thereto. The current members of
the Nominating Committee are Messrs. Meyerson and Rose. In order for a
stockholder to nominate persons for election as directors at an annual meeting,
the Charter requires the stockholder to submit a written recommendation to the
Secretary of the Company not less than ninety days prior to the first
anniversary of the date of the last annual meeting. Such recommendation must
contain certain information specified in the Charter concerning the nominating
stockholder and each of his or her nominees. The recommendation must also state
that the nominating stockholder is on the date of such notice a stockholder of
record of the Company entitled to vote generally in the election of directors
and that he intends to appear in person at the meeting of the Company's
stockholders at which directors are to be elected to nominate the person(s)
specified in the notice of recommendation.
Stock Option and Restricted Stock Committee. The Stock Option and
Restricted Stock Committee held four meetings during Fiscal 1995. The Stock
Option and Restricted Stock Committee is a subcommittee of the Compensation and
Organization Committee. The primary functions of the Committee are to administer
the Company's employee stock option plans and its restricted stock plan. The
current members of the Committee are Messrs. Goodman and Rose.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert A. Goodman, a director and one of the members of the Compensation
and Organization Committee, is also Secretary of the Company. During Fiscal
1995, the Company paid to the law firm of Goodman Weiss Miller Freedman
$1,294,381 for legal services and $80,687 in reimbursement of expenses. It is
anticipated that payments will continue to be made to said firm in the future
for additional services. Mr. Goodman is senior partner of the firm.
In August 1994, the Company paid $50,000 for continued exclusive
negotiating rights to a sublicense for advanced voice recognition computer
technology under a master license from Carnegie Mellon University to Pen Speech
Corporation of Zelienople, Pennsylvania, a corporation 50 percent owned by Dr.
Reddy's family, which payment would be credited against license fees under any
future licensing arrangement.
COMPENSATION OF DIRECTORS
Cash Compensation. The Company's non-employee directors each receive an
annual fee of $20,000, $2,500 plus travel expenses for each directors' meeting
attended ($1,250 for a telephonic meeting), and $2,500 for each Audit Committee
or Compensation and Organization Committee meeting attended, unless the
committee and the full Board meet on the same day, in
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which event compensation in the amount of $1,250 is paid for attendance at such
committee meeting.
In addition to the foregoing amounts, the Company paid the following
consulting fees to directors during Fiscal 1995: Mr. Goodman received $10,000
for strategic advisory services; Mr. Rose received $30,000 for human resources
advisory services; Dr. Reddy received $25,000 for technology advisory services;
and Mr. Anderson received $7,500 for financial advisory services.
Messrs. Meyerson, Murphy and Cribb, by reason of also being employees of
the Company, do not receive any compensation from the Company for their services
as directors (see the Summary Compensation Table under "EXECUTIVE COMPENSATION"
below for the compensation paid to them in their capacities as executive
officers of the Company).
Stock Options. Directors who are not employees of the Company or a
subsidiary receive options to purchase Shares under the Company's 1990 Stock
Option Plan for Non-Employee Directors, as amended (the "Directors' Plan"). All
250,000 Shares currently authorized for issuance under the Directors' Plan have
been fully utilized for grants presently outstanding under the Plan. The Board
of Directors has adopted amendments to the Directors' Plan which are being
submitted to the stockholders of the Company for their approval, as described
under "3. Approval of Amendments to the Telxon Corporation 1990 Stock Option
Plan for Non-Employee Directors" below. If such amendments are approved by the
stockholders, the number of shares authorized for issuance under the Directors'
Plan will be increased by 150,000 Shares. Under the Directors' Plan, each
independent director is automatically granted an option to purchase 25,000
Shares upon first being elected to the Board and annually thereafter is also
automatically granted a 10,000 Share option during his or her continued service
on the Board. Each option has a seven-year term and an option price per Share
equal to the closing sales price of the Common Stock as reported on The Nasdaq
Stock Market's National Market ("Nasdaq NNM") on the trading day immediately
preceding the date of grant. The initial 25,000 Share grants become exercisable
in equal thirds on each of the first three anniversaries of their grant date,
whereas the additional 10,000 Share grants become exercisable in full on the
third anniversary of their grant date. The options terminate three months
following the optionee no longer being a director of the Company, six months
following death and one year following disability.
REPORT OF BOARD COMPENSATION COMMITTEES
ON EXECUTIVE COMPENSATION
The Compensation and Organization Committee of the Board of Directors (the
"Committee") recommends, subject to the full Board's approval (except as to
stock option and restricted stock grants, which are administered by the Stock
Option and Restricted Stock Committee), the compensation of the Company's
executive officers. The Committee is currently composed of the five non-employee
directors. Two of such non-employee directors serve as the members of the Stock
Option and Restricted Stock Committee.
COMPENSATION POLICIES
The Company operates in the competitive and rapidly changing environment of
high technology businesses. The Committee seeks to establish compensation
policies that will allow the Company flexibility to respond to fluctuations in
the already dynamic business environment in which it operates and competes. The
Company's compensation philosophy thus is based upon the belief that achievement
in this environment can only be accomplished by attracting, retaining and
motivating highly energized, entrepreneurial-minded, talented, creative and
goal-oriented people. To achieve this, the Company does not use a quantitative
method or mathematical formula in setting elements of compensation. The
Committee exercises discretion and considers all elements of executive
compensation to provide the impetus and challenge for its
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key officers, employees and associates. The Committee has access to and does
study a variety of surveys, reports and data which reflect compensation of
executives in other industrial sectors, and particularly in the technology world
in which it operates, including its direct and indirect competitors, vendors,
customers and other technology businesses from which it has attracted, and
wishes to continue to attract, the highest qualified people.
While the Committee considers such compensation data, the Committee does
not attempt to establish any self-selected peer group for compensation purposes
or to fix the Company's executive compensation levels at a defined percentile of
any such self-selected peer group. Rather, such data forms a part of the total
mix of information which the Committee evaluates in arriving at compensation
levels deemed necessary to effectively compete for highly qualified people in
the technology sector.
COMPENSATION COMPONENTS
The Company's executive officers are compensated with a base salary
together with eligibility for short-term performance bonuses and long-term
incentive awards. The Committee assesses past and current as well as anticipated
future performance and contribution, in consideration of the total compensation
package (earned or potentially available) for each executive officer.
Salary. The salaries of executive officers are determined by the Committee
generally on the basis of a one to three year employment agreement which
encompasses a base salary consistent with the Company's stated policy and
philosophy of competing for highly qualified people in the technology sector.
Bonus. The Committee reviews and approves the executive bonus plan for
each fiscal year under which each executive officer is eligible for a bonus
computed as a percentage of base salary, structured to reflect the officer's
individual performance and the Company's performance in the forthcoming year.
Criteria include revenue, profitability, and stock performance, to none of which
are any particular weights assigned, as well as additional, more subjective
bases.
Awards of Stock Options and Restricted Stock. Awards of stock options, and
in certain instances restricted stock grants, under the Company's 1990 Stock
Option Plan and 1992 Restricted Stock Plan, are designed not only to provide
additional incentive for the performance and continued employ of the individual
officers, but also to more fully align their long-term interests with that of
the Company and the Company's stockholders. The Stock Option and Restricted
Stock Committee selects the officers to receive stock option and restricted
stock awards, and determines the number of shares of each such award. The size
of the grants and the frequency thereof is generally intended by the Stock
Option and Restricted Stock Committee to reflect the significance of the
executive's position, performance, continued tenure with the Company and
anticipated contributions to its growth.
The option program generally utilizes a three year vesting period, up to a
ten year term and an exercise price equal to the closing market price of the
underlying stock. These options are to provide value to the officer only to the
extent that the price of the Company's Common Stock increases thereafter during
the term of employ.
The grant of restricted stock is significantly less frequent and is
utilized only for those members of the executive officer group who are
considered by the Board of Directors to be those individuals upon whom the
Company is most reliant for its anticipated future success and achievement.
These grants typically are subject to forfeiture during a five year period,
thereby providing an additional incentive to the officer to remain with the
Company.
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COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Although the compensation philosophy and policies of the Company are
applicable to all executive officers, including Robert F. Meyerson, the Chief
Executive Officer, Mr. Meyerson's current compensation package, together with
the consulting arrangements with Accipiter described in detail under "RELATED
PARTY TRANSACTIONS," was determined by negotiated contracts in 1992 at the time
of the request by the independent members of the Board of Directors that he
reduce his then-current positions and responsibilities in order to return to the
Company in a full-time capacity, to function as the Chief Executive Officer and
to create and implement a long-term strategic growth plan for the Company.
During Fiscal 1995, the Stock Option and Restricted Stock Committee awarded Mr.
Meyerson options to purchase 120,000 Shares which vest over a three year period
and have a term of ten years. The Stock Option and Restricted Stock Committee
initially proposed granting Mr. Meyerson options to purchase 160,000 Shares in
view of the fact that Mr. Meyerson has not received any awards of stock options
or restricted stock since October 1990. At Mr. Meyerson's request, the Committee
reduced its award to the 120,000 options actually granted.
OMNIBUS BUDGET RECONCILIATION ACT OF 1993
In 1993, the Internal Revenue Code was amended by the Omnibus Budget
Reconciliation Act of 1993 ("OBRA") to limit to $1 million per year the
deduction allowed to public companies for federal income tax purposes for
compensation paid to their chief executive officer and four other most highly
compensated executive officers. This deduction limit, which first became
applicable to the Company in Fiscal 1995, does not apply to compensation paid
under a plan that meets certain requirements for "performance-based
compensation." To qualify as "performance-based," (a) the compensation must be
payable on account of the attainment of one or more pre-established objective
performance goals; (b) the performance goals must be established by a
compensation committee of the board of directors that is comprised solely of two
or more "outside directors"; (c) the material terms of the compensation and the
performance goals must be disclosed to and approved by stockholders before
payment; and (d) the compensation committee must certify in writing that the
performance goals have been satisfied prior to payment. The Board of Directors
does not believe that OBRA will generally have an effect on the Company.
However, the Board of Directors has approved certain amendments to the Company's
1990 Stock Option Plan which are being submitted to the stockholders for
approval in order that the exercise of stock options granted under the Plan will
not be subject to the OBRA deduction limit. See "2. PROPOSAL TO APPROVE
AMENDMENTS TO THE TELXON CORPORATION 1990 STOCK OPTION PLAN." Salaries and
perquisites and amounts which may be payable in the future under consulting
arrangements are subject to approval by the Committee, but will not be submitted
to a vote of stockholders and, thus, will not be deductible to the extent that
such payments are subject to and exceed the OBRA deduction limit. Otherwise, it
is the Company's policy to structure, to the extent consistent with other
important corporate objectives, its incentive compensation programs to satisfy
the "performance-based compensation" OBRA exception and, thus, to preserve the
full deductibility of all compensation paid thereunder.
<TABLE>
<S> <C>
COMPENSATION AND ORGANIZATION STOCK OPTION AND RESTRICTED STOCK
COMMITTEE COMMITTEE
Norton W. Rose, Chairman Norton W. Rose, Chairman
J. Robert Anderson Robert A. Goodman
Robert A. Goodman
Raj Reddy
Walter J. Salmon
</TABLE>
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EXECUTIVE COMPENSATION
The following table shows all annual, long-term and other compensation for
services rendered to the Company in all capacities paid or awarded to the
Company's Chief Executive Officer and the other four executive officers of the
Company at the end of Fiscal 1995 who received the highest combined salary and
bonus compensation during that year for those of fiscal years 1993, 1994 and
1995 during which they served as executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ ------------------------
OTHER RESTRICTED ALL
NAME AND ANNUAL STOCK STOCK OTHER
PRINCIPAL COMPEN- AWARDS OPTIONS COMPEN-
POSITION YEAR SALARY BONUS SATION ($)(1) (SHARES) SATION(2)
- -------------------------- ---- -------- -------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert F. Meyerson 1995 $120,000(3) $ 0 $ 0 $ 0 120,000 $4,620
Chairman of the Board 1994 120,000(3) 0 0 0 0 4,997
and Chief Executive 1993 120,000(3) 0 0 0 0 4,133
Officer
William J. Murphy 1995 281,250(4) 435,000(5) 80,661(6) 155,000(7) 90,000 11,832
President and 1994 250,000 285,000(8) 81,261(9) 131,250(10) 10,000(11) 6,072
Chief Operating Officer 1993 88,609(12) 111,458 0 0 70,000 1,810
John H. Cribb 1995 315,000 415,385(13) 84,577(14) 155,000(15) 49,000 0
Vice Chairman of the 1994 270,000 160,000(5) 0 43,750(16) 0 0
Board and Chairman, 1993 271,476 264,098 0 0 50,000 0
International
Dan R. Wipff 1995 399,038 186,611(17) 0 0 0 47,144
President and Chief 1994 501,244 0 0 0 6,000(18) 4,997
Executive Officer, 1993 450,769 0 802,057(19) 1,150,000(20) 0 4,422
Telxon Products
Frank E. Brick 1995 350,000 0 0 0 0 3,374
President and Chief 1994 148,077(21) 0 0 543,750(22) 50,000 0
Operating Officer,
Telxon International
</TABLE>
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(1) The amounts shown are the dollar value of awards made under the Company's
1992 Restricted Stock Plan (the "Restricted Stock Plan") based on the
closing sale price for the Common Stock as reported on the Nasdaq NNM for
the respective dates of the awards. The vesting of each award is
conditioned upon the awardee continuing to be employed by the Company on
the applicable vesting date. The awards are subject to transfer
restrictions during the respective vesting periods.
(2) The amounts shown are matching contributions made by the Company under the
Company's Retirement and Uniform Matching Profit Sharing Plan, except that
the amount shown for Fiscal 1995 for each of Messrs. Murphy, Wipff and
Brick also includes $7,212, $43,389 and $2,524, respectively, paid pursuant
to a one-time election to surrender accumulated unused vacation time.
(3) The amount shown was paid to Mr. Meyerson exclusively for his services as
Chairman, and no portion thereof represents compensation to Mr. Meyerson
for his services as Chief Executive Officer. During each of the fiscal
years shown, the Company paid Accipiter Corporation $840,000 in consulting
fees and a $240,000 general administrative and overhead expense
reimbursement, for services principally performed by Mr. Meyerson, as more
fully described under "RELATED PARTY TRANSACTIONS."
(4) Includes $31,250 paid in Fiscal 1996 in recognition of Mr. Murphy's
increased responsibilities as the result of his January 1995 promotion to
President and Chief Operating Officer.
(5) The amount shown was earned under the executive bonus plan in respect of
the fiscal year shown but was paid during the immediately succeeding fiscal
year.
8
<PAGE> 11
(6) Consists of $73,049 paid toward living expenses and $7,612 for automobile
expenses.
(7) An aggregate of 10,000 Shares was awarded to Mr. Murphy, 2,000 of which
have vested to date, with the remaining Shares vesting in 2,000 Share
increments on July 17, 1996, 1997, 1998 and 1999.
(8) Includes $50,000 paid in respect of Mr. Murphy's promotion to President,
North America Division and $235,000 earned under the executive bonus plan
in respect of Fiscal 1994 and paid during Fiscal 1995.
(9) Consists of $78,045 in relocation expenses and $3,216 in automobile
expenses.
(10) An aggregate of 15,000 Shares was awarded to Mr. Murphy, 6,000 of which
have vested to date, with the remaining Shares vesting in 3,000 Share
increments on May 18, 1996, 1997 and 1998.
(11) The number of Shares shown represents repriced options received by Mr.
Murphy pursuant to his election to participate in the opportunity extended
by the Company in September 1993 to all holders of options (other than then
directors) under the 1990 Stock Option Plan, in order to restore the
incentive intended to be afforded by the Plan but lost due to the imbalance
between the exercise prices under many of the Plan options then outstanding
(equal to the respective market prices for the Common Stock at the times
they were granted) and the lower market prices which had prevailed for the
Common Stock since October 1992, to exchange two outstanding options for
one repriced option.
(12) Includes $31,846 not paid until Fiscal 1994.
(13) The amount shown includes $256,835 in incentive compensation earned under
his employment agreement during Fiscal 1995, $202,045 of which was paid
during Fiscal 1995 and the remaining $54,790 of which was paid during
Fiscal 1996; $79,000 in discretionary bonus awarded in respect of Fiscal
1995 and paid during Fiscal 1996; and $80,000 in discretionary bonus
awarded in respect of Fiscal 1994 (in addition to the bonus described in
footnote (14) below) paid during Fiscal 1995 pursuant to an award made
subsequent to the 1994 annual meeting and, accordingly, not reflected in
the proxy statement issued with respect thereto as Fiscal 1994 compensation
paid to Mr. Cribb.
(14) Consists of a $68,000 contribution to a personal pension for Mr. Cribb and
a $16,577 personal expense account allowance.
(15) An aggregate of 10,000 Shares was awarded to Mr. Cribb, 2,000 of which have
vested to date, with the remaining Shares vesting in 2,000 Share increments
on July 17, 1996, 1997, 1998 and 1999.
(16) An aggregate of 5,000 Shares was awarded to Mr. Cribb, all of which have
vested to date.
(17) Includes $136,611 paid in connection with the July 1994 realignment of Mr.
Wipff's executive responsibilities and $50,000 earned under the executive
bonus plan in respect of Fiscal 1995 and paid during Fiscal 1996.
(18) This option, originally granted to Mr. Wipff in 1988 in his then capacity
as a non-employee director of the Company in conjunction with similar
grants to the Company's other then non-employee directors and scheduled to
expire October 18, 1993, was extended, by vote of the Board of Directors
during Fiscal 1994 prior to the expiration of its initial term and of the
Company's stockholders at the 1994 annual meeting, for an additional
five-year term expiring October 17, 1998. The extended option terminated by
its own terms three months after Mr. Wipff's January 19, 1995 resignation
from the Board.
(19) Includes $766,667 paid Mr. Wipff in Fiscal 1993 representing the amount
calculated to provide him the cash required in order for him to pay the
federal, state and local income taxes due with respect to the restricted
stock awarded him as described in footnote (20) below.
9
<PAGE> 12
(20) An aggregate of 100,000 Shares was awarded to Mr. Wipff, 20,000 of which
vested on December 30, 1992 and were subject to transfer restrictions until
June 29, 1993, and 20,000 of which vested on December 30, 1993. As part of
the July 1994 realignment of Mr. Wipff's executive responsibilities, 20,000
of the Shares originally scheduled to vest on December 30, 1994 were vested
as of the July date, and 20,000 Shares scheduled to vest on December 30,
1996 were forfeited. The remaining 20,000 Shares will vest on their
originally scheduled date of December 30, 1995.
(21) Represents the salary earned by Mr. Brick during the portion of Fiscal 1994
after he joined the Company as an executive officer.
(22) An aggregate of 50,000 Shares was awarded to Mr. Brick, 10,000 of which
have vested to date, with the remaining Shares vesting in 10,000 Share
increments on October 27, 1995, 1996, 1997 and 1998.
EMPLOYMENT AGREEMENTS
Effective as of Mr. Murphy's January 1995 promotion to President and Chief
Operating Officer, his annual base salary has been increased to $375,000 from
the $250,000 annual base salary which he had received under, and subsequent to
the March 31, 1994 expiration of, his prior employment agreement with the
Company. Pending finalization of a new employment agreement consistent with his
new responsibilities, Mr. Murphy will continue to receive that increased salary
and will be eligible for bonuses under the Company's executive bonus plan and a
further bonus in the discretion of the Board of Directors.
In Fiscal 1995, Mr. Cribb received a base salary of $315,000 under an
employment agreement with the Company which expired March 31, 1995. The expired
agreement also provided for incentive compensation based on the achievement of
specified financial objectives, a discretionary bonus and severance benefits of
twelve months base salary in the event that Mr. Cribb's employment was
terminated by the Company other than for cause. Pending finalization of a new
employment agreement, Mr. Cribb will continue to receive the same annual base
salary and to be eligible to receive incentive compensation and a discretionary
bonus in an amount determined by the Board of Directors.
Mr. Wipff has an employment agreement with the Company ending March 31,
1997, at a base salary of $275,000 for each of Fiscal 1996 and 1997, plus bonus
compensation up to $150,000 per year subject to achievement of certain goals and
achievements agreed to by Mr. Wipff and the Company's Chief Executive Officer
and approved by the Board of Directors. Mr. Wipff's employment agreement also
entitles him or his estate to certain benefits in the event of his permanent
disability or death, and severance benefits in the event the Company terminates
Mr. Wipff's agreement other than "for cause" in an amount equal to the greater
of the remaining base salary due under the employment agreement or $250,000.
In Fiscal 1995, Mr. Brick received a base salary of $350,000 under an
employment agreement with the Company which expired March 31, 1995. The expired
agreement also provided for incentive compensation, eligibility for grants of
stock options and restricted stock and severance benefits of twelve months base
salary in the event that Mr. Brick's employment was terminated by the Company
other than for cause. Pending finalization of a new employment agreement, Mr.
Brick will continue to receive the same annual base salary and to be eligible to
receive incentive compensation in the discretion of the Board of Directors.
10
<PAGE> 13
STOCK OPTIONS
The following tables provide information with respect to options granted
to, and exercises by, the persons indicated during Fiscal 1995 and the value of
unexercised options held by such persons at the end of Fiscal 1995.
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
PERCENT OF
TOTAL OPTIONS GRANT
OPTIONS GRANTED TO EXERCISE DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (SHARES) FISCAL 1995 (PER SHARE) DATE VALUE(1)
- --------------------------------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Robert F. Meyerson 120,000 12.4% $ 14.50(2) 1/19/05 $1,113,600
William J. Murphy 30,000 3.1% $ 15.25(3) 7/18/04 288,810
60,000 6.2% $ 14.50(2) 1/19/05 556,800
John H. Cribb 25,000 2.6% $ 15.25(3) 7/18/04 240,680
24,000 2.5% $ 14.50(2) 1/19/05 222,720
Dan R. Wipff -- -- -- -- --
Frank E. Brick -- -- -- -- --
</TABLE>
- ---------------
(1) Aggregate present value of the options granted during Fiscal 1995 as of the
date of their grant, calculated using the Cox-Ross-Rubenstein binomial
variation of the Black-Scholes option valuation model using the following
assumptions: (a) an executive may typically be expected to hold an option
with a stated term of ten years for a period of seven years prior to
exercise, (b) interest rates of 7.14 percent and 7.74 percent based on the
published yield of Treasury Strips maturing in seven years (as assumed in
(a) above) from the July 18, 1994 and January 19, 1995 grant dates,
respectively, (c) a continuation of the $0.01 per Share dividend
historically paid by the Company, and (d) stock price volatility of 53.6
percent based on the monthly closing prices for the Company's Common Stock
from December 1983 to May 1995.
(2) Equal to the closing sale price for the Common Stock as reported on the
Nasdaq NNM for the last trading day prior to the date of grant. These
options were granted on January 19, 1995.
(3) Equal to the closing sale price for the Common Stock as reported on the
Nasdaq NNM for the last trading day prior to the date of grant. These
options were granted on July 18, 1994.
AGGREGATED OPTION EXERCISES IN FISCAL 1995
AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
FISCAL YEAR-END
EXERCISES DURING FISCAL ---------------------------------------------------------------
1995
--------------------------- NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS MONEY OPTIONS(2)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Meyerson 51,853 $ 370,483 4,985 120,000 $ 26,171 $ 75,000
William J. Murphy 5,500 $ 40,350 56,200 113,800 $ 217,475 $ 123,775
John H. Cribb 34,002 $ 276,433 66,500 66,000 $ 295,500 $ 76,625
Dan R. Wipff 25,006 $ 171,916 89,750 -- $ 442,658 --
Frank E. Brick -- -- 16,500 33,500 $ 61,875 $ 125,625
</TABLE>
- ---------------
(1) Excess of the closing price for the Common Stock as reported on the Nasdaq
NNM for the last trading day prior to the date of exercise over the exercise
price, multiplied by the number of Shares acquired upon exercise.
11
<PAGE> 14
(2) Aggregate fair market value, based on the amount by which the closing sale
price for the Common Stock as reported on the Nasdaq NNM for March 31, 1995
exceeded the exercise price, of all unexercised "in-the-money" (fair market
value per share in excess of exercise price) options then held.
RELATED PARTY TRANSACTIONS
The Company has contracted with Metropolitan Life Insurance Company
("Metropolitan", which beneficially owns more than five percent of the Company's
outstanding Shares; see "COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS"
below) for calendar year 1995 to serve as third-party administrator for all of
the Company's domestic self-insured health plans as well as to provide stop-loss
coverage for individual and group claims thereunder in excess of certain
thresholds. The Company selected Metropolitan from among more than ten companies
that bid to provide such services. Metropolitan's administrative charges are
based on the actual number of covered employees and volume of activity each
month, and the stop-loss premiums, on the actual number of covered employees
each month. Through June 30, 1995, the Company has paid $172,727 in
administrative charges and $82,460 in stop-loss premiums to Metropolitan and
estimates that such charges may total approximately $345,000 and $165,000,
respectively, for the year.
The Company has contracted with Premier Travel Partners ("Premier") as the
Company's travel agency for a term ending December 31, 1995, subject to annual
renewal thereafter unless terminated by 90 days written notice by either party
to the other. Premier, in which Mr. Rose and a member of his immediate family
own in the aggregate an approximately 11 percent interest, was selected from
among seven companies that submitted service proposals to the Company. Under the
agreement, the Company is entitled to all commissions with respect to travel
arranged by Premier for the Company. Originally, Premier was entitled to a
$3,000 monthly management fee, a per transaction fee, on-site office space and
certain expense reimbursements. Effective February 1995, the Company's
obligations were revised in connection with the discontinuation of Premier's
on-site services to approximate the same net result by increasing the monthly
management fee to $14,000 while reducing the per transaction fee and eliminating
all expense reimbursements other than postage and telephone charges. During
Fiscal 1995, the commissions totalled $403,952 and the fees and expenses,
$237,164. For April and May, 1995, there have been $63,903 in commissions and
$37,294 in fees.
In October 1992, the Company's outside directors asked Mr. Meyerson to
reassume the position of Chief Executive Officer, a position he had previously
held from 1979 to 1985. Following his 1985 retirement from that office, he had
continued to assist the Company only in his more limited role as Chairman. The
Summary Compensation Table under "EXECUTIVE COMPENSATION" above sets forth the
salary paid to Mr. Meyerson for his services as Chairman during Fiscal 1995. Mr.
Meyerson has received that same salary as Chairman since September 1989.
The Company's consulting arrangements, described below, with Accipiter
Corporation ("Accipiter"), a consulting firm owned by Mr. Meyerson's wife,
described below, are in lieu of any other compensation paid to Mr. Meyerson in
his capacity as Chief Executive Officer of the Company. These arrangements were
approved by the full Board of Directors (Mr. Meyerson abstaining) in order to
secure Mr. Meyerson's full-time services for the Company in connection with his
reassumption of the office of Chief Executive Officer in October 1992. Mr.
Meyerson's obligations to the Company under the revised consulting arrangements
constitute a full-time personal commitment by Mr. Meyerson.
The Company's consulting arrangements with Accipiter currently provide for
a term ending March 31, 1996, subject to annual extensions. Accipiter's services
to the Company are required to be principally performed by Mr. Meyerson and
include all services that would customarily be performed by a Chief Executive
Officer of a public company of the Company's size and
12
<PAGE> 15
character. For such services, Accipiter receives from the Company a fee of
$840,000 per year, plus $240,000 per year in reimbursement of Accipiter's
general administrative and overhead expenses and reimbursement of its
out-of-pocket expenses incurred on behalf of the Company. In the event of a
change in control of the Company, Accipiter has the right to terminate the
agreement if, following such change in control, there is an adverse change in
the nature or extent of the services requested of Accipiter thereunder which
does not represent a continuation or elevation of, or constitutes a substantial
change in, its responsibilities prior to such change in control or Accipiter
personnel are thereafter required to travel on Company business to an extent
substantially greater than or different from that required prior to such change
in control or to conduct business at locations substantially different from
those required prior to the change in control. Accipiter is entitled to receive
a liquidation benefit equal to three years' consulting fee in each of the
following events: Mr. Meyerson ceasing, for any reason other than his death,
disability, voluntary resignation or termination for cause, to act as the
Company's Chief Executive Officer, Chairman or other equivalent top management
position; upon the election of Accipiter following a change in control of the
Company to terminate the agreement on the grounds discussed above; failure of
Telxon to extend the agreement beyond March 31, 1996; and termination of the
agreement by the Company other than for breach.
During Fiscal 1995, the Board of Directors approved personal loans to Mr.
Meyerson, Chairman and Chief Executive Officer of the Company. The largest
amount of such indebtedness outstanding during Fiscal 1995 was $254,815
(principal and interest), which was repaid in full on March 30, 1995. At June
30, 1995, Mr. Meyerson owed the Company $250,000 (principal) for an additional
borrowing under the above authorization. The above loans bore/bear interest at
ten percent per annum.
Under the terms of his employment agreement with the Company for Fiscal
1994, Mr. Murphy received a $200,000 interest-free loan from the Company on
March 29, 1993, for his use in purchasing a home in connection with his then
promotion to Executive Vice President, North American Operations and associated
relocation to Akron. The loan, which was originally due April 1, 1994, has been
extended by the Company. The full amount of the loan remained outstanding
throughout Fiscal 1995, but as the result of a partial repayment made by Mr.
Murphy on June 5, 1995, the outstanding loan balance has been reduced to
$150,000.
On October 6, 1993, Mr. Wipff received a $75,000 interest-free loan from
the Company, payable on demand, for his use for payment of taxes. The loan was
repaid in full on July 29, 1994.
On December 3, 1993, and January 5, 1994, Mr. Brick received loans of
$75,985 and $58,000, respectively, from the Company, for his use in payment of
withholding and estimated tax obligations incurred with respect to Shares
awarded to him under the Restricted Stock Plan as shown in the Summary
Compensation Table under "EXECUTIVE COMPENSATION" above. The loans are secured
by the restricted stock and bear interest at two percent in excess of the prime
rate, adjusted quarterly. The principal and accrued interest are due on October
27, 1996 or any earlier termination of Mr. Brick's employment. Mr. Brick is also
required to make annual mandatory principal reductions with respect to these
loans equal to 50 percent of any after-tax bonus received. The largest amount of
such indebtedness outstanding during Fiscal 1995 was $149,206 (principal and
interest). At June 30, 1995, Mr. Brick owed the Company $153,160 (principal and
interest) in respect of such loans.
For information concerning the legal fees paid and expenses reimbursed to
Goodman Weiss Miller Freedman, of which Mr. Goodman is senior partner, and
concerning payments to Pen Speech Corporation, which is 50 percent owned by Dr.
Reddy's family, see "ELECTION OF DIRECTORS -- Compensation Committee Interlocks
and Insider Participation."
13
<PAGE> 16
STOCK PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total returns during
the preceding five fiscal year period for the Company, the S&P 500 Index and the
S&P High-Tech Composite Index assuming an initial investment of $100 and the
reinvestment of all dividends when received. The information presented should
not be interpreted as being necessarily indicative of future performance.
TOTAL RETURN TO SHAREHOLDERS
<TABLE>
<CAPTION>
S&P HIGH- TECH
MEASUREMENT PERIOD TELXON COR- S&P 500 IN- COMPOSITE IN-
(FISCAL YEAR COVERED) PORATION DEX DEX
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 328.71 114.41 109.17
1992 346.72 127.05 111.71
1993 143.12 146.39 122.75
1994 180.83 148.55 144.38
1995 213.20 171.68 182.71
</TABLE>
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information concerning each person known to
the Company to be the beneficial owner of more than five percent of the
outstanding Shares of the Company.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
NAME AND ADDRESS ----------------------------
OF BENEFICIAL OWNER NUMBER PERCENTAGE(1)
---------------------------------------------- --------- -------------
<S> <C> <C>
The Prudential Insurance 1,233,819(2) 7.8%
Company of America
100 Mulberry Street
Newark, NJ 07102
Metropolitan Life 953,100(3) 6.0%
Insurance Company
One Madison Avenue
New York, NY 10010
</TABLE>
14
<PAGE> 17
- ---------------
(1) Computed based upon the 15,798,709 Shares outstanding as of June 30, 1995.
(2) The Shares shown are held by The Prudential Insurance Company of America
("Prudential") for the benefit of its clients, separate accounts, externally
managed accounts, registered investment companies, subsidiaries and/or other
affiliates. The information in this Proxy Statement concerning the number of
Shares beneficially owned by Prudential is as of June 30, 1995 and is based
upon information contained in the CDA/Spectrum 13(f) Filing Report to which
the Company subscribes as updated and confirmed with Prudential by the
Company in connection with the preparation of this Proxy Statement.
(3) Of the Shares shown, 6,100 are owned directly by Metropolitan, and the
remaining 947,000 are deemed owned by it indirectly through State Street
Research & Management Company, Inc. and its affiliate, State Street Research
Investment Services, Inc. (each an investment adviser registered under the
Investment Advisers Act of 1940 and together referred to as the "Management
Companies"), One Financial Center, 30th Floor, Boston, MA 02111. Insofar as
all of the Shares attributed to the Management Companies are in fact owned
by a variety of their clients, the Management Companies disclaim beneficial
ownership of the Shares. The information in this Proxy Statement concerning
the number of Shares beneficially owned by Metropolitan and the Management
Companies is as of March 31, 1995 and is based upon the copies received by
the Company of the Schedule 13Gs they filed with the Securities and Exchange
Commission in February 1995 as updated and confirmed with them by the
Company in connection with the preparation of this Proxy Statement.
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the outstanding Shares, as of June 30, 1995, by all
directors and the director nominee of the Company, by the executive officers of
the Company named in the Summary Compensation Table, and by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
NAME AND ADDRESS(1) ------------------------
OF BENEFICIAL OWNER NUMBER PERCENTAGE(2)
- ------------------------------------------------- --------- ----------
<S> <C> <C>
J. Robert Anderson............................... 8,250(3) *
Frank E. Brick................................... 70,650(4) *
Richard J. Bogomolny............................. -- *
John H. Cribb.................................... 90,750(5) *
Robert A. Goodman................................ 87,390(6) *
Robert F. Meyerson............................... 488,460(7) 3.1%
William J. Murphy................................ 97,550(8) *
Raj Reddy........................................ 48,500(9) *
Norton W. Rose................................... 25,500(10) *
Walter J. Salmon................................. 8,250(3) *
Dan R. Wipff..................................... 144,250(11) *
All directors and executive officers as a group
(12 persons)................................... 1,079,924(12) 6.7%
</TABLE>
- ---------------
* less than 1 percent
(1) The address for the named individuals is 3330 West Market Street, Akron,
Ohio 44333.
(2) Computed based upon the 15,798,709 Shares outstanding as of June 30, 1995,
as adjusted with respect to the Shares which may be acquired within 60 days
by exercise of options by the person(s) whose percentage ownership is being
computed.
(3) Consists of Shares which may be acquired within 60 days by exercise of
options.
15
<PAGE> 18
(4) Includes 16,500 Shares which may be acquired within 60 days by exercise of
options. Also includes 40,000 Shares awarded to Mr. Brick under the
Restricted Stock Plan, which will vest in 10,000 Share increments on
October 27, 1995, 1996, 1997 and 1998, provided that he is then employed by
the Company, and are subject to transfer restrictions during the respective
vesting periods.
(5) Includes 1,000 Shares owned by Mr. Cribb's wife as to which Shares Mr.
Cribb disclaims beneficial ownership and 74,750 Shares which may be
acquired within 60 days by exercise of options. Also includes 10,000 Shares
awarded to Mr. Cribb under the Restricted Stock Plan, 2,000 of which have
vested since June 30, 1995, with the remaining Shares vesting in 2,000
Share increments on July 17, 1996, 1997, 1998 and 1999, provided that he is
then employed by the Company, and being subject to transfer restrictions
during the respective vesting periods.
(6) Includes 8,900 Shares owned by Mr. Goodman's wife as to which Shares Mr.
Goodman disclaims beneficial ownership and 68,500 Shares which may be
acquired within 60 days by exercise of options.
(7) Includes 267,750 Shares beneficially owned by Mr. Meyerson's wife (4,950 of
which are held by Mrs. Meyerson as custodian for grandchildren under the
Uniform Gifts to Minors Act) as to which Shares Mr. Meyerson disclaims
beneficial ownership and 4,985 Shares which may be acquired within 60 days
by exercise of options.
(8) Includes 1,000 Shares owned by Mr. Murphy's wife as to which Shares Mr.
Murphy disclaims beneficial ownership and 66,100 Shares which may be
acquired within 60 days by exercise of options. Also includes 16,000 Shares
awarded to Mr. Murphy under the Restricted Stock Plan, 2,000 of which have
vested since June 30, 1995, 9,000 of which will vest in 3,000 Share
increments on May 18, 1996, 1997 and 1998, and the remaining 8,000 of which
will vest in 2,000 Share increments on July 17, 1996, 1997, 1998 and 1999,
provided with respect to each of the foregoing installments that he is then
employed by the Company, and all of which installments are subject to
transfer restrictions during the respective vesting periods.
(9) Includes 41,000 Shares which may be acquired within 60 days by exercise of
options.
(10) Includes 20,000 Shares which may be acquired within 60 days by exercise of
options.
(11) Includes 83,750 Shares which may be acquired within 60 days by exercise of
options. Also includes 20,000 Shares awarded to Mr. Wipff under the
Restricted Stock Plan, which will vest on December 30, 1995, provided that
he is then employed by the Company, and are subject to transfer
restrictions until they vest.
(12) Includes 397,035 Shares which may be acquired within 60 days by exercise of
options and 94,000 Shares awarded under the Restricted Stock Plan, of which
5,000 Shares have vested since June 30, 1995, and provided the respective
awardees are then employed by the Company, 30,000 Shares will vest during
the remaining portion of Fiscal 1996; 18,000 Shares in each of Fiscal 1997,
1998 and 1999; and 5,000 Shares, in Fiscal 2000.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors, and greater than ten-percent stockholders
are required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers and directors were complied with, except that
16
<PAGE> 19
one transaction report filed by Mr. Wipff in Fiscal 1995 understated the number
of Shares owned by him after giving effect to the transactions reported and the
Company became aware in Fiscal 1995 that one transaction report filed by Mr.
Brick in Fiscal 1994, and the initial ownership reports filed by each of Gerald
J. Gabriel and Kenneth W. Haver in Fiscal 1995 each incorrectly stated the
expiration date of options granted those officers under the Company's 1990 Stock
Option Plan. The Company does not believe it had any greater than ten-percent
beneficial owners at any time during Fiscal 1995 based on its records and
because it has not received copies of, and is not otherwise aware of, any
filings by any such beneficial owner with the Securities and Exchange Commission
under Section 13 or 16(a) of the Exchange Act.
2. APPROVAL OF AMENDMENTS TO THE TELXON CORPORATION
1990 STOCK OPTION PLAN
GENERAL
The Board of Directors believes that the continued growth and profitability
of the Company depends, in large part, upon the ability of the Company to remain
competitive in attracting and retaining key personnel. Accordingly, on June 26,
1995, the Board of Directors adopted, subject to stockholder approval,
amendments (the "1995 Amendments") to the Telxon Corporation 1990 Stock Option
Plan (the "1990 Plan") that (i) increase the number of Shares available for
issuance under the 1990 Plan from 2,500,000 to 3,350,000 (subject to adjustment
for certain changes in the Company's capitalization), (ii) in order to qualify
certain grants of options as performance-based compensation under provisions of
the Internal Revenue Code added by OBRA, limit to 500,000 Shares the maximum
number of Shares with respect to which options may be granted to any employee in
any one fiscal year, (iii) provide that none of the additional 850,000 Shares
added to the 1990 Plan by such amendments would be issuable under options
granted under the 1990 Plan having a term of more than eight (8) years, and (iv)
provide that none of such 850,000 options would be subject to "repricing." The
1990 Plan, as amended, defines "repricing" as any transaction which has the
effect of changing the exercise price of an outstanding option, whether by
direct amendment of the option or replacement of the option by the issuance of a
new option at a different price.
The 1990 Plan was originally adopted by the Board of Directors of the
Company on August 27, 1990 and approved by the stockholders of the Company at
the annual meeting held October 18, 1990. Under the terms of the 1990 Plan,
Shares not granted under the Company's predecessor plan, the Telxon Corporation
1988 Stock Option Plan, at the time of stockholder approval of the 1990 Plan
were carried over to and available for issuance under the 1990 Plan. At the 1992
and 1994 annual meetings, the stockholders of the Company approved amendments to
the 1990 Plan increasing the authorized number of shares set aside for issuance
under the 1990 Plan by an aggregate of 1,500,000 Shares.
As of July 21, 1995, options for an aggregate of 2,501,971 Shares were
outstanding under the 1990 Plan, and 124,707 Shares remained available for the
granting of options under the 1990 Plan. The proposed amendment will increase
the Shares available for grant under the 1990 Plan to 974,707.
To date, no options have been granted to any employee conditional upon
stockholder approval of the increase in the number of shares subject to the 1990
Plan hereby being submitted for such approval. Since, upon such approval, the
employees to whom and the quantities on which options may be granted with
respect to such additional shares will be determined from time to time by the
Stock Option and Restricted Stock Committee (the "Committee") in the exercise of
its discretionary authority under the 1990 Plan, the benefits and amounts that
may be received by any executive officer or other employee of the Company in
respect of such increased shares are not presently determinable.
The Company is required under the terms of its listing agreement with the
Nasdaq NNM to obtain approval of the amendments to the 1990 Plan from the
Company's stockholders.
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Stockholder approval of the amendments is also required in order for officers
receiving option grants out of the Shares being added to the 1990 Plan to
qualify for certain protections from the "short swing profit" liability
provisions of Section 16(b) of the Exchange Act (i.e. forfeiture of profits
realized from purchases and sales of securities made within six months)
available under Securities and Exchange Commission Rule 16b-3 ("Rule 16b-3") as
currently in effect.
SUMMARY OF THE 1990 PLAN
The following summary of the amended 1990 Plan is qualified by reference to
the full text of the 1990 Plan, as amended, which has been filed electronically
with the Securities and Exchange Commission together with this Proxy Statement
and is available upon written request to the Secretary of the Company.
The purpose of the 1990 Plan is to promote the best interests of the
Company and its stockholders by enabling the Company and its subsidiaries to
attract and retain highly qualified personnel through rewarding valued employees
with the opportunity, pursuant to options granted under the 1990 Plan, to
acquire a proprietary interest in the Company and thereby encouraging them to
put forth their maximum efforts for the continued success and growth of the
Company. Directors of the Company as such are not eligible to receive grants
under the 1990 Plan, but those directors who are employees of the Company are,
like all other Company employees, eligible to receive such grants.
The 1990 Plan is currently administered by the Committee, neither of whose
members is eligible to participate in the 1990 Plan. The Committee selects the
employees to whom options are granted and determines the time or times at which,
and the number of Shares for which, options are granted to them. The Committee
also determines the exercise price, exercise period, vesting schedule and all
other terms and conditions of each option granted under the 1990 Plan. The
exercise price per Share cannot be less than the fair market value per Share on
the day prior to the date of grant. So long as the Common Stock is included in
the Nasdaq NNM, the 1990 Plan provides that the fair market value per Share is
the last reported sales price for the Common Stock as reported therein. An
option is not transferable by the optionee other than by will or the laws of
descent and distribution and is exercisable during the optionee's lifetime only
by him. In the event of his death, an option is exercisable (generally for a
limited post-death period as described below) by the optionee's estate or by the
person who acquires the right to exercise the option by bequest or inheritance.
Section 162(m) of the Internal Revenue Code of 1986, added by OBRA,
disallows a tax deduction to public companies for certain compensation in excess
of $1 million paid to the company's chief executive officer and four other most
highly compensated executive officers. Certain compensation, including
"performance-based" compensation, is not included in compensation subject to the
$1 million deduction limit. The proposed amendments to the 1990 Plan limiting
the amount of option grants to any individual employee in any one fiscal year of
the Company and providing for the administration of the 1990 Plan by
"independent directors" within the meaning of Section 162(m) and the regulations
thereunder are intended to preserve the tax deductions to the Company that might
otherwise be unavailable with respect to certain grants under the 1990 Plan.
Subject to the discretionary authority given to the Board, and the
Committee, under the 1990 Plan to fix different terms for a particular option
grant, each option granted under the 1990 Plan will generally be subject to the
following additional terms:
Term of Option. Each option will be exercisable for a period of ten years
from the date of grant, except that, as noted above, the 850,000 Shares added to
the 1990 Plan by the 1995 Amendments will be limited to grants of options having
a maximum term of eight years from the date of grant.
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Exercise of Option. To exercise an option, the optionee must tender full
payment of the exercise price therefor and the taxes required to be withheld in
connection therewith. The 1990 Plan permits the exercise price and withholding
taxes to be paid in cash, check, already owned Shares, the withholding of Shares
from those to be issued on such exercise, proceeds from the sale of the Shares
to be issued upon such exercise pursuant to a brokerage arrangement, or any
combination thereof.
Termination of Employment. A former employee generally may exercise an
option within 30 days (or within such greater period as may be determined by the
Board of Directors or Committee thereof at the time of termination of
employment) after the termination of his employment with the Company (other than
by reason of death, disability or retirement) to the extent such option was
vested on the date of termination of employment.
Retirement of Optionee. An option may be exercised within three months of
the retirement of an optionee at or after age 65, or other retirement at any age
entitling him to benefits under any retirement plan of the Company, to the
extent the option is vested on the date of retirement.
Disability of Optionee. An option may be exercised within one year of the
termination of an employee by reason of permanent, total disability to the
extent the option is vested on the date of termination.
Death of Optionee. If an optionee dies while employed by the Company, his
estate may exercise his options within six months of the date of death to the
extent such options would have been exercisable had the optionee continued
living and terminated employment as of the date six months after the date of his
death. If an optionee dies within one month of termination of employment, his
estate generally may exercise his options within six months of the date of
termination of employment to the extent vested on the date of termination.
In the event of specified changes in the Company's capital structure, the
1990 Plan requires adjustments in the exercise price of, and number of Shares
subject to, outstanding options and in the number of Shares authorized by the
1990 Plan.
In the event of any proposed dissolution or liquidation of the Company, all
options then outstanding under the 1990 Plan will terminate immediately prior to
the consummation of such action unless otherwise provided by the Board of
Directors.
In the event of a proposed sale of all or substantially all of the assets
of the Company or the merger of the Company with or into another corporation,
the 1990 Plan requires that each outstanding option be assumed, or an equivalent
option be substituted, by the successor corporation or a parent or subsidiary of
such successor corporation unless the Board of Directors determines that each
optionee shall have the right to exercise his option as to all or any part of
the Shares subject thereto, including Shares as to which the option would not
otherwise then be vested and exercisable.
In the event of certain changes in control of the Company, the 1990 Plan
provides that, unless otherwise determined by the Board, all options then
outstanding under the 1990 Plan as of the date of such change in control become
fully vested and shall be cashed out in full by a payment to each optionee equal
to the amount by which the "change in control price" exceeds the exercise price
of each such option.
The 1990 Plan will remain in effect until (i) terminated by resolution of
the Board of Directors or (ii) both (A) all options granted under the 1990 Plan
have been exercised in full and (B) no Shares remain available under the 1990
Plan for the granting of additional options. The Board of Directors may from
time to time amend the 1990 Plan in such respects as it may deem advisable,
provided that any amendment to the 1990 Plan must be approved by the Company's
stockholders if such approval is required in order for the 1990 Plan to continue
to
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qualify under Rule 16b-3 as then in effect or to comply with any other
requirements of law or any securities market on which the Shares are listed or
included for trading.
An optionee will not recognize taxable income as the result of receiving a
grant of a stock option, regardless of whether it is an incentive stock option
or a non-qualified stock option. The Company is not entitled to a tax deduction
at the time of grant of any stock option. Upon the exercise of a non-qualified
stock option (which is the nature of all options granted to date under the 1990
Plan), the optionee will recognize ordinary income equal to the amount by which
the fair market value of the Shares at the time of exercise exceeds the exercise
price paid therefor, and the Company, provided that it satisfies certain tax
withholding requirements and subject to certain limits imposed by Section 162(m)
of the Internal Revenue Code of 1986, as amended, on the deductibility of
compensation paid certain executives in excess of $1 million, will be entitled
to a corresponding deduction. The optionee's tax basis in the Shares acquired
through such exercise will be equal to the exercise price paid for such Shares
plus the amount of income recognized as a result of the exercise of the option.
When the optionee subsequently disposes of the Shares acquired through exercise
of a non-qualified stock option, the optionee will recognize, either as short-
or long-term capital gain or loss depending upon how long the optionee held the
Shares from the date of exercise of the option until the date of disposition,
income or loss equal to the difference between the amount realized from the
disposition of such Shares and the fair market value of the Shares on the date
the option was exercised. Under current law, net capital gains (net long-term
capital gain minus any net short-term capital loss) are taxed at a maximum rate
of 28 percent; capital losses are allowed in full against capital gains plus up
to $3,000 of other income.
VOTE REQUIRED
The Nasdaq NNM stockholder approval requirement, the most stringent of the
two stockholder approval requirements noted above, requires that the amendments
to the 1990 Plan be approved by the favorable vote of the holders of a majority
of the Shares present or represented by proxy at the Annual Meeting and voting
on the proposal, provided that the total vote cast on the proposal represents
over 50 percent in interest of the issued and outstanding Common Stock. Approval
by such vote will also satisfy the remaining stockholder approval requirement
applicable to the amendments to the 1990 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENTS
TO THE 1990 STOCK OPTION PLAN, WHICH IS DESIGNATED IN THE PROXY AS PROPOSAL 2.
3. APPROVAL OF AMENDMENTS TO THE TELXON CORPORATION
1990 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
GENERAL
The Board of Directors believes that the Company's 1990 Stock Option Plan
for Non-Employee Directors (the "Directors' Plan") has served the interests of
the Company well by enabling it to attract and motivate highly-qualified outside
directors. Accordingly, on June 26, 1995, the Board of Directors adopted,
subject to stockholder approval, amendments to the Directors' Plan that (i)
increase the number of Shares available for issuance under the Directors' Plan
from 250,000 to 400,000 (subject to adjustment for certain changes in the
Company's capitalization), and (ii) confirm and clarify that the exercise price
for each option granted under the Directors' Plan is the fair market value of
the Common Stock as of the date prior to the date of grant.
The Directors' Plan was originally adopted by the Board of Directors of the
Company on October 18, 1990, and approved by the stockholders of the Company at
the annual meeting held September 5, 1991.
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As of June 30, 1995, options for an aggregate of 225,000 Shares were
outstanding under the Directors' Plan, and no Shares are presently available for
the granting of further options under the Directors' Plan. The proposed
amendments will make 150,000 additional Shares available for grant under the
Directors' Plan.
The Company is required under the terms of its listing agreement with the
Nasdaq NNM to obtain approval of the amendments to the Directors' Plan from the
Company's stockholders. Stockholder approval of the amendments is also required
in order for non-employee directors receiving option grants out of the Shares
being added to the Directors' Plan to qualify for certain protections from the
"short swing profit" liability provisions of Section 16(b) of the Exchange Act
available under Rule 16b-3 as currently in effect.
SUMMARY OF DIRECTORS' PLAN
The following summary of the amended Directors' Plan is qualified by
reference to the full text of the amended Directors' Plan, which has been filed
electronically with the Securities and Exchange Commission together with this
Proxy Statement and is available upon written request to the Secretary of the
Company.
The Directors' Plan is administered by the Board of Directors. The
aggregate number of Shares which may be issued pursuant to the exercise of
options granted under the Directors' Plan, as amended pursuant to Proposal 3,
may not exceed 400,000, subject to certain adjustments. Such Shares may be made
available from the authorized and unissued Common Stock of the Company or from
Common Stock issued and held in the treasury of the Company, as determined by
the Board. Shares subject to the unexercised portion of an option become
available for regrant under the Plan upon the expiration, lapse, cancellation,
surrender, forfeiture or other termination of such option.
The option price per share with respect to options granted under the
Director' Plan is the fair market value of the Common Stock at the time the
option is granted. Such fair market value is the closing sales price of the
Common Stock as reported in the Nasdaq NNM on the trading day immediately
preceding the date of grant.
The term of options under the Directors' Plan is seven years from the date
of grant. Initial options of 25,000 Shares are exercisable as to one-third of
the Shares subject to the option after the first anniversary of the grant date,
exercisable as to two-thirds of the Shares subject to the option after the
second anniversary of the grant date, and exercisable as to all or any part of
the Shares subject to the option after the third anniversary of the grant date.
Each continuing grant of 10,000 Shares granted on an anniversary date of
election or reelection is exercisable as to all or any part of the Shares
subject to the option after the third anniversary of the grant date. Pending and
subject to stockholder approval of the amendments to the Directors' Plan, grants
will continue to be made in accordance with the provisions described above,
including grants to Messrs. Rose, Reddy and Goodman during August 1995. The
Directors' Plan provides for mandatory adjustment to the option price and the
number or kind of securities covered by the options in the event of a stock
dividend, stock split, recapitalization, merger, consolidation, combination or
exchange of Shares, reorganization, dissolution or liquidation.
Options granted under the Directors' Plan are not transferable other than
by will or the laws of descent and distribution. The options terminate upon the
earlier of three months following the optionee's no longer being a director of
the Company or seven years from the date of grant, subject in either case to
earlier termination in certain events as discussed below. Upon the disability of
an optionee under the Directors' Plan, the options may be exercised (to the
extent the optionee was entitled to do so as of the date he ceased to be a
director due to such disability) until the earlier of one year following the
date he ceased to be director or seven years from the date of grant.
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Upon the death of an optionee under the Directors' Plan at a time when he
is a director of the Company, the options may be exercised (to the extent the
optionee would have been entitled to exercise the option had he continued living
and terminated his directorship six months after the date of death) by the
optionee's estate or by a person who acquires the right to exercise the option
by bequest or inheritance until the earlier of six months following the date of
such optionee's death or seven years from the date of grant. Upon the death of
an optionee under the Directors' Plan within thirty days after the termination
of his directorship for any reason other than disability, the options may be
exercised (to the extent the optionee would have been entitled to exercise the
option at the date of termination of his directorship by the optionee's estate
or by a person who acquires the right to exercise the option by bequest or
inheritance) until the earlier of six months following the date of the
optionee's death or seven years from the date of grant.
In the event of the proposed dissolution or liquidation of the Company, the
options under the Directors' Plan terminate immediately prior to the
consummation of such proposed action unless otherwise provided by the members of
the Company's Board of Directors other than the optionees under the Directors'
Plan. Such other members of the Company's Board of Directors may in their sole
discretion declare that the options shall terminate as of a date fixed by them
and give the optionees under the Directors' Plan the right to exercise their
options as to all or any part of the Shares subject to the options including
Shares as to which the option would not otherwise be exercisable.
In the event of a proposed sale of all or substantially all of the assets
of the Company or the merger or consolidation of the Company with or into
another corporation, the options under the Directors' Plan are required to be
assumed, or equivalent options are required to be substituted, by the successor
corporation or a parent or subsidiary of such successor corporation unless the
members of the Company's Board of Directors other than the optionees under the
Directors' Plan determine in their sole discretion that in lieu of such
assumption or substitution, the optionees under the Directors' Plan shall have
the right to exercise the options as to all Shares covered thereby, including
Shares as to which the options would not otherwise then be exercisable.
In the event of certain changes of control of the Company, unless otherwise
determined by the members of the Company's Board of Directors other than the
optionees under the Directors' Plan prior to the occurrence of such "change in
control," the options under the Directors' Plan immediately become fully
exercisable and vested as to all of the Shares covered thereby, and the value of
the option measured by the excess of the "change in control price" over the
exercise price of the option is required to be paid to the optionee.
The grant of a non-qualified stock option under the Directors' Plan does
not result in any taxable income to the optionees or deduction to the Company at
the time the option is granted. Generally, the holder of a non-qualified stock
option realizes ordinary income at the time such holder exercises the option and
receives Shares in an amount measured by the excess of the fair market value of
the Shares at that time over the option price, and the Company is entitled to a
corresponding deduction.
VOTE REQUIRED
The Nasdaq NNM stockholder approval requirement, the most stringent of the
two stockholder approval requirements noted above, requires that the amendments
to the Directors' Plan be approved by the favorable vote of the holders of a
majority of the Shares present or represented by proxy at the Annual Meeting and
voting on the proposal, provided that the total vote cast on the proposal
represents over 50 percent in interest of the issued and outstanding Common
Stock. Approval by such vote will also satisfy the remaining stockholder
approval requirement applicable to the amendments to the Directors' Plan.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENTS
TO THE 1990 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS, WHICH IS DESIGNATED IN
THE PROXY AS PROPOSAL 3.
4. APPROVAL OF THE TELXON CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
On June 26, 1995, the Board of Directors adopted, subject to stockholder
approval, the Telxon Corporation 1995 Employee Stock Purchase Plan (the
"Employee Plan"), which provides for the granting of rights to purchase up to
500,000 Shares (subject to antidilution adjustment) to eligible employees of the
Company and its participating subsidiaries. The following summary of the
Employee Plan is qualified by reference to the full text of the Employee Plan
attached as Exhibit A to this Proxy Statement.
The purpose of the Employee Plan is to promote the interests of the Company
and its stockholders by providing eligible employees of the Company and its
participating subsidiaries with additional incentive to continue in their
employment and to encourage increased efforts to promote the best interests of
the Company by permitting such employees to purchase Shares at a price which is
less than the current market price thereof.
The Employee Plan will be administered by the Stock Option and Restricted
Stock Committee of the Board (the "Committee"). The Committee has authority to
establish rules for administering and interpreting the Employee Plan. Any
employee of the Company and its participating subsidiaries is eligible to
participate in the Employee Plan, except employees who have not been
continuously employed for at least 12 months prior to, and on the first day of,
a Payment Period (defined below), part-time employees working an average of less
than 20 hours per week and employees whose annual base salary exceeds $150,000.
Each six-month period, January 1 to June 30 and July 1 to December 31, will be a
"Payment Period" during which payroll deductions will be accumulated under the
Employee Plan. However, no employee may acquire any right to purchase Shares
under the Employee Plan if, immediately after receiving such right, such
employee would own five percent or more of the total combined voting power or
value of all classes of stock of the Company. Approximately 1,850 employees are
currently eligible to participate in the Employee Plan.
Employees will be provided with the opportunity to enroll in the Employee
Plan at two times during the calendar year. To enroll in the Employee Plan, an
employee must submit a written authorization pursuant to which payroll
deductions in an amount not less than 1 percent and not more than 15 percent of
such employee's gross weekly base compensation plus bonuses and commissions up
to a maximum of $150,000 (before tax withholding or other deductions) will be
made each payroll period during the Payment Period. The amount of an employee's
payroll deductions may not be modified during any Payment Period and will remain
in effect for all successive Payment Periods unless changed by the employee in a
written request filed with the Company.
Payroll deductions will be credited to the contribution account of each
participating employee. At the end of each Payment Period, the amount in each
participant's contribution account will be applied to the purchase of the number
of Shares determined by dividing such amount by the purchase price of the Shares
for that Payment Period. The purchase price per Share for each Payment Period
will be equal to 85 percent of the lesser of (a) the closing price of a Share on
the first trading day of such Payment Period, and (b) the closing price on the
last trading day of such Payment Period. As of July 18, 1995, the closing price
of the Common Stock on the Nasdaq NNM was $22.00 per Share.
The Shares purchased by each participant will be considered to be issued
and outstanding as of the close of business on the last day of each Payment
Period. A person who disposes of Shares purchased pursuant to the Employee Plan
within two years of the commencement of the
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Payment Period during which such Shares are purchased is required to notify the
Company of such disposition promptly in writing.
A participant may elect to terminate his or her participation in the
Employee Plan by providing appropriate written notice to the Company. Once each
Payment Period, a participant may elect to cease further contributions to the
Plan; in such event, all pre-withdrawal contributions will be applied to the
purchase of Shares as of the end of that Payment Period.
In the event a participant's employment with the Company or its
participating subsidiaries ceases during a Payment Period for any reason, then
such person's participation in the Employee Plan shall terminate as of the date
of such termination of employment. Upon such termination, the entire cash
balance in such participant's contribution account will be refunded, without
interest, and less any taxes required to be withheld.
The Board may terminate the Employee Plan at any time. It will terminate in
any case when all or substantially all of the Shares reserved for the purposes
of the Employee Plan have been purchased. The Board may amend the Employee Plan
from time to time in any respect in order to meet changes in legal requirements
or for any other reason; provided, however, that no such amendment shall (a)
increase the number of Shares to be offered pursuant to the Employee Plan
(except pursuant to the antidilution provisions thereof), or (b) change the
class of employees eligible to purchase Shares under the Employee Plan.
It is the intention of the Company to have the Employee Plan qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended. The provisions of the Employee Plan will be construed so as to
extend and limit participation in a manner consistent with the requirements of
Section 423. The tax law refers to participating employees' rights to purchase
stock under an employee stock purchase plan as "options". An employee will not
be deemed to have received any compensation for federal income tax purposes at
the time of the grant or exercise of an option under the Employee Plan. Whenever
an employee sells the Shares or dies, the 15 percent discount in the option
price will be taxed as ordinary income. If an employee exercises an option under
the Employee Plan and does not dispose of the Shares thus acquired until more
than two years after the date the option was granted, profit (other than the 15
percent discount) realized upon such disposition will be taxed as a long-term
capital gain. In such case, the Company will not be entitled to a deduction for
federal income tax purposes in connection with either the grant or the exercise
of the option. In the event the Shares are sold within two years after the date
the option is granted, the employee is taxed on his or her entire gain over the
discounted price paid for the Shares as ordinary income, and the Company is
entitled to a corresponding deduction.
Rights acquired under the Employee Plan are not transferable, other than by
will or the laws of descent and distribution, and may be exercised only by a
participant. No eligible employee or participant will, by reason of
participation in the Employee Plan, have any rights as a stockholder of the
Company until such employee acquires Shares as provided in the Employee Plan.
Nothing in the Employee Plan confers upon any participant any right to continue
in the employment of the Company or its participating subsidiaries.
Stockholder approval of the Employee Plan is being sought in order to
qualify the Plan under Section 423 of the Internal Revenue Code.
Stockholder approval of the Employee Plan is also required in order for
officers eligible to participate in the Employee Plan, if any, to qualify for
certain protections from the "short swing" profit liability provisions of
Section 16(b) of the Exchange Act available under Rule 16b-3 as currently in
effect.
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VOTE REQUIRED
The favorable vote of the holders of the majority of the outstanding Shares
by proxy present or represented at the Annual Meeting will be required for the
approval of the Telxon Corporation 1995 Employee Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE TELXON CORPORATION 1995 EMPLOYEE STOCK PURCHASE PLAN.
STOCKHOLDER PROPOSAL
Richard M. Goltermann, 311 E. Morris Blvd., Bldg. 6, Apt. 7, Winter Park,
Florida, 32789-3828, a stockholder of the Company beneficially owning 10,000
Shares, has notified the Company that he intends to present the following
proposal at the Annual Meeting:
RESOLVED: that the Board of Directors shall be requested to take steps
to establish a meaningful dividend on the common stock.
In support of this proposal, Mr. Goltermann has submitted the following
statement:
Shareholders presently have no way to benefit from their investment in
the common stock other than by selling their shares when the price goes up.
The establishment of a meaningful dividend would encourage long-term
ownership of the stock and would benefit the Company by providing a more
established owner base.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL FOR THE
FOLLOWING REASONS:
As is common practice among technology-driven growth companies, the Company
has traditionally reinvested earnings to support further growth and has
historically paid a $.01 per share annual dividend. The Board of Directors
continues to believe that the Company's existing dividend policy is in the best
long-term interests of the Company and its stockholders by seeking to maximize
stockholder returns through capital appreciation of their investment in the
Company.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand has been reappointed as the independent public
accountants to examine the Company's financial statements for the fiscal year
ending March 31, 1996. Coopers & Lybrand has served as the Company's independent
auditors since October 1990. Representatives of Coopers & Lybrand are expected
to be present at the Annual Meeting and will have the opportunity to make a
statement if they so desire and to respond to appropriate questions.
EXPENSE OF SOLICITATION
The cost of solicitation of proxies in the accompanying form will be paid
by the Company. In addition to solicitation by use of the mails, certain
officers and regular employees of the Company may solicit the return of proxies
by telephone, telegram or personal interview. The Company has retained
Kissel-Blake Inc. to solicit proxies on behalf of the Board of Directors for a
fee of $10,500 plus reimbursement of out-of-pocket expenses.
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STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
In order for a stockholder proposal to be considered at the 1996 annual
meeting of stockholders, the Charter requires that it be received by the
Secretary of the Company at the Company's offices, 3330 West Market Street,
Akron, Ohio 44333, no later than June 2, 1996. Each proposal submitted must
contain certain information specified in the Charter about the proponent and the
business matter to be proposed and a statement that the proponent is as of the
date of such notice a stockholder of record. The stockholder must also state his
intention personally to appear at the 1996 annual meeting of stockholders to
present the proposal. Under Rule 14a-8 promulgated under the Exchange Act, in
order for a stockholder proposal to be included in the proxy statement with
respect to the 1996 annual meeting of stockholders, such proposal must be a
proper subject for action at a stockholders meeting, the proposal and its
proponent must satisfy the other requirements and conditions of Rule 14a-8, and
the proposal must be received by the Secretary of the Company at the address set
forth above not later than 120 days in advance of the first anniversary of the
date of mailing of this Proxy Statement.
By Order of the Board of Directors,
ROBERT A. GOODMAN
Secretary
July 31, 1995
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EXHIBIT A
TELXON CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE OF THE PLAN. The Plan is intended as an incentive to and to
encourage stock ownership by all Eligible Employees of the Company and
Participating Subsidiaries so that they may share in the fortunes of the Company
by acquiring or increasing their proprietary interest in the Company. The Plan
is designed to encourage Eligible Employees to remain in the employ of the
Company. It is intended that options granted pursuant to this Plan shall
constitute options issued pursuant to an "employee stock purchase plan" within
the meaning of Section 423 of the Code.
2. DEFINITIONS. In addition to such other capitalized terms as are defined
elsewhere in this Plan, the following terms shall when used in this Plan have
the respective meanings set forth below:
(a) "Business Day" means a day on which there is trading in the Common
Stock on the Principal Market.
(b) "Base Compensation" means an employee's annual base salary, or if
not salaried, annualized amount of hourly pay (including any shift or other
compensatory premium which employee will regularly receive) based on the
employee's regular weekly or biweekly hours, for services rendered to the
Company and Participating Subsidiaries, including paid vacation and
holidays and before adjustment for salary reduction contributions to the
Company's 401(k) plan, health care or dependent care spending accounts and
similar pre-tax plans but excluding bonuses and commissions.
(c) "Closing Price" means the closing price for one share of Common
Stock on the Principal Market.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" means the Stock Option and Restricted Stock Committee
of the Board of Directors.
(f) "Common Stock" means the Common Stock, par value $.01 per share,
of the Company.
(g) "Company" means Telxon Corporation, a Delaware corporation.
(h) "Covered Compensation" means an employee's Base Compensation plus
bonuses, commissions, overtime and other premium payments, sick pay, and
short- and long-term disability payments but excluding severance pay and
taxable fringe benefits (such as club dues, excess life insurance and
personal automobile use); provided, however, that no more than $150,000 in
cumulative aggregate amount of all of the foregoing forms of included
compensation during any single Payment Period or two Payment Periods
together comprising a single calendar year may be counted as Covered
Compensation for purposes of any payroll deductions, stock purchases or
other computations under this Plan with respect to such Payment Period(s).
(i) "Eligible Employees" shall have the meaning set forth in Section
3.
(j) "Option Price" means, in respect of each Payment Period, the
dollar amount (carried out to one one-thousandth of a cent ($0.00001))
equal to 85% of the lesser of (i) the Closing Price of the Common Stock on
the first Business Day of the Payment Period and (ii) the Closing Price of
the Common Stock on the last Business Day of the Payment Period.
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(k) "Participating Subsidiaries" means any majority-owned subsidiary
of the Company which is designated by the Committee to participate in the
Plan. The Committee shall have the power to make such designation before or
after the Plan is approved by the Company's stockholders.
(l) "Payment Period" means the six month periods during which payroll
deductions will be accumulated under the Plan.
(m) "Plan" means this Telxon Corporation 1995 Employee Stock Purchase
Plan.
(n) "Principal Market" means The Nasdaq Stock Market's National Market
or stock exchange which is then the principal trading market for the Common
Stock (if the Common Stock is traded on more than one market, that market
which the Committee determines to be the principal trading market).
(q) "Securities Law Requirements" means the Securities Act of 1933,
the Securities and Exchange Act of 1934 and the rules and regulations
promulgated by the Securities and Exchange Commission thereunder, including
but not limited to Rule 16b-3, as adopted and amended from time to time and
as interpreted by formal or informal opinions of and releases published or
other interpretative advice provided by the Staff of the Securities and
Exchange Commission, and the requirements of any stock exchange, automated
interdealer quotation system or other recognized securities market on which
the Common Stock is listed or traded on in which the Common Stock is
included, as adopted and amended from time to time and as interpreted by
formal or informal opinions of, and other interpretative advice provided
by, the representatives of such stock exchange, quotation system or other
securities market.
3. ELIGIBLE EMPLOYEES. Each full-time employee of the Company or any of its
Participating Subsidiaries, and each part-time employee thereof regularly
working at least 20 hours per week or 40 hours every two weeks, who has
completed 12 months of continuous employment with the Company and/or one or more
of its Participating Subsidiaries and whose Base Compensation does not exceed
$150,000 shall be eligible to receive options under this Plan to purchase Common
Stock (except employees in countries whose laws make participation impractical).
Persons who have been so employed for 12 months or more on the first day of a
Payment Period shall receive their options as of such day. The determination of
an employee's Plan eligibility with respect to the Base Compensation limitation
will be made only as of the beginning of each Payment Period, based on the rate
of Base Compensation he or she is then receiving, without regard to any changes
in his or her Base Compensation that may subsequently be made during that
Payment Period (including any changes given retroactive effect to a date prior
to the commencement of the Payment Period). Except as otherwise provided in
Section 14, all other eligibility requirements must be satisfied at all times
throughout the Payment Period until and including the third Friday of the last
month of such Payment Period or, in the case of the requirement that a
participant be employed by the Company or a Participating Subsidiary, up until
and including the last Business Day of such Payment Period (provided that, after
the third Friday of the last month of the Payment Period, satisfaction of said
employment conditions shall be determined without regard to the full-time and
part-time minimum hour requirements of the first sentence of this Section 3,
which full-time and part-time minimum shall apply for that Payment Period only
through said third Friday). All participating employees satisfying the
eligibility requirements of the Plan as of said third Friday or last Business
Day of the Payment Period as provided in the preceding sentence shall be
entitled to purchase shares on the last Business Day of such Payment Period as
provided in this Plan. Any employee eligible to and duly participating in the
Plan as of the beginning of a Payment Period but who at any time during that
Payment Period loses his or her status as an Eligible Employee will be deemed to
have lost such status, and to have withdrawn from participation in the Plan as
described in Section 10, effective as of the beginning of the regular payroll
period during which he or she ceases to satisfy any such requirement; provided,
however, that if such ineligibility is
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the result of the termination of his or her employment, the provisions of
Section 15 shall, subject to the provisions of Section 14, control over the
foregoing provisions of this sentence.
In no event may an employee be granted an option if such employee,
immediately after the option is granted, owns stock representing 5% or more of
the total combined voting power or value of all classes of stock of the Company.
For purposes of determining stock ownership under this paragraph, the rules of
Section 425(d) of the Code shall apply, and stock which the employee may
purchase under outstanding options shall be treated as stock owned by the
employee.
4. STOCK SUBJECT TO THE PLAN. The total number of shares of Common Stock
that may be optioned under the Plan is 500,000 shares, which may consist, in
whole or in part, of unissued shares or treasury shares.
5. PAYMENT PERIODS AND GRANT OF OPTIONS. The six-month periods, January 1
to June 30 and July 1 to December 31, are the Payment Periods during which
payroll deductions will be accumulated under the Plan.
Two times each year, on the first Business Day of each Payment Period, each
Eligible Employee who is then a participant in the Plan will automatically be
granted by the Company an option to purchase, on the last Business Day of such
Payment Period, at the applicable Option Price, such number of whole or
fractional shares of the Common Stock reserved under this Plan as such employee
is entitled to purchase under this Plan with the payroll deductions authorized
and credited to his or her account during each Payment Period in accordance with
the terms hereof, up to that number of shares which does not exceed 15% of the
employee's Covered Compensation during the Payment Period divided by the Option
Price, provided that such employee remains eligible to participate in the Plan
as provided herein. The participant shall be entitled to exercise such options
as granted only to the extent of his or her unused payroll deductions
accumulated as of the third Friday of the last month of a Payment Period.
Deductions after the third Friday of the last month of a Payment Period shall be
included in the subsequent Payment Period.
No employee shall be granted an option which permits his or her rights to
purchase Common Stock under the Plan and any similar plans of the Company or any
parent or subsidiary corporations to accrue at a rate which exceeds $25,000 of
fair market value of such stock (determined at the time such option is granted)
for each calendar year in which such option is outstanding at any time. The
purpose of the limitation in the preceding sentence is to comply with Section
423(b)(8) of the Code.
6. EXERCISE OF OPTIONS. Each Eligible Employee who continues to qualify as
such as of the last Business Day of a Payment Period, or would have been a
continuing participant in the Plan as of such date had he or she not withdrawn,
or been deemed to have withdrawn, from participation pursuant to Section 10,
shall be deemed by his or her payroll deduction contributions to the Plan during
such Payment Period to have irrevocably stated his or her intention to exercise
his or her option on the last Business Day of such Payment Period and shall be
deemed to have purchased from the Company such number of whole shares of the
Common Stock reserved for the purposes of the Plan as his or her unused payroll
deductions accumulated as of the third Friday of the last month of such Payment
Period will pay for at the Option Price. If a participant is not an employee of
the Company or any Participating Subsidiary on the last Business Day of a
Payment Period, he or she shall not be entitled to exercise his or her option.
7. AUTHORIZATION FOR ENTERING PLAN. An employee may enter the Plan by
filling out, signing and delivering to the Company's Employee Services
Department a written "Authorization", in form and manner satisfactory to the
Company:
(a) stating the whole percentage of Covered Compensation to be
deducted regularly from his or her pay; and
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<PAGE> 32
(b) authorizing the purchase of stock for him or her in each Payment
Period in accordance with the terms of the Plan.
Such Authorization must be received by the Company's Employee Services
Department no later than the third Friday of the last month of a Payment Period
in order to be effective for the following Payment Period.
The Company will accumulate as a credit for the employee's account the
authorized deductions made from his or her pay. No interest will be paid on such
accumulated amounts.
8. AMOUNT OF PAYROLL DEDUCTIONS. An employee may authorize payroll
deductions in a whole percentage amount not less than 1% but not more than 15%
of his or her Covered Compensation received during the Payment Period. Covered
Compensation is considered received on the date a payroll check for, or direct
deposit of, the net amount thereof due employee is issued or made by the Company
(provided, however, that any commission or other advances are not considered
Covered Compensation received until the date such advanced amount has been
actually earned and would have regularly been paid had such amount not been
advanced), and deductions therefrom authorized for purchases of Common Stock
under this Plan are considered made at the time of the issuance or making of the
related check or deposit and not as of the date as of which the associated Base
Compensation was earned or accrued.
9. CHANGE IN PAYROLL DEDUCTIONS. An employee may increase or decrease
(including to zero) his or her rate of payroll deduction effective only as of
the beginning of a Payment Period and, except as otherwise provided in Section
10, not as of any other time. A new written Authorization will be required to
effect any such change and must be received by the Company's Employee Services
Department no later than the third Friday of the last month of a Payment Period
in order to be effective for the following Payment Period.
10. WITHDRAWAL FROM PARTICIPATION. An employee may withdraw from
participation in the Plan, in whole but not in part, at any time by delivering
to the Company's Employee Services Department a written "Withdrawal", in form
and manner satisfactory to the Company, indicating such employee's intent to
withdraw. Deductions will be stopped as soon as practicable, and deductions
accumulated during such Payment Period prior to the discontinuation of
deductions will be applied to the purchase of stock as of the end of the Payment
Period. Once made, a Withdrawal is irrevocable for the balance of that Payment
Period, and no further contributions can be made during that Payment Period.
An employee who withdraws or is deemed to have withdrawn from the Plan as
provided in this Section 10 will be treated (other than with respect to the
purchase of stock with his or her accumulated pre-withdrawal deductions) as an
employee who has never entered the Plan. To resume participation in the Plan in
any future Payment Period (which resumed participation will be effective only as
of the beginning of such Payment Period), he or she must file a new
Authorization by the third Friday of the last month of the preceding Payment
Period.
11. ESTABLISHMENT OF BROKERAGE ACCOUNT. By enrolling in the Plan, each
participating employee will be deemed to have authorized the establishment of a
brokerage account in his or her name at such securities brokerage firm as may be
designated from time to time by the Committee.
12. ISSUANCE OF STOCK. Stock purchased under the Plan will be issued, or in
the event the Committee establishes brokerage accounts pursuant to Section 11,
held in an account, in the name of the employee, or if his or her Authorization
so designates, in the name of the employee and another person of legal age as
joint tenants with rights of survivorship, unless prohibited by state or local
law. Stock will be issued to or for the account of a participating employee or
his or her designee as of the end of each Payment Period in an amount equal to
the number of shares calculated by dividing his or her unused payroll deductions
accumulated as of the third Friday of the last month of such Payment Period by
the Option Price, rounded down to the nearest whole share. No fractional shares
will be issued or accrued, but the excess of an employee's
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<PAGE> 33
accumulated payroll deductions over the aggregate Option Price for the whole
number of shares that can be purchased with such accumulated deductions with
respect to such Payment Period will be carried forward for the employee's
account under the Plan until applied to the purchase of shares in future Payment
Periods or refunded pursuant to the provisions of the Plan. The Committee may
establish a procedure for the refund of such carried-forward balance to
requesting employees who do not continue participation in the Plan during the
Payment Period (or number of Payment Periods specified by the Committee)
subsequent to the Payment Period with respect to which such excess arises.
13. NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS. An employee's rights
under the Plan are his or hers alone and may not be transferred, assigned, or be
availed of by any other person. Any option granted to an employee may be
exercised only by him or her.
14. SUSPENSION OF PARTICIPATION. In the event the Company's payment of
Covered Compensation to a participating employee is reduced by any legal
process, all deductions with respect to this Plan will automatically cease until
such time as the employee's compensation payments normalize. Such suspension of
deductions shall not constitute a withdrawal subject to Section 10. Upon
normalization of the employee's compensation payments, even where it occurs in a
subsequent Payment Period, deductions shall automatically resume at the
pre-suspension amount authorized by the employee (or if the employee has
properly submitted a revised Authorization in the interim, at the level
specified therein).
An employee's leave of absence (absence from active employment not
involving authorized vacation, death, retirement, resignation, discharge,
reduction-in-force or layoff, such as due to disability, illness, compensable or
non-compensable injury, personal emergency or other approved personal leave)
shall not have any effect on his or her eligibility to participate in the Plan,
and if such employee was participating in the Plan at the time such leave
commenced, his or her deductions shall be automatically suspended for the
duration of such leave and, upon such employee's resumption of an eligible level
of active employment, shall automatically resume at the pre-suspension amount
authorized by the employee unless the employee has properly submitted a revised
Authorization in the interim; provided that if the employee receives Covered
Compensation, or payments in lieu thereof, from the Company during any such
leave of absence (such as, for example, short-term disability benefits), the
deduction rate authorized by the employee prior to such leave (or if the
employee has properly submitted a revised Authorization, at the level specified
therein) shall be applied to all such amounts so paid during such leave of
absence.
15. TERMINATION OF EMPLOYEE'S RIGHTS. Except as otherwise provided in
Section 14, an employee's rights under the Plan will terminate when he or she is
no longer employed by the Company or any Participating Subsidiary, whether
because of retirement, resignation, discharge, death, or for any other reason.
All accumulated payroll deductions not used to purchase stock as of the date of
such cessation of employment will be refunded to the former employee or, in the
event of an employee's death, to his or her estate as an adjustment to such
former employee's final paycheck.
16. TERMINATION OF AND AMENDMENTS TO THE PLAN. The Plan may be terminated
at any time by the Committee. It will terminate in any case when all or
substantially all of the shares of stock reserved for the purposes of the Plan
have been purchased. If at any time shares of stock reserved for the purpose of
the Plan remain available for purchase but not in sufficient number to satisfy
all then unfilled purchase requirements, the available shares shall be
apportioned among participants in proportion to their options, and the Plan
shall terminate. Upon such termination or any other termination of the Plan, all
payroll deductions not used to purchase stock will be refunded.
The Committee also has authority to amend the Plan from time to time in any
respect; provided, however, that no amendment shall be effective without prior
approval of the stockholders of the Company, which would (a) except as provided
in Section 23, increase the
A-5
<PAGE> 34
number of shares of Common Stock to be offered above, or (b) change the class of
employees eligible to receive options under the Plan.
17. LIMITATIONS ON SALE OF STOCK PURCHASED UNDER THE PLAN. The Plan is
intended to provide Common Stock for investment and not for resale. The Company
does not, however, intend to restrict or influence any employee in the conduct
of his or her own affairs. An employee may, therefore, sell stock purchased
under the Plan at any time he or she chooses; provided, however, that because of
certain Federal income tax requirements, each employee agrees by his or her
participation in the Plan to give the Company prompt notice of any such stock
disposed of within (i) two years after the date of grant of the applicable
option, or (ii) one year after the transfer of such stock to such employee,
which notice shall state the number of shares so disposed of, and an appropriate
legend requiring such notice shall be placed on the certificates of Common Stock
issued hereunder. The employee assumes the risk of any market fluctuations in
the price of all stock acquired hereunder.
18. PLAN EXPENSES. The Company will bear all costs of administering and
carrying out the Plan.
19. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. Acts by a majority of the Committee, or acts reduced to or approved
in writing by a majority of the members of the Committee, shall be the valid
acts of the Committee.
The interpretation and construction of the Plan are entrusted to the
discretion of the Committee, and its interpretation and construction of any
provisions of the Plan or of any option granted under it shall be final. The
Committee may from time to time adopt such rules and regulations for carrying
out the Plan as it may deem best. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
20. NO EMPLOYMENT RIGHTS. The existence of this Plan shall not create in
any employee any right to be granted an option or to purchase Common Stock
hereunder. Neither the existence of this Plan nor the granting of any option
hereunder to any employee shall confer upon such employee any right to the
continuation of his or her employment with the Company or any subsidiary thereof
or shall in any way interfere with or otherwise limit the right which such
employee, the Company or any subsidiary may otherwise have to terminate such
employment at any time with or without cause. Any benefits realized by an
employee under this Plan or any option granted hereunder shall not be deemed a
part of such employee's regular, recurring compensation for purposes of the
termination, indemnity or severance pay laws of any jurisdiction and shall not
be included in, or have any effect on, the determination of benefits under any
such law or, except as otherwise expressly provided thereby or determined in the
discretion of the person or group authorized to administer the same, any other
employee benefit plan or similar arrangement in which an employee may otherwise
be eligible to participate.
21. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an option to an
employee nor the deductions from his or her pay shall constitute such employee
the owner of the shares covered by an option until such shares have been
purchased by him or her.
22. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to options granted under the Plan may be used by
the Company for any corporate purpose. The Company shall have no obligation to
segregate employees' payroll deductions from any other funds of the Company or
to hold funds representing the same pending the application thereof in
accordance with this Plan.
23. CHANGES IN CAPITAL. If the Common Stock subject to the Plan shall at
any time be changed or exchanged by declaration of a stock dividend, stock
split, combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number and kind of shares subject to this Plan and the Option Price shall be
appropriately and equitably adjusted. In the event of a dissolution or
liquidation
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<PAGE> 35
of the Company or a merger, consolidation, sale of all or substantially all of
its assets, or other corporate reorganization in which the Company is not the
surviving corporation, or any merger in which the Company is the surviving
corporation but the holders of its Common Stock receive securities of another
corporation, the then current Payment Period shall be deemed to end as of the
Business Day prior to the effective date of such transaction such that all then
accumulated payroll deductions shall be applied to the purchase of Common Stock
in accordance with the provisions hereof. Other than giving effect to the
provisions of this Section 23, the existence of the Plan or options hereunder
shall not in any way prevent any transaction described herein, and no holder of
an option shall have the right to prevent such transaction.
24. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of Shares pursuant thereto shall comply with all applicable Securities
Law Requirements and all other applicable provisions of law, including, without
limitation, any applicable state "blue sky" laws and foreign (national and
local) securities laws and the rules and regulations promulgated under any of
such laws, 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 or the issuance of Shares upon
exercise of an Option, the Company may require the person exercising such Option
to make such representations and warranties to the Company as may be required,
in the opinion of counsel for the Company, by any of the aforementioned
Securities Law Requirements and other laws, which may include, without
limitation, representations and warranties that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares.
The Company shall not have any liability to any Plan participant in respect
of any delay in the sale or issuance of Shares hereunder until the Company is
able to obtain governmental authority (domestic or foreign) or the authority of
a self-regulatory organization having jurisdiction over it, which authority is
deemed by the Company's counsel to be necessary to the lawful sale and issuance
of such Shares, or any failure to sell or issue such Shares as to which such
requisite authority the Company is unable to obtain.
25. GOVERNING LAW. To the extent that federal laws (such as the Code) or
the Delaware General Corporation Law do not otherwise control, this Plan and all
determinations made and actions taken pursuant hereto shall be governed by the
laws of the State of Ohio, without regard to principles of conflicts of laws,
and construed accordingly.
26. CAPTIONS. The captions contained in this Plan are for convenience of
reference only and shall not affect the meaning of any term or provisions
hereof.
27. APPROVAL OF STOCKHOLDERS. This Plan will become effective only upon
approval hereof by the Company's stockholders. The Plan will begin operation on
January 1, 1996, assuming that the Company's stockholders approve the Plan prior
to such date. In the event the Plan is not so approved, no employee shall have
any right or option to purchase shares of Common Stock pursuant to the terms of
the Plan.
A-7
<PAGE> 36
TELXON LOGO
Proxy for Annual Meeting of August 31, 1995
This Proxy is Solicited on Behalf of the Board of Directors
P
The undersigned hereby appoints Robert F. Meyerson and Norton W.
Rose as Proxies, each with the power to appoint his substitute, and
R hereby authorizes either of them to represent and to vote, as
provided on the reverse side hereof, all of the Common Stock of
Telxon Corporation held of record by the undersigned on July 3,
O 1995, at the Annual Meeting of Stockholders to be held on August
31, 1995 or any adjournment thereof.
X
Y
<TABLE>
<S> <C>
Election of Directors, Nominees: (change of address)
John H. Cribb and Richard J. Bogomolny ________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
(If you have written in the above space, please mark the
corresponding box on the reverse side of this card.)
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4 AND
"AGAINST" PROPOSAL 5.
IMPORTANT -- THIS PROXY MUST BE SIGNED AND DATED ON REVERSE SIDE.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
DETACH CARD
<PAGE> 37
<TABLE>
<C> <S> <C>
X PLEASE MARK YOUR SHARES IN YOUR NAME
VOTES AS IN THIS
EXAMPLE.
</TABLE>
<TABLE>
<CAPTION> <C> <C> <C>
<S> <C> <C> <S> <C> FOR AGAINST ABSTAIN
1. Election of FOR WITHHELD 2. Approval of / / / / / /
Directors / / / / amendments to the
(see reverse) Telxon Corporation
1990 Stock Option
For, except vote withheld from the following nominee(s): Plan for employees.
_______________________________________________________
</TABLE>
<TABLE>
<C> <C> <C>
FOR AGAINST ABSTAIN
3. Approval of amendments to / / / / / /
the Telxon Corporation 1990
Stock Option Plan for Non-
Employee Directors.
4. Approval of the Telxon Corpor- / / / / / /
ation 1995 Employee
Stock Purchase Plan.
5. Stockholder proposal. / / / / / /
Change 6. In their discretion, the Proxies are authorized
of / / to vote upon such other business as may properly
Address come before the meeting.
Attend
Meeting / /
NOTE: Please sign exactly
as name appears hereon. Joint
owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
If a corporation, please sign in full
corporate name by its president or other
authorized officer. If a partnership, please sign
in partnership name by an authorized person.
SIGNATURE(S)____________________________________________________ DATE ____________
SIGNATURE(S)____________________________________________________ DATE ____________
</TABLE>
- --------------------------------------------------------------------------------
DETACH CARD
<PAGE> 1
PROPOSED AMENDED
TELXON CORPORATION
1990 STOCK OPTION PLAN
(REVISED JUNE 1995)
1. PURPOSE OF THE PLAN. The purpose of this plan is to
promote the best interests of the Company and its stockholders by
enabling the Company and its Subsidiaries to attract and retain
highly qualified personnel through rewarding valued employees with
the opportunity, pursuant to Options granted under the plan, to
acquire a proprietary interest in the Company and thereby encourage
them to put forth their maximum efforts for the continued success
and growth of the Company.
2. DEFINITIONS. In addition to such other capitalized terms
as are defined elsewhere in this plan, the following terms shall
when used in this plan have the respective meanings set forth
below:
(a) "Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(b) "Authorized Shares" means the maximum aggregate
number of shares of Common Stock specified in Section 3(a) as
being authorized for issuance and sale under Options granted
pursuant to the plan, subject to adjustment thereof in
accordance with Section 12 of the plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Commission" means the United States Securities and
Exchange Commission.
(f) "Committee" means the Committee appointed by the
Board in accordance with paragraph (a) of Section 4 of the
plan, if a Committee is appointed. If, with respect to any
individual grant of Options under this plan, any member or
members of the Committee would cause such Committee not to
satisfy the disinterested administration requirement of
Rule 16b-3, as then applicable to the Company under the Act,
or the "outside director" administration requirement of Code
Section 162(m)(4)(C) and regulations thereunder, then in such
event the Committee shall be comprised of the Committee
without such member or members. If no Committee has been
appointed, any reference to the "Committee" shall be deemed a
reference to the "Board".
<PAGE> 2
(g) "Common Stock" means the Common Stock, par value
$.01 per share, of the Company.
(h) "Company" means Telxon Corporation, a Delaware
corporation.
(i) "Continuous Employment" means with respect to any
Employee, the continued employment of such Employee by the Company or any
Subsidiary without interruption or termination after the grant of an
Option to such Employee. Continuous Employment shall not be considered
interrupted in the case of sick leave, military leave or any other leave
of absence approved by the Board (provided that such leave is for a period
of not more than ninety (90) days or re-employment upon the expiration of
such leave is mandated by contract or statute) or in the cause of
transfers between locations of the Company or between the Company, any
Subsidiary or any of their respective successors.
(j) "Employee" means any person, including officers and
directors who are also officers, employed by the Company or
any Subsidiary. The payment of director's fees by the Company
shall not be sufficient to constitute a person as an
"Employee" of the Company.
(k) "Option" means a right granted to an Employee
pursuant to the plan to purchase a specified number of shares
of Common Stock at a specified price during a specified period
and on such other terms and conditions as may be specified
pursuant to the plan. Options may be granted as Tax Qualified
Options or as Options which do not qualify as Tax Qualified
Options.
(l) "Option Agreement" means the written agreement
evidencing an Option by and between the Company and the
Optionee as required by Section 14.
(m) "Optioned Stock" means the Company Stock subject to
an Option.
(n) "Optionee" means an Employee who receives an Option.
(o) "Plan" means this 1990 Stock Option plan.
(p) "Predecessor Plan" means the Company's 1988 Stock
Option Plan.
(q) "Rule 16b-3" means Rule 16b-3 promulgated by the
Commission under the Act or any similar successor regulation
exempting certain transactions involving stock-based
compensation arrangements from the liability provisions of
2
<PAGE> 3
Section 16 of the Act, as adopted and amended from time to
time and as interpreted by formal or informal opinions of, and
releases published or other interpretive advice provided by,
the Staff of the Commission.
(r) "Repricing Transaction" means any grant(s) of
Option(s) reasonably related to any prior or potential
Option(s), whether by an exchange of existing Options or
Options with new terms; the grant of new Options in tandem
with previously granted Options that will operate to cancel
the previously granted Options upon exercise, repricing of
previously granted Options or any other grant which would be
required to be reported as a repricing under item 402(i) of
Regulation S-K promulgated under the Act; but excluding any
repricing occurring through the operation of the antidilution
provisions of Section 12 of the Plan.
(s) "Section 16 Person" means an Employee who is subject
to Section 16 of the Act, as interpreted by the rules and
regulations promulgated by the Commission thereunder, as
adopted and amended from time to time, and by formal or
informal opinions of, and releases published or other
interpretive advice provided by, the Staff of the Commission.
(t) "Securities Law Requirements" means the Act and the
rules and regulations promulgated by the Commission
thereunder, as adopted and amended from time to time,
including but not limited to Rule 16b-3, and as interpreted by
formal or informal opinions of, and releases published or
other interpretive advice provided by, the Staff of the
Commission, and the requirements of any stock exchange,
automated interdealer quotation system or other recognized
securities market on which the Common Stock is listed or
traded or in which the Common Stock is included, as adopted
and amended from time to time and as interpreted by formal or
informal opinions of, and other interpretive advice, provided
by the representatives of such stock exchange, quotation
system or other securities market.
(u) "Shares" means the Common Stock as adjusted in
accordance with Section 12 of the Plan.
(v) "Subsidiary" means a corporation of which not less
than fifty percent (50%) of the voting shares are owned by the
Company or a Subsidiary, whether or not such corporation now
exists or is hereafter organized or acquired by the Company or
a Subsidiary.
(w) "Successor" means the estate of an Optionee or a
person who succeeds by will or the laws of descent and
distribution to an Optionee's right to exercise an Option.
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(x) "Tax Qualified Option" means an Option which is
intended at the time of grant to qualify for special tax
treatment under Section 422A or other particular provisions of
the Code and the regulations, rulings and procedures
promulgated, published or otherwise provided thereunder, as
adopted and amended from time to time.
3. STOCK SUBJECT TO THE PLAN.
(a) Number of Shares Issuable. Subject to adjustment in
accordance with the provisions of Section 12 of the Plan, the
maximum aggregate number of Authorized Shares which may be
issued and sold under Options granted pursuant to the plan is
(i) Pre-1995 Authorized Shares. 2,500,000
shares of Common Stock, plus such number of the 1,200,000
shares of Common Stock authorized for issuance and sale
under the Predecessor Plan which (A) as of the date this
Plan is approved by the stockholders of the Company, are
not subject to grants (including conditional grants) of
stock options then outstanding under the Predecessor Plan
(from and after stockholder approval of this plan, no
further grants shall be made under the Predecessor Plan,
but any grants (including conditional grants) of stock
options outstanding under the Predecessor plan at the
time of such approval shall continue in full force and
effect in accordance with their respective terms) or
(B) to the extent grants (including conditional grants)
outstanding under the Predecessor Plan as of the date of
stockholder approval of this Plan are not exercised in
full, are, as of any subsequent date, (x) issued pursuant
to the exercise of a stock option granted under the
Predecessor Plan in an amount equal to the number of
Shares already owned by the person exercising such stock
option which are delivered by such person to the Company
in payment of the exercise price and/or related
withholding taxes, (y) withheld by the Company, in
payment of the withholding taxes with respect to the
exercise of a stock option granted under the Predecessor
Plan, from the total number of Shares with respect to
which such option is exercised, or (z) no longer subject
to grants under the Predecessor Plan by reason of such
grants having expired or lapsed or having been cancelled,
surrendered, forfeited or otherwise terminated, plus
(ii) 1995 Authorized Shares. Eight Hundred Fifty
Thousand Shares of Common Stock (the "1995 Authorized
Shares").
The inclusion under this Plan of such shares reserved for
issuance and sale under the Predecessor Plan as hereinabove
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<PAGE> 5
provided shall not be affected by the expiration or other
termination of the Predecessor Plan. The Shares issued and
sold upon the exercise of Options may be treasury Shares,
Shares of original issue or a combination thereof.
(b) Computation of Shares Available for Grant. For
purposes of computing the number of Authorized Shares
available from time to time under the Plan for the grant of
Options, the number of Shares subject to each Option granted
pursuant to the Plan shall be provisionally counted against
the Authorized Shares from and after the grant of such Option
but only for so long as and to the extent that such Option
shall remain outstanding and unexercised. Upon the exercise,
in whole or in part, of an Option, the number of Shares issued
upon such exercise shall be permanently deducted from the
authorized Shares, provided that no such permanent deduction
shall be made, and the provisional deduction against the
Authorized Shares shall be reversed, to the extent that the
exercise price and/or the withholding taxes with respect to
such exercise are paid through the delivery to the Company by
the person exercising the option of Shares already owned by
such person and/or through the withholding by the Company of
Shares from the total number of Shares with respect to which
the Option is exercised. The provisional deduction against
the Authorized Shares shall likewise be reversed to the extent
of the unexercised portion of an Option upon the expiration,
lapse, cancellation, surrender, forfeiture or other
termination of such Option. The Shares covered by any such
reversal of a provisional deduction against the Authorized
Shares shall immediately become available for the granting of
new Options under the Plan with respect thereto; provided,
however, that any Shares covered by any such reversal which
were 1995 Authorized Shares shall be subject to the
restrictions set forth in Section 4(c) of the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) Procedure. The Plan shall be administered by the
Board or the Board may, in its discretion, appoint a Committee
to administer the Plan subject to such terms and conditions as
the Board may prescribe; provided that the terms upon which,
including the time or times at or within which, and the price
or prices at which Shares may be purchased upon the exercise
of Options shall be approved or ratified by such action of the
Board or a committee duly designated by the Board from its
members as may be required by the Delaware General Corporation
Law, as amended from time to time. Once appointed, the
Committee shall continue to serve until otherwise directed by
the Board. From time to time the Board may increase the size
of the Committee and may appoint additional members thereof,
remove members (with or without cause), fill vacancies however
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<PAGE> 6
caused and remove all members of the Committee and thereafter
directly administer the Plan.
(b) Powers of the Committee. Subject to the provisions
of this Plan, the Committee shall have the authority, in its
sole discretion:
(i) To determine, upon review of relevant
information in accordance with Section 7(b) of the Plan,
the "Fair Market Value" (as defined in said Section 7(b))
of the Shares;
(ii) To determine the Employees to whom, and the
time or times at which, Options shall be granted and the
number of Shares (up to a maximum of 500,000 Shares with
respect to which Options may be granted to any individual
in any one fiscal year of the Company) subject to
purchase upon exercise of each Option (there being no
limit on the time following the adoption or approval of
this Plan within which Options may be granted under the
Plan so long as it remains in effect, on the number of
Options which may be granted to any one Employee or on
the aggregate number of Shares subject to purchase
thereunder, except such restrictions thereon as may be
imposed by applicable tax laws which will have to be
observed if the Committee intends that a particular
Option qualify as a Tax Qualified Option);
(iii) To determine the terms and provisions of
each Option (which terms and provisions need not be
identical), including, but not limited to, the following:
(A) The exercise price per Share, subject
to the provisions of Section 7 of the Plan; and
(B) Whether Options shall become
exercisable over a period of time and when they
shall be fully exercisable;
(iv) To accelerate the time as of which any
Option may be exercised;
(v) To amend any outstanding Option, subject to
the provisions of Section 19 of the Plan;
(vi) To authorize any person to prepare and
execute on behalf of the Company any instrument deemed by
the Committee to be necessary or advisable to evidence or
effectuate the Plan, any Option granted thereunder or any
amendment to the Plan or any Option;
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<PAGE> 7
(vii) To interpret the Plan;
(viii) To prescribe, amend and rescind, if deemed
necessary or appropriate, rules and regulations relating
to the Plan; and
(ix) To make all other determinations the
Committee may deem necessary or advisable in connection
with the administration of the Plan.
(c) Certain Limitations Applicable To Options Granted
With Respect to 1995 Authorized Shares. Notwithstanding any
other provision of the Plan, neither the Committee nor the
Board shall, with respect to any Option granted under the Plan
with respect to any 1995 Authorized Shares, provide for an
Option Term of greater than eight (8) years from the date of
grant thereof or approve any Repricing Transaction.
(d) Effects of Board and Committee Decisions. All
decisions, determinations and actions of the Board and the
Committee in connection with the construction, interpretation,
administration, application, operation and implementation of
the Plan shall be final, conclusive and binding on the
Company, its stockholders and Subsidiaries, all Employees and
Optionees and the respective legal representatives, heirs,
successors and assigns of all of the foregoing and all other
persons claiming under or through any of them.
(e) Exculpation and Indemnification. No member of the
Board on the Committee, and no Employee or other agent acting
on behalf of the Board or the Committee, shall be personally
liable for any decision, determination or action made or
taken, or failed to be made or taken, with respect to this
Plan or any Option granted hereunder, and the Company shall
fully protect each such person in respect of any such
decision, determination or action and shall indemnify each
such person against any and all claims, losses, damages,
expenses and liabilities arising from or in connection with
any such decision, determination or action.
5. ELIGIBILITY. Options may be granted only to Employees
who, in the sole judgment of the Committee, have contributed or
will contribute to the success and growth of the Company. An
Employee to whom the Company has previously granted a stock option
pursuant to this Plan or otherwise may, if he is otherwise
eligible, be granted additional Options.
The existence of this Plan shall not create in any Employee
any right to be granted an Option hereunder, and neither the
existence of this Plan nor the granting of any Options to any
Employee hereunder shall confer upon such Employee any right with
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<PAGE> 8
respect to continuation of the employment of such Employee by the
Company or any Subsidiary or shall in any way interfere with or
limit the right which such Employee, the Company or any Subsidiary
may otherwise have to terminate such employment at any time with or
without cause. Upon the termination of any Employee's employment
with the Company or any Subsidiary, neither the Company nor any
Subsidiary shall have any liability or obligation to such Employee
under this Plan or any Options granted to such Employee hereunder
except to issue the appropriate number of Shares to such Employee
upon the exercise of any Option granted to such Employee under this
Plan prior to such termination of employment, provided that such
exercise is duly and timely made in accordance with the provisions
of this Plan and such Option.
6. TERM OF OPTIONS. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof
and reflected in the Option Agreement evidencing such Option, the
term of each Option shall be ten (10) years (eight (8) years in the
case of Options with respect to 1995 Authorized Shares) from the
date of grant thereof, provided that the Committee, if it intends
that a particular Option qualify as a Tax Qualified Option, will
have to observe such restrictions on the term of such Option as may
be imposed by the applicable tax laws in order for such Option so
to qualify. Each Option shall continue in effect in accordance
with its terms notwithstanding that the Plan may be terminated
prior to the expiration of the term of such Option.
7. EXERCISE PRICE.
(a) Minimum Price Required. The per Share exercise
price for the Shares subject to an Option shall be such price
as is determined by the Committee at the time of grant of an
Option and reflected in the Option Agreement evidencing the
same; provided that in no event shall such exercise price per
Share be less than the Fair Market Value per Share as of the
day prior to the date of grant of such Option.
(b) Definition of "Fair Market Value". For all purposes
under the Plan, "Fair Market Value" per Share shall be
determined by the Committee in its sole discretion; provided
that if the Shares are included in the NASDAQ National Market
System or listed on a stock exchange on the date as of which
the same is to be determined, the Fair Market Value per Share
shall be the closing price on such quotation system or
exchange which is the principal trading market for the Shares
on the date of determination or, if no sale price was reported
for the Shares on the date of determination, the closing price
on such principal trading market for the last trading day
prior to the date of determination for which a sale price was
reported; provided further, however, that if the foregoing
method of determining Fair Market Value is inconsistent with
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<PAGE> 9
the then existing tax law requirements with respect to any
Option which the Committee intends to qualify as a Tax
Qualified Option, then the Fair Market Value per Share shall
be determined by the Committee in such manner as is required
for such Tax Qualified Option to qualify as such.
8. WITHHOLDING TAXES. Before a stock certificate evidencing
the Shares being acquired through exercise of an Option will be
issued to the Optionee, the Optionee must pay, or make arrangements
acceptable to the Company for the payment of, any and all federal,
state and local withholding taxes, whether domestic or foreign,
required to be withheld in connection with the exercise of an
Option.
9. FORM OF PAYMENT.
(a) Acceptable Forms of Consideration. Except as may
otherwise be specified by the Committee in its sole discretion
at the time of grant thereof and reflected in the Option
Agreement evidencing such Option, the following forms of
consideration will be accepted in payment of the exercise
price for the Shares to be issued upon exercise of an Option
and of the taxes required to be withheld in connection with
such exercise: (i) cash, (ii) personal check, (iii) bank
cashier's check, (iv) already owned Shares (duly endorsed for
transfer with signature guaranteed), or (v) any combination of
the foregoing. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof
and reflected in the Option Agreement evidencing such Option,
Shares withheld from the Shares to be issued upon exercise of
the Option, either alone or in any combination with any of the
other acceptable forms of consideration recited in this
Paragraph (a), will also be an accepted form of consideration
for payment of the taxes required to be withheld in connection
with the exercise of an Option. In addition to the acceptable
forms of consideration hereinabove recited in this Paragraph
(a), the Committee may determine in its sole discretion at the
time of grant of an Option, and if the Committee so
determines, shall provide in the Option Agreement evidencing
such Option, that one or both of the following additional
forms of consideration will be accepted, either alone or in
any combination with any of the other acceptable forms of
consideration recited in this Paragraph (a), in payment of the
items specified: (vi) in payment of the exercise price for the
Shares to be issued upon exercise of an Option, Shares
withheld from the Shares to be issued upon such exercise,
and/or (vii) in payment of the exercise price for the Shares
to be issued upon exercise of an Option and the taxes required
to be withheld in connection with such exercise, a commitment
for the delivery to the Company of proceeds from the sale,
pursuant to a brokerage or similar arrangement approved in
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<PAGE> 10
advance by the Committee in its sole discretion, of Shares to
be issued upon exercise of the Option. The forms of
consideration which will be accepted in payment of the
exercise price for an Option and related withholding taxes
shall be specified in the Option Agreement evidencing such
Option, and the person or persons entitled to exercise the
Option shall be entitled to elect from those so specified the
form(s) to be used in effecting payment with respect to a
particular exercise; provided that any election by a Section
16 Person to use already owned Shares or have Shares withheld
from those issuable upon such exercise shall be effective only
if made in accordance with the applicable requirements of Rule
16b-3; and provided further that a commitment for the delivery
to the Company of proceeds from the sale, pursuant to a
brokerage or similar arrangement, of Shares to be issued upon
exercise of an Option will not be accepted from a Section 16
Person if under Securities Law Requirements such a sale would
be matched with such exercise to result in "shortswing" profit
liability under Section 16(b) of the Act on the part of such
Section 16 Person with respect to such transaction.
(b) Withholding Tax Loans. In addition to any one or
more of the acceptable forms of consideration recited in
Paragraph (a) of this Section 9 which the Committee may permit
in the Option Agreement to be used for the payment of
withholding taxes, the Committee may determine in its
discretion at the time of grant of an Option to permit the
Optionee (but not any Successor) to, and if the Committee so
determines, shall provide in the Option Agreement evidencing
such Option that such Optionee may, borrow from the Company an
amount sufficient to pay the taxes required to be withheld in
connection with the exercise of such an Option, with each such
borrowing to be evidenced by a promissory note of the Optionee
payable to the order of the Company. Except as may otherwise
be specified by the Committee in its sole discretion at the
time of grant thereof and reflected in the Option Agreement
evidencing an Option, each such loan shall be for a term of
five (5) years at a rate of interest equal to the Company's
then primary domestic commercial lender's prime or base rate
as in effect from time to time, with payments of interest on
such loan due quarterly and payments toward the principal of
such loan due, to the extent of the net proceeds therefrom,
within fifteen (15) days after any disposition by the Optionee
of any Shares acquired upon exercise of any stock option
granted by the Company to the Optionee pursuant to this Plan
or otherwise (excluding any disposition of such Shares by gift
or to the Company in payment of the exercise price of a stock
option granted by the Company to the Optionee pursuant to this
Plan or otherwise and/or any related withholding taxes),
provided that the entire unpaid principal balance shall be due
at the earlier of (i) the expiration of the five (5) year
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<PAGE> 11
term, or (ii) the termination of the Optionee's Continuous
Employment (other than by reason of Optionee's "disability"
(as defined in Section 10(d)) or "retirement" (as defined in
Section 10(e)).
(c) Company Withholding of Taxes. If, upon being
notified by the Company of the amount of the taxes required to
be withheld in connection with an exercise of an Option, the
Optionee fails promptly to pay, or to make arrangements
acceptable to the Company for the payment of, such taxes, the
Company shall have the right to elect (but shall be under no
obligation) to cover such taxes through:
(i) withholding Shares from those issuable upon
such exercise, provided that any such election so to
withhold Shares with respect to the exercise of an Option
by a Section 16 Person shall be effective only if made in
accordance with the applicable requirements of Rule
16b-3; and/or
(ii) deducting such taxes from any amounts
payable in cash to the Optionee by the Company for any
reason as of the time of such exercise or any time
thereafter.
(d) Valuation of Shares Delivered or Withheld. Where
already owned Shares, or Shares withheld from those issuable
upon such exercise, are used in payment of the exercise price
and/or related withholding taxes, such Shares shall be valued
(i) with respect to the payment of the exercise price, at Fair
Market Value as of the day immediately preceding the date of
exercise and (ii) with respect to the payment of withholding
taxes, at Fair Market Value as of the day immediately
preceding the date tax withholding is required to be made.
(e) Optionee Certification of Already Owned Shares.
Already owned Shares which were acquired through a previous
exercise of a stock option granted to an Optionee by the
Company pursuant to this Plan or otherwise may be used in
payment of the exercise price of an Option and/or related
withholding taxes only if the previous exercise through which
such Shares were acquired was made as of a date not less than
six (6) months prior to the date of the exercise of the Option
in connection with which such Shares are being tendered as
payment. A tender of already owned Shares in payment of the
exercise price of an Option and/or related withholding taxes
will not be accepted by the Company unless accompanied by a
written statement signed by the person or persons entitled to
exercise such Option certifying that either (i) the Shares
tendered in payment were acquired other than through the
exercise of a stock option granted by the Company or (ii) the
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Shares tendered in payment were acquired through the exercise,
on such date(s) as shall be recited in such statement (which
date(s) shall be not less than six (6) months prior to the
date of tender), of stock option(s) granted by the Company.
(f) Delivery of Already Owned Shares. Where the person
exercising an Option elects to use already owned Shares in
full or partial payment of the exercise price and/or related
withholding taxes, the Committee may, in its sole discretion,
accept, in lieu of physical delivery of the stock certificates
evidencing such Shares, such constructive delivery of such
Shares as may be satisfactory to the Committee.
10. METHOD OF EXERCISE.
(a) Procedure for Exercise; Rights as a Stockholder.
Any Option granted hereunder shall be exercisable at such
times and under such conditions as determined by the Committee
and as permitted under the Plan. An Option may not be
exercised for a fraction of a Share. In order to exercise an
Option, the person or persons entitled to exercise it shall
deliver to the Company written notice of the number of shares
with respect to which the Option is being exercised,
accompanied by payment in full of the aggregate exercise price
for the Shares so to be acquired. To constitute an effective
exercise of an Option, such notice and payment shall be
addressed to the attention of the Treasurer of the Company and
must be received at the principal executive office of the
Company (i) with respect to an Option that is terminated for
"Misconduct" (as defined below) pursuant to Paragraph (b) of
this Section 10 or for "Prohibited Conduct" (as defined in
Section 16(a)) pursuant to Section 16(a), prior to the time of
the occurrence of the event constituting such Misconduct or
Prohibited Conduct or (ii) with respect to any other Option,
by 5:00 p.m., local time, on the date of expiration or
termination of the Option. 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 nor any other rights as a stockholder shall
exist with respect to the Optioned Stock notwithstanding the
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 12.
Exercise of an Option shall result in a decrease in the
number of Shares which thereafter shall be available for sale
under such Option by the number of Shares as to which the
Option is exercised, including any shares withheld from the
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Shares to be issued pursuant to such exercise to cover the
exercise price and/or related withholding taxes.
(b) Termination of Employment. Except as may otherwise
be specified by the Committee in its sole discretion at the
time of grant thereof and reflected in the Option Agreement
evidencing such Option, upon the termination of an Optionee's
Continuous Employment (other than by reason of the Optionee's
death, disability or retirement), he may exercise his Option
(to the extent that he was entitled to exercise it at the time
of such termination of employment) until the earlier of (i)
the date thirty (30) days (or such longer period of time as is
determined by the Committee in its sole discretion at the time
of such termination of employment, provided that if the
Committee intends that a particular Option continue to qualify
as a Tax Qualified Option, the Committee will have to observe
such restrictions as may be imposed by applicable tax laws on
the post-termination period within which a Tax Qualified
Option may be exercised if it wishes to ensure that any
post-termination exercise of such Option is made only within
the period permitted by such laws) after the effective date of
the termination of his employment or (ii) the expiration date
of such Option, and the Option shall terminate on the earlier
of such dates; provided, however, that if the Optionee is
terminated by the Company for Misconduct, then such Option
shall terminate effective as of the time of the conduct
constituting such Misconduct. As used in this Plan,
"Misconduct: means that the Optionee has engaged in Prohibited
Conduct, committed an act of embezzlement, fraud or theft with
respect to the property or business of the Company or a
Subsidiary or deliberately disregarded the rules of the
Company or a Subsidiary in such a manner as to cause material
loss, damage or injury to or otherwise endanger the property,
reputation, employees or business prospects of the Company or
a Subsidiary. The Committee shall determine whether an
Optionee's employment was terminated by reason of Misconduct.
In making such determination, the Committee may, but shall not
be required to, give the Optionee an opportunity to be heard
and to present evidence on his behalf.
(c) Death of Optionee. Except as may otherwise be
specified by the Committee in its sole discretion at the time
of grant thereof and reflected in the Option Agreement
evidencing such Option, upon the death of an Optionee:
(i) who is at the time of his death in the
employ of the Company or a Subsidiary and who shall have
been in Continuous Employment since the date of grant of
the Option, the Option may be exercised (to the extent
the Optionee would have been entitled to do so had he
continued living and terminated employment six (6) months
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after the date of death) by his Successor until the
earlier of (A) the date six (6) months (or, if the
Committee intends that a particular Option qualify as a
Tax Qualified Option, such lesser period of time within
which the applicable tax laws may require that the Option
be exercised in order for such Option so to qualify)
following the date of the Optionee's death or (B) the
expiration date of such Option, and the Option shall
terminate on the earlier of such dates; or
(ii) within one (1) month after the termination
of Continuous Employment other than termination by the
Company or a Subsidiary for Misconduct or due to
disability, the Option may be exercised (to the extent
the Optionee was entitled to do so at the date of
termination of Continuous Employment) by his Successor
until the earlier of (A) the date six (6) months
following the date of the Optionee's death (or, if the
Committee intends that a particular Option qualify as a
Tax Qualified Option, such lesser period of time within
which the applicable tax laws may require that the Option
be exercised in order for such Option so to qualify) or
(B) the expiration date of such Option, and the Option
shall terminate on the earlier of such dates.
(d) Disability of Optionee. Except as may otherwise be
specified by the Committee in its sole discretion at the time
of grant thereof and reflected in the Option Agreement
evidencing such Option, if an Optionee's Continuous Employment
terminates due to his having become permanently and totally
disabled within the meaning of Section 22(e)(3) of the Code
("disability"), the Option may be exercised (to the extent the
Optionee was entitled to do so as of the effective date of the
termination of his employment by reason of such disability)
until the earlier of (i) the date one (1) year after the
effective date of such termination of his employment or (ii)
the expiration date of such Option, and the Option shall
terminate on the earlier of such dates.
(e) Retirement of Optionee. Except as may otherwise be
specified by the Committee in its sole discretion at the time
of grant thereof and reflected in the Option Agreement
evidencing such Option, if an Optionee's Continuous Employment
terminates by reason of (A) his retirement at any age
entitling him to benefits under the provisions of any
retirement plan of the Company or any Subsidiary in which such
Optionee participates; or (B) retirement at any time after
attaining age 65 (whichever circumstance is applicable
constituting "retirement"), the Option may be exercised (to
the extent the Optionee shall be entitled to do so as of the
effective date of the termination of his employment by reason
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<PAGE> 15
of such retirement) until the earlier of (i) the date three
(3) months after the effective date of the termination of his
employment or (ii) the expiration date of such Option, and the
Option shall terminate on the earlier of such dates.
11. NONTRANSFERABILITY OF OPTIONS. Options may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any
manner by the Optionee except at death by will or by the laws of
descent and distribution and may be exercised during the life of
the Optionee only by the Optionee. No lien, obligation or
liability of an Optionee or a Successor shall attach to or
otherwise encumber the right and interest of such Optionee or
Successor in and to any Options outstanding under the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) Adjustments, in general. Subject to the provisions
of Paragraph (b) of this Section 12 and to any required action
by the stockholders of the Company, the number of Shares
covered by each outstanding Option, and the number of Shares
which have been authorized for issuance under the Plan but as
to which no Options have yet been granted or which due to the
expiration, lapse, cancellation, surrender, forfeiture or
other termination of a stock option under this Plan or the
Predecessor Plan are again available for grant, as well as the
price per Share covered by each such outstanding Option, shall
be proportionately adjusted for any increase or decrease in
the number of issued and outstanding Shares resulting from a
stock split, reverse stock split, stock dividend, combination
or reclassification of Shares or any other increase or
decrease in the aggregate number of issued and outstanding
Shares effected without receipt of consideration by the
Company; provided, however, that the issuance of Shares
pursuant to the conversion or exchange of any securities of
the Company convertible into or exchangeable for Shares shall
not be deemed to have been "effected without receipt of
consideration." Any fractional Shares which would otherwise
result from any such adjustments shall be eliminated either by
deleting all fractional Shares or by appropriate rounding to
the next higher (fractions of one-half or more) or lower
(fractions of less than one-half) whole Share. All such
adjustments shall be made by the Board in its sole discretion.
Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities
convertible into or exchangeable for shares of stock of any
class, shall affect, and no adjustment by reason thereof shall
be made to, the number of or exercise price for Shares subject
to an Option.
In the event of the proposed dissolution or liquidation
of the Company, all outstanding Options will terminate
15
<PAGE> 16
immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare
that any Option shall terminate as of a date fixed by the
Board and give each Optionee the right to exercise his Option
as to all or any part of the Optioned Stock, including Shares
as to which the Option would not otherwise then be
exercisable.
Subject to the provisions of Paragraph (b) of this
Section 12, in the event of a sale of all or substantially all
of the assets of the Company, or the merger or consolidation
of the Company with or into another corporation, each
outstanding Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board,
in the exercise of its sole discretion, determines that, in
lieu of such assumption or substitution, the Optionee shall
have the right to exercise the Option as to all or any part of
the Optioned Stock, including Shares as to which the Option
would not otherwise then be exercisable. If in the event of
a merger, consolidation or sale of assets the Board makes an
Option fully exercisable in lieu of assumption or substitution,
the Company shall notify the Optionee that the Option shall
be fully exercisable for a period of thirty (30) days from
the date of such notice, and the Option will terminate upon
the expiration of such period.
(b) Special Adjustments upon Change in Control. In the
event of a "Change in Control" of the Company (as defined in
Paragraph (c) of this Section 12), unless otherwise determined
by the Board in its sole discretion prior to the occurrence of
such Change in Control, the following acceleration and
valuation provisions shall apply:
(i) Any Options outstanding as of the date of
such Change in Control that are not yet fully vested on
such date shall become fully vested; and
(ii) The value of all outstanding Options,
measured by the excess of the "Change in Control Price"
(as defined in Paragraph (d) of this Section 12) over the
exercise price, shall be cashed out. The cash out
proceeds shall be paid to the Optionee or, in the event
of death of an Optionee prior to payment, to his
Successor.
(c) Definition of "Change in Control." For purposes of
this Section 12, a "Change in Control" means the happening of
any of the following:
16
<PAGE> 17
(i) When any "person," as such term is used in
Sections 13(d) and 14(d) of the Act (other than the
Company, a Subsidiary or a Company or Subsidiary employee
benefit plan, including any trustee of such a plan acting
as trustee) becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated by the Commission under the Act,
as adopted and amended from time to time and as
interpreted by formal or informal opinions of, and
releases published or other interpretive advice provided
by, the Staff of the Commission), directly or indirectly,
of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the
Company's then outstanding securities; or
(ii) The consummation of a transaction requiring
stockholder approval and involving the sale of all or
substantially all of the assets of the Company or the
merger or consolidation of the Company with or into
another corporation.
(d) Definition of "Change in Control Price." For
purposes of this Section 12, "Change in Control Price" shall
be, as determined by the Board, (i) the highest closing sale
price of a Share, as reported by the NASDAQ National Market
System, any stock exchange on which the Shares are listed or
any other recognized securities market on which the Shares are
traded, at any time within the sixty (60) day period
immediately preceding the date of the Change in Control (the
"Sixty-Day Period"), or (ii) the highest price paid or
offered, as determined by the Board, in any bona fide
transaction or bona fide offer related to the Change in
Control, at any time within the Sixty-Day Period.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option
shall, for all purposes, be the date on which the Committee makes
the determination granting such Option. Notice of such
determination shall be given to each Employee to whom an Option is
so granted within a reasonable time after the date of such grant.
14. OPTION AGREEMENTS. As a condition to the effectiveness
of each grant of an Option (including, but not limited to, a
Replenishment Option) under this Plan, the Optionee shall enter
into a written Option Agreement in such form as may be authorized
by the Committee from time to time. Subject to the provisions of
Section 20(a), each such Option Agreement shall contain such
provisions as are required by the terms of this Plan and may
contain such additional provisions not inconsistent with the terms
of this Plan as the Committee in its sole discretion may from time
to time authorize. Each Option Agreement evidencing an Option
granted to a Section 16 Person shall also provide for such minimum
waiting period from the date of grant before the Option may be
17
<PAGE> 18
exercised, and such minimum holding period from the date of the
acquisition of Shares upon exercise of an Option for which such
Shares must be held before making any disposition of such Shares,
as may be required by Rule 16b-3.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be
issued with respect to an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall
comply with all applicable Securities Law Requirements and all
other applicable provisions of law, including, without limitation,
any applicable state "blue sky" laws and foreign (national and
provincial) securities laws and the rules and regulations
promulgated under any of such laws, 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 or the issuance of
Shares upon exercise of an Option, the Company may require the
person exercising such Option to make such representations and
warranties to the Company as may be required, in the opinion of
counsel for the Company, by any of the aforementioned Securities
Law Requirements and other laws, which may include, without
limitation, representations and warranties that the Shares are
being purchased only for investment and without any present
intention to sell or distribute such Shares.
The Company shall not have any liability to any Optionee in
respect of any delay in the sale or issuance of Shares hereunder
until the Company is able to obtain authority from any governmental
authority (domestic or foreign) or self-regulatory organization
having jurisdiction thereover, which authority is deemed by the
Company's counsel to be necessary to the lawful sale and issuance
of such Shares, or any failure to sell or issue such Shares as to
which such requisite authority the Company is unable to obtain.
16. FORFEITURE OF OPTIONS AND REALIZED BENEFITS.
(a) Loss of Unexercised Options. If an Optionee holding
an outstanding Option, without the written consent of the
Company as authorized by the Committee in its sole discretion,
engages in any of the following conduct (any such conduct
being referred to as "Prohibited Conduct") at any time during
the period beginning on the date the Optionee first entered
the employ of the Company or a Subsidiary and continuing for
so long as any portion of such Option remains outstanding and
unexercised (the "Orant Period"):
(i) rendering services for any organization or
engaging directly or indirectly in any business which, in
the sole judgment of the Committee, is or becomes
competitive with the Company or a Subsidiary, or where
18
<PAGE> 19
such rendering of services or engaging in business, in
the sole judgment of the Committee, is or becomes
otherwise prejudicial to or in conflict with the
interests of the Company or a Subsidiary; provided that
the ownership of a not more than ten percent (10%) equity
interest in any organization or business whose equity is
listed on a recognized securities exchange or traded
over-the-counter shall not constitute Prohibited Conduct
within the meaning of this Subparagraph (i);
(ii) disclosing to anyone outside the company or
any Subsidiary, or use in other than the business of the
Company or any Subsidiary, any confidential or
proprietary information relating to the business of the
Company or any Subsidiary, acquired by the Optionee
either during or after employment with the Company or a
Subsidiary;
(iii) except as may otherwise be permitted by any
agreement otherwise made by the Company or a Subsidiary
with the Optionee, failing to disclose fully and promptly
in writing and assign to the Company or to the Subsidiary
by which the Optionee is or was employed all right, title
and interest in any discovery, invention, process,
method, improvement or idea, whether or not patentable or
subject to copyright protection and whether or not
reduced to tangible form or reduced to practice, made or
conceived by such person during employment by the Company
or such Subsidiary, relating in any manner to the actual
or contemplated business, research or development work of
the Company or such Subsidiary or to do anything
reasonably necessary to enable the Company or such
Subsidiary to secure a patent, copyright or similar
protection in the United States of America and/or in
foreign countries as the Company or such Subsidiary may
elect; or
(iv) inducing or attempting to induce any customer
or supplier of the Company or a Subsidiary to breach
any contract with the Company or a Subsidiary or otherwise
terminate its relationship with the Company or a Subsidiary;
then the Committee shall have the right, upon determining
that the Optionee has engaged in any Prohibited Conduct
at any time during the Grant Period (in making such
determination, the Committee may, but shall not be
required to, give the Optionee an opportunity to be
heard and to present evidence on his behalf), to declare
the Option forfeited and cancelled effective as of the
time of the conduct constituting such Prohibited Conduct.
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<PAGE> 20
(b) Optionee Certification upon Exercise. Each time an
Optionee exercises an Option, the Optionee shall be deemed to
certify to the Company that such Optionee did not, without the
written consent of the Company as authorized by the Committee
in its sole discretion, engage in any Prohibited Conduct at
any time during the period beginning on the date the Optionee
first entered the employ of the Company or a Subsidiary and
ending on the date of such exercise (the "Pre-Exercise
Period").
(c) Loss of Realized Benefits. In the event that the
Committee determines with respect to a particular exercise of
an Option that the Optionee engaged in any Prohibited Conduct
at any time during the Pre-Exercise Period or within one (1)
year after such exercise (in making such determination, the
Committee may, but shall not be required to, give the Optionee
an opportunity to be heard and to present evidence on his
behalf), such Optionee shall be liable to the Company (i) to
the extent such Optionee has, prior to his receipt of the
"Forfeiture Notice" (as defined below), disposed of the Shares
acquired through such exercise, for payment to the Company of
an amount in cash equal to the excess of (A) the net cash
proceeds from such disposition (or if such Shares were
disposed of other than for cash, the aggregate Fair Market
Value of such Shares as of the date of disposition) over (B)
that portion of the sum of the cash and the aggregate Fair
Market Value as of the exercise date of any already owned
Shares used by the Optionee to pay the exercise price for such
Shares (such sum being referred to as the "Exercise Payment")
which is allocable to the Shares disposed of in the portion
that such number of Shares bears to the total number of Shares
issued pursuant to such Option exercise and (ii) to the extent
such Optionee still owns at the time he receives the
Forfeiture Notice the Shares acquired through such exercise,
at the option of the Committee, either (A) for the return of
such Shares to the Company in exchange for a cash refund from
the Company to such Optionee in an amount equal to that
portion of the Exercise Payment which is allocable to the
Shares still owned in the proportion that such number of
Shares bears to the total number of Shares issued pursuant to
such Option exercise (such portion being referred to as the
"Retained Shares Exercise Payment") or (B) for payment to the
Company of an amount in cash equal to the excess of the
aggregate Fair Market Value as of the exercise date of the
Shares still owned over the Retained Shares Exercise Payment.
To enforce such liability against such Optionee, the Committee
shall notify the Optionee thereof in writing within three (3)
years of the date of the affected Option exercise, which
notice (the "Forfeiture Notice") shall include a statement of
the form of payment which the Committee has elected to receive
from the Optionee with respect to Shares still owned by the
20
<PAGE> 21
Optionee. Within ten (10) days after receiving the Forfeiture
Notice, the Optionee shall make full payment of such liability
to the Company in cash, or to the extent such Optionee still
owns Shares acquired through the affected exercise and the
Committee elects in the Forfeiture Notice to receive such
Shares, stock certificates evidencing such Shares still owned
by the Optionee (duly endorsed for transfer with signature
guaranteed). In the event that the Committee elects to
receive, and the Optionee returns, Shares, the Company shall
make the refund payment required to be made to the Optionee
with respect to such Shares upon the Company's receipt of such
Shares as hereinabove required.
(d) Cumulative Rights. The obligation of an Optionee
under this Section 16 to refrain from Prohibited Conduct is in
addition to, and does not in any way supersede or diminish,
any other obligation of such Optionee with respect to such
matters which such Optionee may owe to the Company, any
Subsidiary or any other person under any agreement, applicable
law or otherwise (a "Similar Obligation"). Any action taken
by the Company or the Committee to enforce, compromise, settle
or waive the provisions of this Section 16 with respect to any
particular event constituting Prohibited Conduct shall not in
any way affect the rights of the Company, the Committee, any
Subsidiary or any person against an Optionee with respect to
any other event constituting Prohibited Conduct or any Similar
Obligation, nor shall any action taken or failed to be taken
by the Company, any Subsidiary or any other person against an
Optionee to enforce, compromise, settle or waive any Similar
Obligation have any effect on the rights of the Company and
the Committee under this Section 16.
17. RESERVATION OF SHARES. The Company, during the term of
this Plan, shall at all times reserve and keep available such
number of Shares as shall be sufficient to satisfy the requirements
of the Plan.
18. EFFECTIVENESS OF PLAN. This Plan was adopted by the
Board on, and shall be effective as of, August 27, 1990; provided,
however, that any Options granted hereunder shall not be
exercisable unless and until, and this Plan and all such Options
shall automatically terminate if, the Plan is not approved, within
one (1) year of the date of adoption of the Plan, by the holders of
the outstanding Shares of the Company present and voting, in person
or by proxy, at a duly held meeting of the Company's stockholders
or any adjournment thereof and by such percentage of such quorum of
such stockholders as may be required by applicable Securities Law
Requirements. Once so approved by the stockholders of the Company,
the Plan shall continue in full force and effect until (i)
terminated by resolution of the Board or (ii) both (A) all Options
granted under the Plan have been exercised in full and (B) no
21
<PAGE> 22
Authorized Shares remain available for the granting of additional
Options. The termination of the Plan shall not affect Options
already granted, which Options shall remain in full force and
effect in accordance with their respective terms as if this Plan
had not been terminated.
19. AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board
may, in its sole discretion, amend the Plan from time to time,
provided that any amendment which Rule 16b-3 or any other
Securities Law Requirement requires be approved by the stockholders
of the Company shall be made only with the approval of such
stockholders. Amendments to the Plan shall apply prospectively to
all Options then outstanding under the Plan, except in the case of
any amendment which is adverse to an Optionee, in which case the
amendment shall apply with respect to the outstanding Options held
by the adversely affected Optionee only upon the consent of such
Optionee to such amendment. In exercising its authority under
Section 4(b)(vi) to amend outstanding Options, the Committee
likewise may make an amendment which adversely affects the Optionee
only upon the consent of such Optionee to such amendment.
Notwithstanding the provisions of this Section 19, the consent of
the Optionee shall not be required with respect to an amendment to
the Plan or to any outstanding Option which is made in order to
comply with Securities Law Requirements or which causes a Tax
Qualified Option no longer to qualify as such.
20. GENERAL PROVISIONS.
(a) Grants to Foreign Employees. Notwithstanding any
other provision of this Plan to the contrary but subject to
applicable Securities Law Requirements and tax laws, to the
extent deemed necessary or appropriate by the Committee in its
sole discretion in order to further the purposes of the Plan
with respect to Employees who are foreign nationals and/or
employed outside the United States of America, an Option
granted to any such Employee may be on terms and conditions
different from those specified in this Plan in recognition of
the differences in the laws, tax policies and customs
applicable to such an Employee, without the necessity of the
Plan being amended to provide for such different terms and
conditions.
(b) Nature of Benefits. Benefits realized by an
Optionee under this Plan or any Option granted hereunder shall
not be deemed a part of such Optionee's regular, recurring
compensation for purposes of the termination, indemnity or
severance pay law of any country and shall not be included in,
nor have any effect on, the determination of benefits under
any other employee benefit plan or similar arrangement
provided to such Optionee by the Company or a Subsidiary
unless expressly so provided by such other plan or
22
<PAGE> 23
arrangement, or except where the Committee expressly
determines in its sole discretion that an Option or portion
thereof should be so included in order accurately to reflect
competitive compensation practices or to recognize that an
Option has been granted in lieu of a portion of competitive
annual cash compensation.
(c) Determination of Deadlines. If any day on or before
which action under this Plan or any Option granted hereunder
must be taken falls on a Saturday, Sunday or
Company-recognized holiday, such action may be taken on the
next succeeding day which is not a Saturday, Sunday or
Company-recognized holiday; provided, however, that the
provisions of this Paragraph (c) shall not apply to, and shall
not extend the time for exercise of, any Option which is
terminated for Misconduct pursuant to Section 10(b) or for
Prohibited Conduct pursuant to Section 16(a).
(d) Governing Law. To the extent that federal laws
(such as the Act or the Code) or the Delaware General
Corporation Law do not otherwise control, this Plan and all
determinations made and actions taken pursuant hereto shall be
governed by the laws of the State of Ohio and construed
accordingly.
(e) Gender and Number. Whenever the context may
require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural
and vice versa.
(f) Captions. The captions contained in this Plan are
for convenience of reference only and do not affect the
meaning of any term or provision hereof.
23
<PAGE> 1
PROPOSED AMENDED
TELXON CORPORATION
1990 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
(Revised June 1995)
1. PURPOSE OF THE PLAN. The purpose of this Plan is to
promote the best interests of the Company and its stockholders by
enabling the Company to attract and retain the services of
experienced and knowledgeable independent directors by providing
such directors the opportunity, pursuant to Options granted under
the Plan, to acquire a proprietary interest in the Company and
thereby encourage them to put forth their maximum efforts for the
continued success and growth of the Company.
2. DEFINITIONS. In addition to such other capitalized terms
as are defined elsewhere in this Plan, the following terms shall
when used in this Plan have the respective meanings set forth
below:
(a) "Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(b) "Authorized Shares" means the maximum aggregate
number of shares of Common Stock specified in Section 4(a) as
being authorized for issuance and sale under Options granted
pursuant to the Plan, subject to adjustment thereof in
accordance with Section 12 of the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Commission" means the United States Securities and
Exchange Commission.
(f) "Committee" means the Committee appointed by the
Board in accordance with Paragraph (a) of Section 5 of the
Plan, if a Committee is appointed. The members of such
Committee shall be members of the Board. If no Committee has
been appointed, any reference to the "Committee" shall be
deemed a reference to the "Board."
(g) "Common Stock" means the Common Stock, par value
$.01 per share, of the Company.
(h) "Company" means Telxon Corporation, a Delaware
corporation.
<PAGE> 2
(i) "Director" means any person elected or duly
appointed in accordance with the certificate of incorporation
or by-laws of the Company, or applicable law, to serve on the
Board.
(j) "Employee" means any person, including officers and
Directors who are also officers, employed by the Company or
any Subsidiary. The payment of director's fees by the Company
shall not be sufficient to constitute a person as an
"Employee" of the Company.
(k) "Option" means a right granted to a non-Employee
Director pursuant to the Plan to purchase a specified number
of shares of Common Stock at a specified price during a
specified period and on such other terms and conditions as may
be specified pursuant to the Plan. Options may be granted as
Tax Qualified Options or as Options which do not qualify as
Tax Qualified Options.
(l) "Option Agreement" means the written agreement
evidencing an Option by and between the Company and the
Optionee as required by Section 14.
(m) "Optioned Stock" means the Common Stock subject to
an Option.
(n) "Optionee" means a non-Employee Director who
receives an Option.
(o) "Plan" means this Telxon Corporation 1990 Stock
Option Plan for Non-Employee Directors.
(p) "Rule 16b-3" means Rule 16b-3 promulgated by the
Commission under the Act or any similar successor regulation
exempting certain transactions involving stock-based
compensation arrangements from the liability provisions of
Section 16 of the Act, as adopted and amended from time to
time and as interpreted by formal or informal opinions of, and
releases published or other interpretive advice provided by,
the Staff of the Commission.
(q) "Securities Law Requirements" means the Act and the
rules and regulations promulgated by the Commission
thereunder, as adopted and amended from time to time,
including but not limited to Rule 16b-3, and as interpreted by
formal or informal opinions of, and releases published or
other interpretive advice provided by, the Staff of the
Commission, and the requirements of any stock exchange,
automated inter-dealer quotation system or other recognized
securities market on which the Common Stock is listed or
traded or in which the Common Stock is included, as adopted
2
<PAGE> 3
and amended from time to time and as interpreted by formal or
informal opinions of, and other interpretive advice provided
by, the representatives of such stock exchange, quotation
system or other securities market.
(r) "Shares" means the Common Stock as adjusted in
accordance with Section 12 of the Plan.
(s) "Subsidiary" means a corporation of which not less
than fifty percent (50%) of the voting shares are owned by the
Company or a Subsidiary, whether or not such corporation now
exists or is hereafter organized or acquired by the Company or
a Subsidiary.
(t) "Successor" means the estate of an Optionee or a
person who succeeds by will or the laws of descent and
distribution to an Optionee's right to exercise an Option.
(u) "Tax Qualified Option" means an Option which is
intended at the time of grant to qualify for special tax
treatment under Section 422A or other particular provisions of
the Code and the regulations, rulings and procedures
promulgated, published or otherwise provided thereunder, as
adopted and amended from time to time.
3. QUALIFICATION OF PLAN. The Plan is intended to qualify
for an exemption from the operation of Section 16(b) of the Act,
pursuant to Rule 16b-3. Further, the Plan is structured to comply
with the requirements of Rule 16b-3(c)(2)(ii) regarding
disinterested administration and formula awards to ensure that
directors receiving grants under the Plan continue to be
"disinterested persons," as that term is defined in Rule
16b-3(c)(2)(i), for the purpose of administering the Company's
employee stock option plans.
4. STOCK SUBJECT TO THE PLAN.
(a) Number of Shares Issuable. Subject to adjustment in
accordance with the provisions of Section 12 of the Plan, the
maximum aggregate number of Authorized Shares which may be
issued and sold under Options granted pursuant to the Plan is
400,000 shares of Common Stock. The Shares issued and sold
upon the exercise of Options may be treasury Shares, Shares of
original issue or a combination thereof.
(b) Computation of Shares Available for Grant. For
purposes of computing the number of Authorized Shares
available from time to time under the Plan for the grant of
Options, the number of Shares subject to each Option granted
pursuant to the Plan shall be provisionally counted against
the Authorized Shares from and after the grant of such Option
3
<PAGE> 4
but only for so long as and to the extent that such Option
shall remain outstanding and unexercised. Upon the exercise,
in whole or in part, of an Option, the number of Shares issued
upon such exercise shall be permanently deducted from the
Authorized Shares, provided that no such permanent deduction
shall be made, and the provisional deduction against the
Authorized Shares shall be reversed, to the extent that the
exercise price and/or the withholding taxes with respect to
such exercise are paid through the delivery to the Company by
the person exercising the Option of Shares already owned by
such person and/or through the withholding by the Company of
Shares from the total number of Shares with respect to which
the Option is exercised. The provisional deduction against
the Authorized Shares shall likewise be reversed to the extent
of the unexercised portion of an Option upon the expiration,
lapse, cancellation, surrender, forfeiture or other
termination of such Option. The Shares covered by any such
reversal of a provisional deduction against the Authorized
Shares shall immediately become available for the granting of
new Options under the Plan with respect thereto.
5. ADMINISTRATION OF THE PLAN.
(a) Procedure. The Plan shall be administered by the
Board or the Board may, in its discretion, appoint a Committee
to administer the Plan. Subject to the provisions of the
Plan, the Committee has authority to manage and control the
operation of the Plan, interpret the provisions of the Plan,
and prescribe, amend and rescind rules and regulations
relating to the Plan. From time to time the Board may
increase the size of the Committee and may appoint additional
members thereof, remove members (with or without cause), fill
vacancies however caused and remove all members of the
Committee and thereafter directly administer the Plan.
(b) Powers of the Committee. Subject to the provisions
of this Plan, the Committee shall have the authority, in its
sole discretion:
(i) To determine, upon review of relevant
information in accordance with Section 8(b) of the Plan,
the "Fair Market Value" (as defined in said Section 8(b))
of the Shares;
(ii) To determine the terms and provisions of
each Option, subject to the provisions of Section 8 of
the Plan.
(iii) To amend any outstanding Option, subject to
the provisions of Section 18 of the Plan;
4
<PAGE> 5
(iv) To authorize any person to prepare and
execute on behalf of the Company any instrument deemed by
the Committee to be necessary or advisable to evidence or
effectuate the Plan, any Option granted thereunder or any
amendment to the Plan or any Option;
(v) To interpret the Plan;
(vi) To prescribe, amend and rescind, if deemed
necessary or appropriate, rules and regulations relating
to the Plan, to the extent not inconsistent with the
Plan; and
(vii) To make all other determinations the
Committee may deem necessary or advisable in connection
with the administration of the Plan.
(viii) To accelerate the time as of which any
Option shall vest and may be exercised by the Optionee,;
provided, however, that the Optionee shall not
participate in any decision regarding acceleration of
vesting of any Option held by him or her.
(c) Effect of Board and Committee Decisions. All
decisions, determinations and actions of the Board and the
Committee in connection with the construction, interpretation,
administration, application, operation and implementation of
the Plan shall be final, conclusive and binding on the
Company, its stockholders and Subsidiaries, all Employees and
Optionees and the respective legal representatives, heirs,
successors and assigns of all of the foregoing and all other
persons claiming under or through any of them.
(d) Exculpation and Indemnification. No member of the
Board or the Committee, and no Employee or other agent acting
on behalf of the Board or the Committee, shall be personally
liable for any decision, determination or action made or
taken, or failed to be made or taken, with respect to this
Plan or any Option granted hereunder, and the Company shall
fully protect each such person in respect of any such
decision, determination or action and shall indemnify each
such person against any and all claims, losses, damages,
expenses and liabilities arising from or in connection with
any such decision, determination or action.
6. ELIGIBILITY; FORMULA GRANTS.
(a) Eligibility. Each Director who is not an Employee
shall be eligible to receive grants of Options under the Plan.
(b) Formula Grants.
5
<PAGE> 6
(i) Initial Grants. Each eligible Director who
is newly elected or appointed to the Board after May 19,
1992 shall automatically be granted an Option (the
"Initial Grant") to purchase 25,000 Shares of Common
Stock (subject to adjustment as provided in Section 12)
on the day he or she joins the Board.
(ii) Continuing Grants. Each non-Employee
director shall automatically be granted an Option (the
"Continuing Grant") to purchase 10,000 Shares of Common
Stock (subject to adjustment as provided in Section 12)
on each anniversary of his or her election or last
re-election to the Board so long as such Director is
serving on the Board on the date of such anniversary.
7. TERM OF OPTIONS; VESTING.
(a) Term of Options. The term of each Option shall be
seven (7) years from the date of grant thereof, provided that
the Committee, if it intends that a particular Option qualify
as a Tax Qualified Option, shall observe such restrictions on
the term of such Option as may be imposed by applicable tax
laws in order for such Option so to qualify. Each Option
shall continue in effect in accordance with its terms
notwithstanding that the Plan may be terminated prior to the
expiration of the term of such Option.
(b) Vesting.
(i) Initial Grants. Each Option constituting an
Initial Grant shall be exercisable as to one-third of the
Shares subject to the Option after the first anniversary
of the grant date, exercisable as to two-thirds of the
Shares subject to the Option after the second anniversary
of the grant date, and exercisable as to all or any part
of the Shares subject to the Option after the third
anniversary of the grant date.
(ii) Continuing Grants. Each Option constituting
a Continuing Grant shall be exercisable as to all or any
part of the Shares subject to the Option after the third
anniversary of the grant date.
8. EXERCISE PRICE.
(a) Fair Market Value. The per Share exercise price for
the Shares subject to an Option shall be the Fair Market Value
per Share as of the day prior to the date of grant of such
Option.
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(b) Definition of "Fair Market Value." For all purposes
under the Plan, "Fair Market Value" per Share shall be
determined by the Committee in its sole discretion; provided
that if the Shares are included in the NASDAQ National Market
System or listed on a stock exchange on the date as of which
the same is to be determined, the Fair Market Value per Share
shall be the closing price on such quotation system or
exchange which is the principal trading market for the Shares
on the date of determination or, if no sale price was reported
for the Shares on the date of determination, the closing price
on such principal trading market for the last trading day
prior to the date of determination for which a sale price was
reported; provided further, however, that if the foregoing
method of determining Fair Market Value is inconsistent with
the then existing tax law requirements with respect to any
Option which the Committee intends to qualify as a Tax
Qualified Option, then the Fair Market Value per Share shall
be determined by the Committee in such manner as is required
for such Tax Qualified Option to qualify as such.
9. FORM OF PAYMENT.
(a) Acceptable Forms of Consideration. Except as may
otherwise be specified by the Committee in its sole discretion
at the time of grant thereof and reflected in the Option
Agreement evidencing such Option, the following forms of
consideration will be accepted in payment of the exercise
price for the Shares to be issued upon exercise of an Option:
(i) cash, (ii) personal check, (iii) bank cashier's check,
(iv) already owned Shares (duly endorsed for transfer with
signature guaranteed), or (v) any combination of the
foregoing. In addition to the acceptable forms of
consideration hereinabove recited in this Paragraph (a), the
Committee may determine in its sole discretion at the time of
grant of an Option, and if the Committee so determines, shall
provide in the Option Agreement evidencing such Option, that
one or both of the following additional forms of consideration
will be accepted, either alone or in any combination with any
of the other acceptable forms of consideration recited in this
Paragraph (a), in payment of the exercise price for the Shares
to be issued upon exercise of an Option, (vi) Shares withheld
from the Shares to be issued upon such exercise, and/or (vii)
subject to compliance with applicable law, a commitment for
the delivery to the Company of proceeds from the sale,
pursuant to a brokerage or similar arrangement approved in
advance by the Committee in its sole discretion, of Shares to
be issued upon exercise of the Option. The forms of
consideration which will be accepted in payment of the
exercise price for an Option shall be specified in the Option
Agreement evidencing such Option, and the person or persons
entitled to exercise the Option shall be entitled to elect
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from those so specified the form(s) to be used in effecting
payment with respect to a particular exercise; provided that
any election by an Optionee to use already owned Shares or
have Shares withheld from those issuable upon such exercise
shall be effective only if made in accordance with the
applicable requirements of Rule 16b-3; and provided further
that a commitment for the delivery to the Company of proceeds
from the sale, pursuant to a brokerage or similar arrangement,
of Shares to be issued upon exercise of an Option will not be
accepted from an Optionee if under Securities Law Requirements
such a sale would be matched with such exercise to result in
"short-swing" profit liability under Section 16(b) of the Act
on the part of such Optionee with respect to such transaction.
(b) Valuation of Shares Delivered or Withheld. Where
already owned Shares, or Shares withheld from those issuable
upon such exercise, are used in payment of the exercise price,
such Shares shall be valued at Fair Market Value as of the day
immediately preceding the date of exercise.
(c) Delivery of Already Owned Shares. Where the person
exercising an Option elects to use already owned Shares in
full or partial payment of the exercise price, the Committee
may, in its sole discretion, accept, in lieu of physical
delivery of the stock certificates evidencing such Shares,
such constructive delivery of such Shares as may be
satisfactory to the Committee.
10. METHOD OF EXERCISE.
(a) Procedure for Exercise; Rights as a Stockholder.
Any Option granted hereunder shall be exercisable at such
times and under such conditions as determined by the Committee
and as permitted under the Plan. An Option may not be
exercised for a fraction of a Share. In order to exercise an
Option, the person or persons entitled to exercise it shall
deliver to the Company written notice of the number of Shares
with respect to which the Option is being exercised,
accompanied by payment in full of the aggregate price for the
Shares so to be acquired. To constitute an effective exercise
of an Option, such notice and payment shall be addressed to
the attention of the Treasurer of the Company and must be
received at the principal executive office of the Company by
5:00 p.m., local time, on the date of expiration or
termination of the Option. 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 nor any other rights as a stockholder shall
exist with respect to the Optioned Stock notwithstanding the
exercise of the Option. No adjustment will be made for a
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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.
Exercise of an Option shall result in a decrease in the number
of Shares which thereafter shall be available for sale under
such Option by the number of Shares as to which the Option is
exercised, including any Shares withheld from the Shares to be
issued pursuant to such exercise to cover the exercise price.
(b) Termination of Service. Except as may otherwise be
specified by the Committee in its sole discretion at the time
of grant thereof and reflected in the Option Agreement
evidencing such Option, in the event that an Optionee shall
cease to be a Director (other than by reason of the Optionee's
death or disability), he may exercise his Option (to the
extent that he was entitled to exercise it at the time he
ceased to be a Director) until the earlier of (i) the date
three (3) months after the date Optionee ceased to be a
Director or (ii) the expiration date of such Option, and the
Option shall terminate on the earlier of such dates.
(c) Death of Optionee. Except as may otherwise be
specified by the Committee in its sole discretion at the time
of grant thereof and reflected in the Option Agreement
evidencing such Option, upon the death of an Optionee:
(i) who is at the time of his death a Director
of the Company, the Option may be exercised (to the
extent the Optionee would have been entitled to do so had
he continued living and terminated his directorship six
(6) months after the date of death) by his Successor
until the earlier of (A) the date six (6) months (or, if
the Committee intends that a particular Option qualify as
a Tax Qualified Option, such lesser period of time within
which the applicable tax laws may require that the Option
be exercised in order for such Option so to qualify)
following the date of the Optionee's death or (B) the
expiration date of such Option, and the Option shall
terminate on the earlier of such dates; or
(ii) within thirty (30) days after the
termination of Optionee's directorship (other than
termination due to disability), the Option may be
exercised (to the extent the Optionee was entitled to do
so at the date of termination of his directorship by his
Successor until the earlier of (A) the date six (6)
months following the date of the Optionee's death (or, if
the Committee intends that a particular Option qualify as
a Tax Qualified Option, such lesser period of time within
which the applicable tax laws may require that the Option
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be exercised in order for such Option so to qualify) or
(B) the expiration date of such Option, and the Option
shall terminate on the earlier of such dates.
(d) Disability of Optionee. Except as may otherwise be
specified by the Committee in its sole discretion at the time
of grant thereof and reflected in the Option Agreement
evidencing such Option, if an Optionee's directorship
terminates due to Optionee having become permanently and
totally disabled within the meaning of Section 23(e)(3), of
the Code ("disability"), the Option may be exercised (to the
extent the Optionee was entitled to do so as of the effective
date of the termination of Optionee's directorship by reason
of such disability) until the earlier of (i) the date one (1)
year after the effective date of such termination or (ii) the
expiration date of such Option, and the Option shall terminate
on the earlier of such dates.
11. NONTRANSFERABILITY OF OPTIONS. Options granted under the
Plan may not be sold, pledged, assigned, hypothecated, disposed of
or otherwise transferred in any manner by the Optionee other than
by will or the laws of descent and distribution or pursuant to a
"qualified domestic relations" order (as defined by the Code) or
Title I of the Employee Retirement Income Securities Act, or the
rules thereunder. The designation of a beneficiary by an Optionee
shall not be deemed to constitute a transferee. No lien,
obligation or liability of an Optionee or a Successor shall attach
to or otherwise encumber the right and interest of such Optionee or
Successor in and to any Options outstanding under the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) Adjustments, in general. Subject to the provisions
of Paragraph (b) of this Section 12 and to any required action
by the stockholders of the Company, the number of Shares
covered by each outstanding Option, and the number of Shares
which have been authorized for issuance under the Plan but as
to which no Options have yet been granted or which due to the
expiration, lapse, cancellation, surrender, forfeiture or
other termination of an Option under this Plan are again
available for grant, as well as the price per Share covered by
each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued
and outstanding Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification
of Shares or any other increase or decrease in the aggregate
number of issued and outstanding Shares effected without
receipt of consideration by the Company; provided, however,
that the issuance of Shares pursuant to the conversion or
exchange of any securities of the Company convertible into or
exchangeable for Shares shall not be deemed to have been
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"effected without receipt of consideration." Any fractional
Shares which would otherwise result from any such adjustments
shall be eliminated either by deleting all fractional Shares
or by appropriate rounding to the next higher (fractions of
one-half or more) or lower (fractions of less than one-half)
whole Share. All such adjustments shall be made by the Board
in its sole discretion. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or
securities convertible into or exchangeable for shares of
stock of any class, shall affect, and no adjustment by reason
thereof shall be made to, the number of or exercise price for
Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, all outstanding Options will terminate immediately
prior to the consummation of such proposed action, unless
otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare
that any Option shall terminate as of a date fixed by the
Board and give each Optionee the right to exercise his Option
as to all or any part of the Optioned Stock, including Shares
as to which the Option would not otherwise then be
exercisable.
Subject to the provisions of Paragraph (b) of this Section 12,
in the event of a sale of all or substantially all of the
assets of the Company, or the merger or consolidation of the
Company with or into another corporation, each outstanding
Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Board, in
the exercise of its sole discretion, determines that, in lieu
of such assumption or substitution, the Optionee shall have
the right to exercise the Option as to all or any part of the
Optioned Stock, including Shares as to which the Option would
not otherwise then be exercisable. If in the event of a
merger, consolidation or sale of assets the Board makes an
Option fully exercisable in lieu of assumption or
substitution, the Company shall notify the Optionee that the
Option shall be fully exercisable for a period of thirty (30)
days from the date of such notice, and the Option will
terminate upon the expiration of such period.
(b) Special Adjustments upon Change in Control. In the
event of a "Change in Control" of the Company (as defined in
Paragraph (c) of this Section 12), unless otherwise determined
by the Board in its sole discretion prior to the occurrence of
such Change in Control, the following acceleration and
valuation provisions shall apply:
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(i) Any Options outstanding as of the date of
such Change in Control that are not yet fully vested on
such date shall become fully vested; and
(ii) The value of all outstanding Options,
measured by the excess of the "Change in Control Price"
(as defined in Paragraph (d) of this Section 12) over the
exercise price, shall be cashed out. The cash out
proceeds shall be paid to the Optionee or, in the event
of death of an Optionee prior to payment, to his
Successor.
(c) Definition of "Change in Control." For purposes of
this Section 12, a "Change in Control" means the happening of
any of the following:
(i) When any "person," as such term is used in
Sections 13(d) and 14(d) of the Act (other than the
Company, a Subsidiary or a Company or Subsidiary employee
benefit plan, including any trustee of such a plan acting
as trustee) becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated by the Commission under the Act,
as adopted and amended from time to time and as
interpreted by formal or informal opinions of, and
releases published or other interpretive advice provided
by, the Staff of the Commission), directly or indirectly,
of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the
Company's then outstanding securities; or
(ii) The consummation of a transaction requiring
stockholder approval and involving the sale of all or
substantially all of the assets of the Company or the
merger or consolidation of the Company with or into
another corporation.
(d) Definition of "Change in Control Price." For
purposes of this Section 12, "Change in Control Price" shall
be, as determined by the Board, (i) the highest closing sale
price of a Share, as reported by the NASDAQ National Market
System, any stock exchange on which the Shares are listed or
any other recognized securities market on which the Shares are
traded, at any time within the sixty (60) day period
immediately preceding the date of the Change in Control (the
"Sixty-Day Period"), or (ii) the highest price paid or
offered, as determined by members of the Board other than the
Optionees, in any bona fide transaction or bona fide offer,
related to the Change in Control, at any time within the
Sixty-Day Period.
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13. TIME OF GRANTING OPTIONS. The date of grant of an Option
shall, for all purposes, be the date on which the Committee makes
the determination granting such Option. Notice of such
determination shall be given to each Director to whom an Option is
so granted within a reasonable time after the date of such grant.
14. OPTION AGREEMENTS. As a condition to the effectiveness
of each grant of an Option under this Plan, the Optionee shall
enter into a written Option Agreement in such form as may be
authorized by the Committee from time to time. Subject to the
provisions of Section 19(a), each such Option Agreement shall
contain such provisions as are required by the terms of this Plan
and may contain such additional provisions not inconsistent with
the terms of this Plan as the Committee in its sole discretion may
from time to time authorize. Each Option Agreement evidencing an
Option granted to a Director shall also provide for such minimum
waiting period from the date of grant before the Option may be
exercised, and such minimum holding period from the date of the
acquisition of Shares upon exercise of an Option for which such
Shares must be held before making any disposition of such Shares,
as may be required by Rule 16b-3.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be
issued with respect to an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall
comply with all applicable Securities Law Requirements and all
other applicable provisions of law, including without limitation,
any applicable state "blue sky" laws and foreign (national and
provincial) securities laws and the rules and regulations
promulgated under any of such laws, 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 or the issuance of
Shares upon exercise of an Option, the Company may require the
person exercising such Option to make such representations and
warranties to the Company as may be required, in the opinion of
counsel for the Company, by any of the aforementioned Securities
Law Requirements and other laws, which may include, without
limitation, representations and warranties that the Shares are
being purchased only for investment and without any present
intention to sell or distribute such Shares.
The Company shall not have any liability to any Optionee in
respect of any delay in the sale or issuance of shares hereunder
until the Company is able to obtain authority from any governmental
authority (domestic or foreign) or self-regulatory organization
having jurisdiction thereover, which authority is deemed by the
Company's counsel to be necessary to the lawful sale and issuance
of such Shares, or any failure to sell or issue such Shares as to
which such requisite authority the Company is unable to obtain.
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16. RESERVATION OF SHARES. The Company, during the term of
this Plan shall at all times reserve and keep available such
number of Shares as shall be sufficient to satisfy the requirements
of the Plan.
17. EFFECTIVENESS OF PLAN. This Plan was adopted by the
Board on, and shall be effective as of, October 18, 1990; provided
however, that any Options granted hereunder shall not be
exercisable unless and until, and this Plan and all such Options
shall automatically terminate if, the Plan is not approved, within
one (1) year of the date of adoption of the Plan, by the holders of
the outstanding Shares of the Company present and voting, in person
or by proxy, at a duly held meeting of the Company's stockholders
or any adjournment thereof and by such percentage of such quorum of
such stockholders as may be required by applicable Securities Law
Requirements. Once so approved by the stockholders of the Company,
the Plan shall continue in full force and effect until (i)
terminated by resolution of the Board or (ii) both (A) all Options
granted under the Plan have been exercised in full and (B) no
Authorized Shares remain available for the granting of additional
Options. The termination of the Plan shall not affect Options
already granted, which Options shall remain in full force and
effect in accordance with their respective terms as if this Plan
had not been terminated.
18. AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board
may, in its sole discretion, amend the Plan from time to time,
provided that any amendment which Rule 16b-3 or any other
Securities Law Requirement requires be approved by the stockholders
of the Company shall be made only with the approval of such
stockholders. Amendments to the Plan shall apply prospectively to
all Options then outstanding under the Plan, except in the case of
any amendment which is adverse to an Optionee, in which case the
amendment shall apply with respect to the outstanding Options held
by the adversely affected Optionee only upon the consent of such
Optionee to such amendment. In exercising its authority under
Section 5(b)(vii) to amend outstanding Options, the Committee
likewise may make an amendment which adversely affects the Optionee
only upon the consent of such optionee to such amendment.
Notwithstanding the provisions of this Section 18, the consent of
the Optionee shall not be required with respect to an amendment to
the Plan or to any outstanding Option which is made in order to
comply with Securities Law Requirements or which causes a Tax
Qualified Option no longer to qualify as such. Notwithstanding the
foregoing, the provisions of Sections 6, 7 and 8 shall not be
amended more than once every six months, other than as required to
comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
19. GENERAL PROVISIONS.
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(a) Grants to Foreign Directors. Notwithstanding any
other provision of this Plan to the contrary but subject to
applicable Securities Law Requirements and tax laws, to the
extent deemed necessary or appropriate by the Committee in its
sole discretion in order to further the purposes of the Plan
with respect to Directors who are foreign nationals and/or
employed outside the United States of America, an Option
granted to any such Director may be on terms and conditions
different from those specified in this Plan in recognition of
the differences in the laws, tax policies and customs
applicable to such a Director, without the necessity of the
Plan being amended to provide for such different terms and
conditions.
(b) Determination of Deadlines. If any day on or before
which action under this Plan or any Option granted hereunder
must be taken falls on a Saturday, Sunday or
Company-recognized holiday, such action may be taken on the
next succeeding day which is not a Saturday, Sunday or
Company-recognized holiday.
(c) Governing Law. To the extent that federal laws
(such as the Act or the Code) or the Delaware General
Corporation Law do not otherwise control, this Plan and all
determinations made and actions taken pursuant hereto shall be
governed by the laws of the State of Ohio and construed
accordingly.
(d) Gender and Number. Whenever the context may
require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural
and vice versa.
(e) Captions. The captions contained in this Plan are
for convenience of reference only and do not affect the
meaning of any term or provision hereof.
(f) Transactions under this Plan are intended to comply
with all applicable conditions of Rule 16b-3 or its successors
under the Securities Exchange Act of 1934. To the extent that
any provision of the Plan or action by the Committee fails to
so comply, such provision or action shall be deemed null and
void to the extent permitted by law and deemed advisable by
the Committee.
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