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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)
[NOT APPLICABLE]
(NAME OF PERSON(S) FILING PROXY STATEMENT,
IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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TEXLON LOGO
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Frank E. Brick
President and
Chief Executive Officer
August 11, 1998
Dear Fellow Stockholder:
It is a pleasure for me to invite you to the Annual Meeting of Stockholders
of Telxon Corporation, which will be held on September 15, 1998 at 10:00 A.M.,
E.D.T., at the Weathervane Community Playhouse, 1301 Weathervane Lane, Akron,
Ohio 44313. At the Annual Meeting, you will be asked to elect two directors of
the Company to hold office until the 2001 annual meeting of stockholders or
until their successors are elected and qualified.
In addition to the election of directors, as you may be aware, stockholders
may also be asked at the Annual Meeting to consider and vote upon certain
proposals that may be advanced by a stockholder of the Company, Guy
Wyser-Pratte. Mr. Wyser-Pratte has given notice that at the Annual Meeting he
intends to present six proposals, as described in the enclosed Proxy Statement,
and to nominate Jonathan R. Macey as a director. For the reasons described in
the enclosed Proxy Statement, your Board of Directors believes that Mr.
Wyser-Pratte's solicitation is misguided and that his interests and objectives
differ from those of the Company's stockholders generally. YOUR BOARD OF
DIRECTORS UNANIMOUSLY OPPOSES THE ELECTION OF MR. MACEY TO THE BOARD OF
DIRECTORS AS WELL AS EACH OF MR. WYSER-PRATTE'S OTHER PROPOSALS. YOUR BOARD
URGES YOU NOT TO RETURN ANY PROXY CARD SENT TO YOU BY MR. WYSER-PRATTE.
The enclosed Proxy Statement contains a discussion of the election of
directors as well as of Mr. Wyser-Pratte's proposals. Please read this material
carefully. Whether or not you plan to attend the Annual Meeting, it is important
that your shares, regardless of the number, be represented. Accordingly, I urge
you to complete, sign, date and return the white proxy card in the envelope
enclosed for your convenience. If you attend the Annual Meeting, you may vote in
person if you wish, even if you have previously returned your proxy card. Your
prompt cooperation will be greatly appreciated.
Sincerely yours,
/s/ Frank E. Brick
FRANK E. BRICK
President and Chief Executive Officer
TELXON CORPORATION / 3330 West Market Street / P.O. Box 5582 / Akron, Ohio
44334-0582
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Telxon Corporation Logo
3330 West Market Street
Akron, Ohio 44333
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO OUR STOCKHOLDERS:
Notice is hereby given that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Telxon Corporation (the "Company") will be held at the
Weathervane Community Playhouse, 1301 Weathervane Lane, Akron, Ohio 44313, at
10:00 A.M., E.D.T., on Tuesday, September 15, 1998, for the following purposes:
(1) To elect two directors of the Company to hold office until the
2001 annual meeting of stockholders or until their successors are elected
and qualified;
(2) To the extent properly brought before the Annual Meeting and any
adjournment or postponement thereof, to consider and vote upon a
stockholder proposal to amend the Company's Bylaws to (i) permit
stockholders owning 10% in interest of the Company to call a special
meeting of stockholders at which a stockholder vote will be taken to
determine whether an acquisition proposal is in the stockholders' best
interests, and (ii) require the Company's Board of Directors to redeem the
rights issued under the Company's stockholder rights plan upon such a
determination that such acquisition proposal is in the stockholders' best
interests;
(3) To the extent properly brought before the Annual Meeting and any
adjournment or postponement thereof, to consider and vote upon a
stockholder proposal to amend the Company's Bylaws to require a unanimous
vote of all directors of the Company for certain corporate action;
(4) To the extent properly brought before the Annual Meeting and any
adjournment or postponement thereof, to consider and vote upon a
stockholder proposal to amend the Company's Bylaws to allow the calling of
special meetings of stockholders by stockholders holding 25% in interest of
the Company's outstanding shares;
(5) To the extent properly brought before the Annual Meeting and any
adjournment or postponement thereof, to consider and vote upon a
stockholder proposal to amend the Company's Bylaws to elect not to be
governed by Section 203 of the General Corporation Law of the State of
Delaware;
(6) To the extent properly brought before the Annual Meeting and any
adjournment or postponement thereof, to consider and vote upon a
stockholder proposal to repeal any bylaws adopted by the Company's Board of
Directors since June 11, 1998;
(7) To the extent properly brought before the Annual Meeting and any
adjournment or postponement thereof, to consider and vote upon a
stockholder proposal to adopt a resolution recommending that the Company
pay Mr. Wyser-Pratte's proxy solicitation and litigation expenses under
certain circumstances; and
(8) To transact such other business as may properly be brought before
the Annual Meeting or any adjournment or postponement thereof.
Only holders of record of the Common Stock of the Company at the close of
business on July 17, 1998 are entitled to notice of and to vote at the Annual
Meeting or any adjournment or postponement thereof. Information relating to the
matters to be considered at the Annual Meeting or any adjournment or
postponement thereof is set out in the Proxy Statement accompanying this Notice.
By Order of the Board of Directors,
ROBERT A. GOODMAN
August 11, 1998 Secretary
IMPORTANT
PLEASE SIGN, DATE & RETURN THE ENCLOSED WHITE PROXY CARD TODAY
IN THE POSTAGE-PAID ENVELOPE PROVIDED WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING.
If you have any questions, or need assistance in voting your shares, please
contact the firm assisting us in the solicitation of proxies:
INNISFREE M&A INCORPORATED
TOLL-FREE: (888) 750-5834
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1998 ANNUAL MEETING OF STOCKHOLDERS
Telxon Corporation Logo
3330 West Market Street
Akron, Ohio 44333
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PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Telxon Corporation, a Delaware corporation ("Telxon" or the "Company"), for use
at the 1998 Annual Meeting of Stockholders of the Company (the "Annual Meeting")
to be held at the Weathervane Community Playhouse, 1301 Weathervane Lane, Akron,
Ohio 44313, at 10:00 A.M., E.D.T., on Tuesday, September 15, 1998 and at any
adjournment or postponement thereof. Only holders of record of the Company's
Common Stock, par value $.01 per share (the "Common Stock"), on July 17, 1998
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting
and at any adjournment or postponement thereof. At the close of business on that
date, the Company had 16,145,213 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 11, 1998.
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 on the
Record Date, 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. Unless other instructions are given in writing, all votes
represented by the enclosed proxy will be cast for the two nominees named by
your Board of Directors unless authorization to do so is withheld by a
stockholder and will be cumulated in a manner so as to elect the maximum number
of the Board's nominees. The two nominees who receive the greatest number of
votes cast and entitled to be voted at the Annual Meeting will be elected.
In addition to the election of directors, stockholders may also be asked at
the Annual Meeting and any adjournment or postponement thereof to consider and
vote upon certain proposals that may be advanced by a stockholder of the
Company, Guy P. Wyser-Pratte. Mr. Wyser-Pratte has given notice that at the
Annual Meeting he intends to present six proposals (collectively, the
"Wyser-Pratte Proposals") as described under Proposals 2 through 7 below and to
nominate Jonathan R. Macey as a director. The Company has filed suit seeking a
declaratory judgment that certain of the Wyser-Pratte Proposals are invalid and
alleging disclosure violations in the preliminary proxy materials filed by Mr.
Wyser-Pratte with the Securities and Exchange Commission (the "SEC") on June 18,
1998, as revised (the "Wyser-Pratte Proxy Materials"). See "CERTAIN LITIGATION"
below.
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 or postponement thereof. A proxy may be
revoked by timely delivery to Innisfree M&A Incorporated, as Tabulating Agent
for the Annual Meeting, of a writing stating that the proxy is
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revoked or a subsequent proxy or by attendance at the Annual Meeting or any
adjournment or postponement thereof and voting in person.
Brokers holding shares of record for customers are not entitled to vote on
certain matters unless they receive voting instructions from those customers. As
used herein, "broker non-votes" means the votes which a broker could have voted
on a particular matter had the broker received voting instructions with respect
to that matter from its customer for the shares so held but which it is unable
to cast because it has not received such instructions from the customer, of
which inability to vote the broker has advised the Company on a proxy form in
accordance with industry practice or has otherwise advised the Company that it
lacks voting authority.
A majority of the outstanding Shares, represented in person or by proxy,
will constitute a quorum at the Annual Meeting and at any adjournment or
postponement thereof. 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 or any adjournment or postponement thereof, provided
a quorum is present. Abstentions, votes that are withheld and broker non-votes
with respect to the election of directors are excluded from the vote and have no
effect on the outcome.
To the extent the Wyser-Pratte Proposals are properly brought before the
Annual Meeting and any adjournment or postponement thereof, the affirmative vote
of a majority of the Shares represented and entitled to vote at the Annual
Meeting will be required for the approval of each such proposal, except as to
Proposal 5, which will require the affirmative vote of a majority of the
Company's outstanding Shares. Shares represented in person or by proxy at the
Annual Meeting or any adjournment or postponement thereof that the holder or the
holder's proxy abstains from voting as to any of the Wyser-Pratte Proposals
(including Proposal 5) 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 generally are not counted for
purposes of determining the number of Shares entitled to vote at the Annual
Meeting and voting on the particular matter for which voting instructions were
not given by the customer and, accordingly, have no effect of whether the
Wyser-Pratte Proposals (other than Proposal 5) receive the required stockholder
vote. However, due to the different approval requirement applicable to Proposal
5, broker non-votes will have the same effect as a negative vote on that matter.
Based upon a review of the Wyser-Pratte Proxy Materials available to the
Company prior to the mailing of this Proxy Statement, the Company is aware that
Mr. Wyser-Pratte has taken the position that broker non-votes will have the same
effect as votes against Proposals 2 through 7. As noted above, it is the
Company's position that broker non-votes will have such an effect solely with
respect to Proposal 5 and will have no effect with respect to the other
Wyser-Pratte Proposals. Resolution of this difference between the Company's
position and that of Mr. Wyser-Pratte with respect to the effect of broker
non-votes may require a determination by a court of competent jurisdiction.
YOUR BOARD OF DIRECTORS UNANIMOUSLY OPPOSES MR. WYSER-PRATTE'S SOLICITATION
OF PROXIES AND URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY MR.
WYSER-PRATTE. THE BOARD RECOMMENDS THAT YOU VOTE FOR THE BOARD'S NOMINEES AND
AGAINST THE WYSER-PRATTE PROPOSALS.
Whether or not you have previously signed a proxy card sent by Mr.
Wyser-Pratte, your Board of Directors urges you to support the Board by signing,
dating and promptly mailing the enclosed white proxy card. By signing and dating
the Company's white proxy card, you will revoke any earlier dated proxy card
solicited by Mr. Wyser-Pratte which you may have signed. Do not return any proxy
card sent to you by Mr. Wyser-Pratte. The only way to support your
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Board's nominees and recommendations is to sign, date and return the Company's
white proxy card. The enclosed white proxy card, when properly executed and
timely returned, will be voted in the manner you direct. If no direction is
made, the enclosed proxy will be voted "for" the election of the Board's
director nominees named in Proposal 1 and "against" Proposals 2 through 7.
Other than the matters described in this Proxy Statement, the Board of
Directors does not intend to bring any business before the Annual 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 or
any adjournment or postponement thereof, 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 or any adjournment or
postponement thereof, 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 (the "DGCL") or the
Charter.
The Board of Directors has adopted a resolution establishing the order in
which matters coming before the Annual Meeting or any adjournment or
postponement thereof will be considered. This resolution provides that matters
brought before the meeting will be considered and voted upon in the order in
which they are presented in this proxy statement and the accompanying notice,
which in the case of the Wyser-Pratte Proposals is the same order in which Mr.
Wyser-Pratte listed them in his advance notice to the Company.
1. ELECTION OF DIRECTORS
OVERVIEW
At the Annual Meeting, two directors are to be elected to hold office for
terms expiring at the 2001 annual meeting of stockholders. Richard J. Bogomolny
and John H. Cribb, the two incumbent directors whose terms expire at the Annual
Meeting, have been nominated by your Board of Directors for election as such
directors. The terms of the four remaining incumbent directors of the Company
will continue after the Annual Meeting.
Under the DGCL, directors are elected by a plurality of the votes cast in
person or by proxy at a meeting of stockholders. 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 Messrs. Bogomolny and Cribb unless the proxy is marked so as to
withhold authority to vote for either or both of such nominees. The Company does
not know of any reason why the Board's nominees would be unable to serve. If
either of the Board's nominees is unable to serve, then the proxies may be voted
for such substitute(s) as may be nominated by the Board of Directors.
YOUR BOARD OF DIRECTORS UNANIMOUSLY OPPOSES THE ELECTION OF MR. MACEY TO
THE BOARD AND URGES YOU TO VOTE FOR RE-ELECTION OF THE BOARD'S NOMINEES, RICHARD
J. BOGOMOLNY AND JOHN H. CRIBB, WHICH IS DESIGNATED IN THE PROXY AS PROPOSAL 1,
FOR THE FOLLOWING REASONS.
Your Board of Directors believes Messrs. Bogomolny and Cribb have strong
qualifications based on their business experience, their knowledge of the
Company and its business as well as of international business, their
contributions to the Company over their years of prior service on the Board of
Directors and, in Mr. Cribb's case, as the Company's executive officer
responsible for its international operations, and their personal investment in
the Company as stockholders and the interests they share with all of the
Company's stockholders as a result.
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Your Board believes that Mr. Wyser-Pratte's solicitation is misguided and
that his interests and objectives differ from those of the Company's
stockholders generally. From the public information readily available to it, the
Company is not aware of Mr. Macey, Mr. Wyser-Pratte's director nominee, having
served on any public company's board of directors or having any relevant
experience with commercial enterprises to inform the decisions that he would be
called upon to make in guiding the Company's business were he elected to the
Board. Unlike the Board's nominees, the Company's records do not indicate that
Mr. Macey owns any stock in the Company so as to align his interests with those
of the Company's stockholders generally. Your Board of Directors believes that
Mr. Wyser-Pratte's objective in nominating Mr. Macey, taken together with his
related bylaw amendment proposals, is to seek short-term gain and publicity, as
well as to pressure the Company into pursuing a transaction with Symbol
Technologies, Inc. ("Symbol"), with little or no consideration given to whether
other Company stockholders receive fair value for their investment.
The Board's belief is based in part on Mr. Wyser-Pratte's statement in the
Wyser-Pratte Proxy Materials that his company is "principally engaged in money
management and event arbitrage." By definition, traditional arbitrage involves
the purchase in one market and sale in another of a security with the intention
of taking advantage of price differences in the different markets. Although
slightly different from traditional arbitrage, an event or risk arbitrageur,
like Mr. Wyser-Pratte, buys shares in a target company, hoping a company will be
acquired or experience a similar event and that its share price will rise, and
then sells the shares at a profit. By its very nature, therefore, event or risk
arbitrage is a short-term enterprise.
In addition, Mr. Wyser-Pratte also has a history of employing various
public means, including negative publicity and the solicitation of proxies, to
pressure a company into a merger after he has purchased shares in that company.
The Company's Board believes Mr. Wyser-Pratte is likely to have a similar
motivation with respect to his solicitation of proxies from the Company's
stockholders. Mr. Wyser-Pratte has actively utilized the media to disseminate
negative information about the Company. Since his initial filing with the SEC on
June 18, 1998, Mr. Wyser-Pratte has disseminated at least seven press releases
criticizing the Company, several relating to the Company's response to Symbol's
unsolicited proposals, as discussed below.
As the Company has previously announced by press release dated April 21,
1998, the Company received a letter from Symbol expressing interest in a
business combination at a price of $38 per Share. On May 8, 1998, the Company's
Board announced that it had determined that Symbol's suggested business
combination was not in the best interests of the Company and its stockholders.
Thereafter, Symbol and the Company held several private discussions concerning
the Company's business and Symbol's proposal. Symbol subsequently issued a press
release on June 2, 1998 announcing that the Company "had rejected Symbol's
written proposal of June 1, 1998 to acquire Telxon for $40 per share in cash or
up to $42 per share in cash and Symbol shares, subject to due diligence", noting
that the "acquisition proposal will expire by its terms at noon on June 8,
1998." By press release dated June 5, 1998, the Company announced that its Board
had unanimously rejected Symbol's $40 per share cash proposal contained in
Symbol's June 1, 1998 letter as not providing Telxon's stockholders fair value
for their Shares. The Company's Board also determined that Symbol's $42 per
share combination cash-stock proposal did not contain enough information to be
considered by the Company's Board. Notwithstanding its rejection of the Symbol
proposals, the Company is committed to enhancing stockholder value, including
through the appropriate consideration of firm offers to acquire the Company if
such proposals include reasonable assurances of financing, offer its
stockholders fair value for their Shares and are otherwise in the best interests
of the Company and its stockholders.
In order to increase stockholder value, upon naming Frank E. Brick as
President and Chief Operating Officer in June 1996, the Company's Board began
implementing a new, three-phase business model focusing on continuous
improvement in operations and new product development. After focusing in the
first phase on increasing gross margin through a streamlined product
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line and other cost reduction initiatives, the Company turned in the second
phase to improving the efficiency of its business processes in sales, product
marketing, product development, customer service and operations, and has begun
the third phase of redesigning its infrastructure and logistics systems to more
effectively address changing market conditions. As the Company continues to
review its operations for further improvements, the Company's Board believes
that the Company's financial performance reflects the initial, but not yet fully
realized, benefits of these ongoing programs, which have better positioned the
Company to capitalize on opportunities in the marketplace for growth in its core
business. The Company's Board also continues to evaluate (i) possible private
and public securities offerings, dispositions and other alternative strategies
for better reflecting in the Company's market value the embedded value of its
investment in its technical subsidiaries while retaining access to their
developed technologies, as evidenced by the recent dispositions of its Itronix
Corporation and Virtual Vision, Inc. subsidiaries and private placement of
common stock in its Aironet Wireless Communications, Inc. ("Aironet")
subsidiary, and (ii) strategic acquisitions, investments and alliances.
The Company's Board believes that there are many considerations, including
the value-creating strategy discussed above, to be taken into account before
agreeing to an acquisition, and that the terms of an acquisition proposal should
dictate whether the proposal would be in the best interests of stockholders. Mr.
Wyser-Pratte's pattern of behavior, as described above, gives the Company no
reason to believe that, in making his various proposals, he has any interest
other than short-term gain and publicity. Since Mr. Wyser-Pratte's strategy is
inconsistent with the value-creating strategy your Board believes will best
serve the interests of the Company and its stockholders, the Board believes that
the election to the Board of Mr. Macey, who would be an advocate for the
Wyser-Pratte agenda, would not serve any purpose beneficial to the Company's
stockholders as a whole.
INFORMATION CONCERNING THE BOARD'S NOMINEES AND THE CONTINUING DIRECTORS
Set forth below as to each of the Board's nominees 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 first became a director of the Company.
The following persons have been nominated by your Board of Directors for
election by the stockholders as the class of directors whose term expires in
2001:
Richard J. Bogomolny, age 63, 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. From May 1992 through May
1998, Mr. Bogomolny was a member of the Supervisory Board (board of
directors) of Royal Ahold n.v., the Netherlands' largest food retailer with
operations also in the United States (Stop-N-Shop Cos. New England, Finast,
BI-LO, Giant, Tops and Edwards), South America, Portugal, Spain, China,
Thailand 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. Mr. Bogomolny has been a director of the
Company since August 1995. He is the Chairman of the Compensation Committee
of the Board and also serves on its Audit, Option and Stock, and Special
Compensation Committees.
John H. Cribb, age 65, retired from active employment with the Company
as Chairman, Telxon International in December 1996, as which he had served
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 and
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Vice Chairman of the Board of the Company since January 1995 and is a
member of the Audit and Compensation Committees of the Board.
The other members of the Board of Directors whose terms of office will
continue after the Annual Meeting are the following:
Frank E. Brick, age 50, has been the Company's President since June
1996 and its Chief Executive Officer since February 1997. Mr. Brick was
Chief Operating Officer of the Company from June 1996 until being named
Chief Executive Officer. He had also previously served the Company as
President and Chief Operating Officer, Telxon International from February
1995 to June 1996 and as Senior Executive Vice President from October 1993
to February 1995. Mr. Brick was President of Basicomputer Corporation
(business computer sales, integration and network services; "Basicomputer")
from 1985 until it was acquired in September 1993 by The Future Now, Inc.
(since consolidated into Intelligent Electronics) and also served as Chief
Executive Officer and a director of Basicomputer from 1988 until the
acquisition. He has been a director of the Company since July 1996. His
current term expires at the 2000 annual meeting. He is a member of the
Nominating Committee of the Board.
Robert A. Goodman, age 63, has been the Company's General Counsel
since 1979 and Secretary since 1983. He has been senior partner of Goodman
Weiss Miller LLP, 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 2000 annual meeting. He is a member of the Audit Committee of the
Board.
Raj Reddy, age 61, 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 and Chairman of the Board of
Directors since February 1997. His current term expires at the 2000 annual
meeting. He is a member of the Audit, Compensation, Nominating, Option and
Stock, and Special Compensation Committees of the Board.
Norton W. Rose, age 69, has been President and principal/owner of
Norton W. Rose & Co., Cleveland, Ohio (consulting firm) since August 1990
and has headed the Beachwood, Ohio office of Kenzer Corporation (executive
search firm) since July 1997. He was Executive Vice President of Creative
Art Activities, Inc. (craft kit manufacturer) from January 1994 to June
1997 and Chairman of the Board of Premier Travel (formerly Prescott Travel)
from July 1991 until it was acquired by Travel One in January 1997. Mr.
Rose has been a director of the Company since October 1990, and his current
term expires at the 1999 annual meeting. He is the Chairman of the Audit
Committee of the Board and also serves on its Compensation, Option and
Stock, and Special Compensation Committees.
Pursuant to Rule 14a-5(c) under the Securities Exchange Act of 1934 (the
"Exchange Act"), reference is made to the Wyser-Pratte Proxy Materials for
information concerning Mr. Wyser-Pratte's nominee. The Company is not in a
position to verify the truthfulness or accuracy of such information.
INFORMATION RELATING TO THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company met 16 times during the fiscal year
ended March 31, 1998 ("Fiscal 1998"). 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. The Board of
Directors has an Audit Committee, a Compensation Committee, a
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Nominating Committee, an Option and Stock Committee and a Special Compensation
Committee. The general function of each committee, the identity of each
committee's members and the number of meetings held by each committee during
Fiscal 1998 are set forth below.
Audit Committee. The Audit Committee held four meetings during Fiscal 1998.
The primary functions of the Committee are to evaluate the performance and fees
of the Company's independent auditors, review the annual audit and the Company's
internal accounting controls with the independent auditors, review the results
of the audit with management, consult with management with respect to the
Company's internal accounting controls and other operating systems, review all
related party transactions on an ongoing basis and review potential conflict of
interest situations where appropriate. Messrs. Bogomolny, Goodman and Rose
(Chairman) and Dr. Reddy served on the Audit Committee throughout Fiscal 1998
and, joined by Mr. Cribb in May 1998, constitute the current members of the
Audit Committee.
Compensation Committee. The Compensation Committee held six meetings during
Fiscal 1998. 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, other than matters
over which the Special Compensation Committee and the Option and Stock Committee
have authority as discussed below. Messrs. Bogomolny (Chairman) and Rose and Dr.
Reddy served on the Audit Committee throughout Fiscal 1998 and, joined by Mr.
Cribb in May 1998, constitute the current members of the Compensation Committee.
Nominating Committee. The Nominating Committee held one meeting during
Fiscal 1998. The primary function of the Committee is to advise the Company's
Board of Directors as to nominees for election thereto. The Fiscal 1998 members
of the Nominating Committee were Messrs. Brick and Rose, and they continue to so
serve at present. 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.
Option and Stock Committee. The Option and Stock Committee held four
meetings during Fiscal 1998. The primary function of the Committee is to
administer the Company's 1990 Stock Option Plan for employees (the "Employee
Option Plan"), the Company's 1992 Restricted Stock Plan (the "Restricted Stock
Plan") and the Company's 1995 Employee Stock Purchase Plan, as each may be
amended from time to time. Messrs. Bogomolny and Rose and Dr. Reddy served on
the Option and Stock Committee during all or a portion of Fiscal 1998 and
continue to so serve at present.
Special Compensation Committee. The Special Compensation Committee held two
meetings during Fiscal 1998. The primary functions of the Committee are to
review the compensation to be offered to the Company's Chief Executive Officer
and four other most highly compensated executive officers for compliance with,
and to the extent consistent with other corporate objectives, establish and
monitor the attainment of appropriate objective performance goals in order to
qualify such compensation as "performance-based compensation" so that it is not
subject to, the $1 million per year limitation imposed by Section 162(m)
("Section 162(m)") of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), on the deductibility for federal income tax purposes
of the compensation paid to any such officer.
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<PAGE> 11
Messrs. Bogomolny and Rose and Dr. Reddy served on the Special Compensation
Committee during all or a portion of Fiscal 1998 and continue to so serve at
present.
COMPENSATION OF DIRECTORS
Cash Compensation. The Company's non-employee directors each receive an
annual fee of $50,000 per year. The non-employee directors also receive $2,500
plus travel expenses for each day of attendance at directors' meetings ($1,250
for a telephonic meeting), and $2,500 for each Audit Committee or Compensation
Committee meeting attended (either as a member thereof or at the request of the
Committee), unless the committee and the full Board meet on the same day, in
which event compensation in the amount of $1,250 is paid for attendance at such
committee meeting.
In July 1996, the Audit Committee of the Board of Directors engaged Mr.
Rose to act as the Committee's delegate to advise Company management by
analyzing, assessing and recommending improvements to the Company's operating
systems and processes and assisting in the recruitment, training and integration
of personnel. The engagement anticipated a total of 90 days of service over a
period ending December 31, 1997 at a fee of $3,500 per day, one half of which he
performed during the fiscal year ended March 31, 1997 ("Fiscal 1997"),
completing the balance of the engagement during Fiscal 1998; Mr. Rose received
$140,000 for those services during Fiscal 1998. In recognition of the other
commitments which Mr. Rose had to resign or forego in order to undertake it, the
engagement also provides for him to receive a severance benefit of $150,000
payable from January through December 1998, $37,500 of which was paid during
Fiscal 1998. In connection with the engagement, Mr. Rose is also receiving
coverage for himself and his wife under the Company's medical, dental and vision
plans, with Mr. Rose paying the customary employee contributions for
participation in those plans; those plans are self-insured by the Company,
subject to individual ($100,000 annually) and group stop-loss insurance it
maintains.
Mr. Brick, by reason of also being an employee of the Company, does not
receive any compensation from the Company for his services as a director (see
the Summary Compensation Table under "EXECUTIVE COMPENSATION" below for the
compensation paid to him in his capacity as an executive officer 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 "Director Option Plan").
Under the Director Option Plan, each non-employee director is automatically
granted an option to purchase 25,000 Shares upon first being elected to the
Board (an "Initial Grant") and annually thereafter is also automatically granted
a 10,000 Share option (each a "Continuing Grant") on each anniversary of his
last election to the Board during his continued service on the Board. An Initial
Grant becomes exercisable in equal thirds on each of the first three
anniversaries of the grant date, whereas each Continuing Grant becomes
exercisable in full on the third anniversary of its grant date. The Director
Option Plan also permits the Board to make discretionary option grants under the
Director Option Plan to any one or more of the Company's non-employee directors
from time to time in addition to the foregoing automatic grants; pursuant to
that authority, a 10,000 Share grant, exercisable in full upon grant, was made
to each of the non-employee directors (Messrs. Bogomolny, Cribb, Goodman and
Rose and Dr. Reddy) in September 1997. Each option granted under the Director
Option Plan 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 National
Market tier of The Nasdaq Stock Market ("Nasdaq NNM") for the trading day
immediately preceding the date of grant. 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. Options granted under the
Director Option Plan are subject to the same "change in control" provisions as
apply under
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<PAGE> 12
the Employee Option Plan described under "EXECUTIVE COMPENSATION -- Employment
Agreements and Termination of Employment Arrangements" below.
REPORT OF BOARD COMPENSATION COMMITTEES
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors recommends, subject to
the full Board's approval (except as to (i) compliance with the Section 162(m)
requirements for performance-based compensation, which matters are determined by
the Special Compensation Committee (the "162(m) Committee"), and (ii) stock
option and restricted stock grants, which are administered by the Option and
Stock Committee), the compensation of the Company's executive officers. During
Fiscal 1998, the Compensation Committee was composed of three non-employee
directors. The Compensation Committee's members also served as both the 162(m)
Committee and the Option and Stock Committee (together with the Compensation
Committee and the 162(m) Committee, collectively referred to as the
"Committees") during all or a portion of Fiscal 1998.
COMPENSATION POLICIES
The Company operates in the competitive and rapidly changing environment of
high technology businesses. The Committees seek 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, talented, creative and goal-oriented people. To
achieve this, the Committees exercise discretion and consider all elements of
executive compensation to provide the impetus and challenge for the Company's
executive officers and key employees, using quantitative formulas (particularly
with respect to the bonus element) along with qualitative considerations as
inputs in setting executives' compensation packages. The Committees have access
to and study a variety of surveys, reports and data which reflect compensation
of executives throughout various industries. The Committees' review focuses on
the compensation practices of firms in the technology world in which the Company
operates, including its direct and indirect competitors, vendors, customers and
other technology businesses from which it has attracted personnel in the past
and may desire to attract personnel in the future. The Committees select those
companies which they consider will best inform the Company's ability to retain
and continue to attract the highest qualified people.
While the Committees consider such compensation data, the Committees do 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
such a peer group. The other companies to which such compensation data relates
may include ones which are, but are not selected by reference to whether they
are, included in the S&P High-Tech Composite Index to which the Company's stock
performance is compared in the "STOCK PERFORMANCE GRAPH" below or any similarly
compiled peer grouping, and the performance of such other companies as compared
to that of the Company is not specifically considered by the Committees in their
deliberations. The compensation data forms a part of the total mix of
information which each Committee evaluates in arriving at compensation decisions
within their respective areas of authority deemed necessary to effectively
compete for highly qualified people in the technology sector. The experience of
Company management in recruiting new personnel and retaining existing personnel
is also an important input into the Committees' evaluation of the Company's
compensation practices.
9
<PAGE> 13
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 Committees assess past and current as well as anticipated
future performance and contribution in its consideration of the total
compensation package (earned or potentially available) for each executive
officer.
Salary. The salaries of executive officers are determined by the
Compensation Committee generally on the basis of three year employment
agreements which encompass base salaries consistent with the Company's stated
policy and philosophy of competing for highly qualified people in the technology
sector. As noted above, the salaries of the Company's executive officers are set
at the levels judged appropriate by the Compensation Committee based on its
evaluation of the total mix of compensation information it has gathered without
assigning relative weights to any particular quantitative or qualitative
factors.
Bonus. Subject to the authority of the 162(m) Committee over those
compensation components which are intended to comply with Section 162(m), the
Compensation Committee reviews and approves an executive bonus plan for each
fiscal year under which each executive officer is eligible for a bonus of up to
a specified percentage of his base salary, generally structured to reflect the
officer's individual performance and the Company's performance in the
forthcoming year. The final determination of the bonus actually paid to each
executive officer is a qualitative one, informed by various subjective and
objective considerations; the objective criteria typically include revenue,
operating costs and profitability, to which various weights are assigned based
on the nature and scope of the individual officer's responsibilities.
Awards of Stock Options and Restricted Stock. Awards of stock options and
restricted stock grants under the Employee Option Plan and the Restricted Stock
Plan, respectively, are designed not only to provide additional incentive for
the performance and continued employ of the individual executive officers as
well as other key employees, but also to more fully align their long-term
interests with those of the Company and the Company's stockholders. The Option
and Stock Committee selects the executive officers and other key employees to
receive stock option and restricted stock awards, and determines the number of
shares of each such award. The Option and Stock Committee generally determines
the size of option grants and the frequency thereof based on its consideration
of the significance of an executive's position, performance and continued tenure
with the Company as well as his anticipated contributions to its growth. The
number and terms of options previously granted to an executive is also
considered in determining whether to make additional grants to him.
The option program generally utilizes a three year vesting period, an eight
year term and an exercise price equal to the closing market price of the
underlying stock at the time of grant. 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 has been significantly less frequent and
utilized only for those executive officers and key employees who are considered
by the Option and Stock Committee to be 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. Grants of an
aggregate of 19,000 shares of restricted stock were made to one of the executive
officers and seven other key employees in Fiscal 1998.
In addition to stock option and restricted stock grants in the Company's
own stock, the Compensation Committee also makes recommendations to the boards
of directors of those of its subsidiaries which have, at the urging of the
Telxon Board, implemented stock option and similar plans to provide their own
key employees, as well as key Telxon employees advising and
10
<PAGE> 14
assisting the subsidiaries in the development of their respective businesses,
with a long-term incentive opportunity to purchase stock in the respective
subsidiaries. In the case of the advisory Telxon employees, this opportunity
encourages them to support the subsidiaries with the same effort and dedication
as in their service to Telxon so as to more closely align their objectives with
the long-term goals of the Company as a whole. The Compensation Committee
reviews the persons to whom such options are granted and the number of options
granted to them.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Frank E. Brick became Chief Executive Officer of the Company in February
1997, and a comprehensive compensation package for him, as further discussed
under "EXECUTIVE COMPENSATION -- Employment Agreements and Termination of
Employment Arrangements" below, was finalized and implemented during Fiscal 1998
consistent with the compensation philosophy and policies of the Company, which
are applicable to all executive officers. As discussed under that heading below,
the Bonus Compensation and Incentive Compensation (as there defined) components
of his compensation package under his employment agreement are determined based
on the performance achieved by the Company. As also provided in Mr. Brick's
employment agreement, the 300,000 Share Telxon stock option granted Mr. Brick on
March 17, 1997 in recognition of his becoming Chief Executive Officer vests on
each of the first three anniversaries of its grant in installments equal to (i)
50,000 Shares for each $30 million incremental increase in the Company's market
capitalization during each year, or 100,000 Shares, whichever is greater; based
on the Company's market capitalization at March 17, 1998 as compared to March
17, 1997, 250,000 Shares of the option vested as of the 1998 anniversary date.
INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) was added to the Internal Revenue Code by the Omnibus Budget
Reconciliation Act of 1993. It limits to $1 million per year the deduction
allowed to a public company for federal income tax purposes for compensation
paid to its chief executive officer and its four other most highly compensated
executive officers. This deduction limit does not apply, however, to
compensation paid under a plan that meets certain requirements for
"performance-based compensation." In general, 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. In
order to qualify the compensation derived by its executive officers from stock
options as performance-based compensation, certain amendments to the Employee
Option Plan were submitted to and approved by the Company's stockholders at the
1995 annual meeting to remove compensation resulting from the exercise of stock
options granted under the Plan from the Section 162(m) deduction limit.
The 162(m) Committee reviews the salaries, bonuses and other forms of
compensation offered to the Company's Chief Executive Officer and four other
most highly compensated executive officers for compliance with Section 162(m).
However, while it is the Company's policy to structure its incentive
compensation programs to satisfy Section 162(m)'s "performance-based
compensation" exception and, thus, to preserve the full deductibility of all
compensation paid by the Company to its executive officers, the Committees
reserve the right in their business judgment, based upon their consideration of
all elements of the cost to the Company of particular compensation payments,
including the potential impact of Section 162(m), and other
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<PAGE> 15
important corporate objectives, to approve such compensation without submitting
it to a vote of stockholders and, thus, not qualify such compensation as
deductible under Section 162(m).
<TABLE>
<S> <C>
COMPENSATION COMMITTEE OPTION AND STOCK COMMITTEE
Richard J. Bogomolny, Chairman Richard J. Bogomolny
Raj Reddy Raj Reddy
Norton W. Rose Norton W. Rose
SPECIAL COMPENSATION COMMITTEE
Richard J. Bogomolny
Raj Reddy
Norton W. Rose
</TABLE>
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 during each
of its three most recently completed fiscal years to the Company's Chief
Executive Officer during Fiscal 1998 and to the other four executive officers of
the Company who received the highest combined salary and bonus compensation
during Fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ---------------------
OTHER RESTRICTED
ANNUAL STOCK STOCK ALL
NAME AND PRINCIPAL COMPEN- AWARDS OPTIONS OTHER
POSITION YEAR SALARY BONUS SATION ($) (SHARES) COMPENSATION(1)
------------------ ---- ------- ------- ------------ ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank E. Brick 1998 750,006 250,000 17,272(2) 0(3) 0(4) 7,187(5)
President and Chief 1997(6) 421,154 500,000 0 0 500,000+ 8,288
Executive Officer
James G. Cleveland 1998 275,000 200,000 0 0 0(4) 3,173
President, North 1997 250,000 150,000 0 0 80,000+ 6,615
America Division
Dan R. Wipff 1998 275,000 100,000 0 0 0(4) 4,125
President and Chief 1997 275,000 70,000 0 0 10,000+ 5,375
Executive Officer, 1996 277,885(7) 0 0 0 11,250+ 4,187
Telxon Products Division
Kenneth W. Haver 1998 200,000 150,000 0 0(8) 25,000+(4) 2,308
Senior Vice President, 1997 200,000 250,000 0 0 50,000+ 7,192
Finance and 1996 198,177 50,000 0 0 48,000+ 6,207
Administration, and Chief Financial
Officer
David D. Loadman 1998 225,000 125,000 30,865(2) 0(9) 0 3,470
Senior Vice President, 1997 200,000 175,000 0 0 75,000+ 5,688
Global Product and 60,000*
Systems Development, and Chief
Technical Officer
</TABLE>
- ---------------
+ Option for the purchase of the indicated number of shares of Telxon Common
Stock granted to the named executive officer pursuant to the Employee Option
Plan. See the table of Option Grants in Fiscal 1998 below for further
information regarding each option granted during Fiscal 1998.
* Option for the purchase of the indicated number of shares of common stock of
the Company's Aironet subsidiary at an exercise price of $1.86 per share
under the Aironet
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<PAGE> 16
1996 Stock Option Plan for employees, directors and advisors (as amended,
the "Aironet Option Plan") granted by Aironet to the named executive officer
as an advisor to Aironet.
(1) Except as otherwise footnoted, the amounts shown are matching contributions
made by the Company under its Retirement and Uniform Matching Profit Sharing
(401(k)) Plan.
(2) The amount shown was paid for relocation expenses.
(3) At March 31, 1998, 10,000 of the 50,000 Shares awarded to Mr. Brick in
October 1993 under the Restricted Stock Plan remained unvested, which
unvested Shares had a value, based on the closing sale price per Share as
reported on the Nasdaq NNM for March 31, 1998, of $265,000.
(4) On March 30, 1998, the Aironet Board of Directors approved the granting of a
pool of options to purchase an aggregate of 300,000 shares of Aironet common
stock to, and to be allocated among, Telxon employees serving as advisors to
Aironet, as designated by Telxon's Chief Executive Officer. The exercise
price for the options included in the pool was fixed at $3.50 per share,
corresponding to the negotiated arm's-length price paid by third party
investors purchasing a minority position in Aironet common stock in a
contemporaneous private placement. In April 1998, subsequent to the end of
the most recent fiscal year required to be disclosed in this Summary
Compensation Table, the pool was fully allocated, based on a review of the
designated recipients and the allocation among them by the Compensation
Committee of Telxon's Board of Directors, with the following named executive
officers receiving the respective number of Aironet stock options indicated:
Mr. Brick, 70,000; Mr. Cleveland, 40,000; Mr. Haver, 50,000 (in addition to
the 25,000 share Telxon stock option shown for him in the body of the
table); and Mr. Wipff, 20,000. The remaining pool shares were allocated to
other Telxon employees. For further information regarding these Aironet
stock option grants, see footnote (4) to the table of Option Grants in
Fiscal 1998 below.
(5) The amount shown also includes $4,591 representing the premiums that would
have had to be paid in order to provide Mr. Brick with a term life
equivalent of the death benefit payable to his estate under the
"split-dollar" universal life insurance arrangements described under
"Employment Agreements and Termination of Employment Arrangements" below.
(6) Mr. Brick became the Company's Chief Executive Officer on February 26, 1997,
having been the Company's President and Chief Operating Officer since June
1996 and served the Company in other executive capacities prior thereto. The
amounts shown in the Summary Compensation Table reflect all compensation
paid to Mr. Brick in all capacities in respect of Fiscal 1997.
(7) Includes $2,885 paid under Mr. Wipff's previous compensation arrangements.
(8) At March 31, 1998, 2,000 of the 5,000 Shares awarded to Mr. Haver in July
1994 under the Restricted Stock Plan remained unvested (1,000 of which have
since vested), which unvested Shares had a value, based on the closing sale
price per Share as reported on the Nasdaq NNM for March 31, 1998, of
$53,000.
(9) At March 31, 1998, 2,000 of the 5,000 Shares awarded to Mr. Loadman in July
1994 under the Restricted Stock Plan remained unvested (1,000 of which have
since vested), which unvested Shares had a value, based on the closing sale
price per Share as reported on the Nasdaq NNM for March 31, 1998, of
$53,000.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Mr. Brick has an employment agreement with the Company to serve as its
Chief Executive Officer through March 31, 2000 at a base salary of $750,000 per
year. In addition, Mr. Brick's employment agreement provides for the following
performance-based bonuses: (1) annual "Bonus Compensation" of $250,000 per year
if the Company meets 100% of the operating
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<PAGE> 17
earnings target for each fiscal year (measured before interest and taxes and
excluding capital and extraordinary gains and losses, and after accrual for all
executive bonuses, including Mr. Brick's Bonus Compensation and Incentive
Compensation), or $125,000 per year if the Company meets at least 90% but less
than 100% of the operating earnings target; (2) annual "Incentive Compensation"
equal to eight percent of all operating earnings in excess of the operating
earnings target for each fiscal year; and (3) a long-term "Market Appreciation
Bonus" equal to one and one-half percent of the Company's market capitalization
in excess of $417 million up to and including $585 million, and two percent of
the Company's market capitalization in excess of $585 million, determined based
on the Company's market capitalization at March 31, 2000, subject to earlier
determination in the event of the termination of his employment by the Company
without "cause", expiration of his employment agreement without renewal by the
Company, his death or the Company becoming privately held or otherwise subject
to a "change in control" (as defined below), and is payable by April 30, 2000 or
within 30 days after earlier determination of the amount thereof upon
termination of employment without "cause" (as defined below), non-renewal of the
employment agreement, death or a "change in control."
As provided in his employment agreement, the Company has obtained $5
million in "split-dollar" universal life insurance on Mr. Brick, with the
insurance being owned and the $130,267 annual premiums therefor paid by the
Company and the death benefit remaining after a return to the Company of the
premiums paid being payable to Mr. Brick's designated beneficiaries; provided
that Mr. Brick remains in the Company's employ until age 60, then, upon his
retirement, the Company will be obligated to make 15 years of deferred salary
continuation payments to him, from, but only from, the cash value of such
policies, at an annual rate of $158,000 or such lesser amount as the policies'
investment earnings experience, as reflected in their then cash value, will
support. In addition to the "split-dollar" arrangements, Mr. Brick or his estate
is entitled to the same disability and death benefits as are extended by the
Company to its executive employees generally.
If Mr. Brick's employment is terminated by the Company for other than
"cause" (defined in his employment agreement as behavior of Employee which is
adverse to the Company's interest, including dishonesty, grossly negligent
misconduct, willful misconduct, disloyalty, acts of bad faith, neglect of duty
or material breach of the agreement), his employment agreement obligates the
Company to pay a severance benefit to him at a rate equal to his base salary for
the greater of 24 months or the remaining term of the agreement, as well as his
basic medical insurance premiums for 18 months. A resignation by Mr. Brick
following the Company's assignment of him to serve in any capacity other than
his current offices or to perform tasks inconsistent with such position will be
deemed a termination by the Company without "cause" entitling him to the
foregoing severance and insurance benefits as well as accelerated determination
and payment of the Market Appreciation Bonus. Mr. Brick is also entitled to the
severance benefit and accelerated determination of the Market Appreciation Bonus
if his employment agreement expires without renewal or extension. If any of the
foregoing employment terminations occurs after a "change in control" of the
Company of a nature which the Company would be required to report in its filings
with the SEC (including, without limitation, (a) the acquisition by any person,
entity or group of beneficial ownership of 15% or more of the combined voting
power of the Company's securities in the election of directors, (b) liquidation
of all or substantially all of the Company's assets or a merger, consolidation
or reorganization in which neither the Company nor any entity in which the
Company's stockholders own at least 50% of the voting power is the surviving
entity, and (c) the current directors of the Company, or persons approved by
them to succeed them (such current and successor directors constituting
"Continuing Directors"), ceasing to constitute at least a majority of the Board)
and such "change in control" is not approved by the affirmative vote of at least
a majority of the Continuing Directors (an "Un-Approved Change in Control"), the
severance benefit payable to Mr. Brick is increased to an amount equal to 2.99
times his base salary and, to the extent that such payment and/or any other
payments which he has the right to receive from the Company would constitute,
alone or
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<PAGE> 18
in the aggregate, an "excess parachute payment" under Section 280G of the
Internal Revenue Code, payment by the Company of any excise tax imposed on such
payments and any taxes due as the result of the Company's payment of such excise
tax and other taxes, as well as the acceleration of the vesting of all then
outstanding stock option grants and restricted stock awards and the ability to
exercise all of his stock options for their full original terms. In the event of
an Un-Approved Change in Control, Mr. Brick has the right to elect to terminate
his employment within 30 days of such event and, upon any such election, to
receive the increased severance benefit.
Mr. Cleveland has an employment agreement with the Company for a term
ending March 31, 2000, at a base salary of $275,000 per year. His employment
agreement further provides for bonus compensation for each fiscal year during
the term as determined by the Board of Directors in its discretion based upon
the recommendation of the Chief Executive Officer. Mr. Cleveland or his estate
is entitled under the employment agreement to the same disability and death
benefits as are extended by the Company to its executive employees generally,
and he is also entitled to severance benefits of twelve months base salary in
the event that his employment is terminated by the Company for other than
"cause".
Mr. Wipff has an employment agreement with the Company for a term ending
March 31, 2000, at a base salary of $275,000 per year. His employment agreement
further provides for bonus compensation for each fiscal year during the term as
determined by the Board of Directors in its discretion based upon the
recommendation of the Chief Executive Officer. Mr. Wipff or his estate is
entitled under the employment agreement to the same disability and death
benefits as are extended by the Company to its executive employees generally,
and he is also entitled to severance benefits of twelve months base salary in
the event that his employment is terminated by the Company for other than
"cause".
Mr. Haver has an employment agreement with the Company for a term ending
March 31, 2000, at a base salary of $200,000 per year. His employment agreement
further provides for bonus compensation for each fiscal year during the term as
determined by the Board of Directors in its discretion based upon the
recommendation of the Chief Executive Officer. Mr. Haver or his estate is
entitled under the employment agreement to the same disability and death
benefits as are extended by the Company to its executive employees generally,
and he is also entitled to severance benefits of twelve months base salary in
the event that his employment is terminated by the Company for other than
"cause".
Mr. Loadman has an employment agreement with the Company for a term ending
March 31, 2000, at a base salary of $225,000 per year. His employment agreement
further provides for bonus compensation for each fiscal year during the term as
determined by the Board of Directors in its discretion based upon the
recommendation of the Chief Executive Officer. Mr. Loadman or his estate is
entitled under the employment agreement to the same disability and death
benefits as are extended by the Company to its executive employees generally,
and he is also entitled to severance benefits of twelve months base salary in
the event that his employment is terminated by the Company for other than
"cause".
In February 1998, the Company entered into letter agreements with each of
its executive officers (other than Mr. Brick, with respect to whom the subject
matter is already addressed in his employment agreement as discussed above)
providing for certain severance benefits in the event such officer's employment
with the Company is terminated under certain circumstances within two years
after a "change in control" of the Company. If the executive officer's
employment is terminated by the Company or its successor other than for "cause",
disability or at retirement age or by the officer for "good reason", the officer
is entitled to a lump sum payment equal to two times his annual salary as in
effect prior to the change in control, continued benefits under all insured and
self-insured welfare benefit plans in effect prior to the employment termination
date for a period of two years or until such earlier date as the officer
15
<PAGE> 19
receives equivalent benefits from a new employer or reaches retirement age (in
which case the terms of any retirement plan shall apply), and to the extent that
such payment and/or any other payments which he has the right to receive from
the Company would constitute, alone or in the aggregate, an "excess parachute
payment" under Section 280G of the Internal Revenue Code, payment by the Company
of any excise tax imposed on such payments and any taxes due as the result of
the Company's payment of such excise tax and other taxes. "Good reason" will
exist for an officer to terminate his own employment without losing his
entitlement to such benefits if, without the officer's prior written consent,
his job status, positions or responsibilities are reduced or otherwise
inconsistent with those prior to the change in control, his salary or benefits
are reduced from pre-change in control levels or he is required to relocate
from, or be based anywhere other than the metropolitan area where his office is
located prior to the change in control. The events constituting a "change in
control" following which the letter agreement's severance provisions apply are
events of a nature which the Company would be required to report in its filings
with the SEC, including, without limitation, (a) the acquisition by any person,
entity or group of beneficial ownership of 15% or more of the combined voting
power of the Company's securities in the election of directors, (b) liquidation
of all or substantially all of the Company's assets or a merger, consolidation
or reorganization in which neither the Company nor any entity in which the
Company's stockholders own at least 50% of the voting power is the surviving
entity, and (c) the current directors of the Company, or persons approved by
them to succeed them, ceasing to constitute at least a majority of the Board;
provided that any of the foregoing events shall not constitute a "change in
control" if the officer or a group of which he is a part acquires, directly or
indirectly, 15% or more of the combined voting power of the Company's
securities.
Each of the Employee Option Plan, Aironet Option Plan and Restricted Stock
Plan under which one or more of the Company's executive officers have received a
grant or award provide for the cancellation or forfeiture of then unvested stock
options or restricted stock, and a limited, 30-day post-termination period for
exercising his then vested stock options (generally extended to three months in
the case of retirement, six months in the case of death and one year in the case
of disability), in the event the recipient ceases to be employed by or an
advisor to the granting or awarding entity, subject to the acceleration of
vesting and/or the extension of the post-termination exercise period by the
administering authority in its discretion. In the event of a "change in control"
of the issuing entity, each of the Plans provides that, except as otherwise
determined at the time by the board of directors of the issuing entity, all
grants and awards then outstanding thereunder shall become fully vested, and the
Employee Option Plan and the Aironet Option Plan further provide that, except as
otherwise determined at the time by the applicable board of directors, a cash
payment shall be made to the holders of outstanding options equal to the amount
by which (i) the highest price paid or offered in any transaction related to the
"change in control", or at which the underlying stock has traded on any
securities market, within the preceding 60 days, as determined by the board,
exceeds (ii) the exercise price. The Employee Option Plan and the Restricted
Stock Plan define "change in control" to mean (1) the acquisition by any person,
entity or group of beneficial ownership of 50% or more of the combined voting
power of the issuing entity's then outstanding securities, or (2) the
consummation of a transaction requiring stockholder approval and involving the
sale of all or substantially all of the assets, or a merger or consolidation, of
the issuing entity; "change in control" is defined under the Aironet Option
Plan, as in effect prior to the March 30, 1998 amendment thereof, and by which
pre-amendment terms such options continue to be governed, to also occur upon any
person, entity or group acquiring 15% or more of the combined voting power of
Telxon's then outstanding securities.
16
<PAGE> 20
EMPLOYEE STOCK OPTIONS
The following tables provide information with respect to options granted
to, and exercises by, the persons indicated during Fiscal 1998 and the value of
unexercised options held by such persons at the end of Fiscal 1998.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
PERCENT OF
TOTAL
OPTIONS
GRANTED TO GRANT
OPTIONS EMPLOYEES EXERCISE DATE
GRANTED IN FISCAL PRICE EXPIRATION PRESENT
NAME (SHARES)(1) 1998 (PER SHARE)(2) DATE VALUE(3)
---- ----------- ----------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C>
Frank E. Brick......... --(4) -- -- -- --
James G. Cleveland..... --(4) -- -- -- --
Dan R. Wipff........... --(4) -- -- -- --
Kenneth W. Haver....... 25,000(4) 4% $25.31 10/4/05 $297,178
David D. Loadman....... -- -- -- -- --
</TABLE>
- ---------------
(1) The option grant shown in the body of the table was made under the Employee
Option Plan for the purchase of the indicated number of shares of Telxon
Common Stock and becomes exercisable as to one-third of the underlying
shares on a cumulative basis on each of the first three anniversaries of its
October 4, 1997 grant date.
(2) The exercise price shown in the body of the table is equal to the closing
sale price for the Common Stock as reported on the Nasdaq NNM for the last
trading day prior to the grant date specified in footnote (1).
(3) Present value of the option as of the date of its grant, calculated using
the Black-Scholes option valuation model under the following assumptions:
(a) based upon the Company's review of historical data concerning the
exercise by employees of options for Shares granted under the Company's
stock option plans and survey data concerning the experience of other
companies, an executive may typically be expected to hold an option with a
stated term of eight years (as in the case of the option granted to Mr.
Haver under the Employee Option Plan during Fiscal 1998 shown in the above
table) for five years prior to exercise; (b) a stock price volatility of
44.66% (based on the changes in the market price for Shares over the five
fiscal year period ended March 31, 1998, the length of which period
corresponds to the expected holding period assumed in (a) above); (c) an
interest rate of 5.85% (based on the published yield as of the grant date of
Treasury securities at "constant maturity" as interpolated by the U.S.
Treasury for a five-year maturity, corresponding to the assumed holding
period); and (d) a continuation of the $0.01 per Share annual dividend
historically paid by the Company.
(4) On March 30, 1998, the Aironet Board of Directors approved the granting of a
pool of options to purchase an aggregate of 300,000 shares of Aironet common
stock to, and to be allocated among, Telxon employees serving as advisors to
Aironet, as designated by Telxon's Chief Executive Officer. Each option
grant will vest as to one-third of the underlying shares on a cumulative
basis on each of March 30, 1999, 2000 and 2001, becoming exercisable upon,
but only after, (i) an underwritten registered public offering by Aironet of
its common stock at a price of at least $8 per share netting proceeds of at
least $8 million to Aironet or (ii) a "change in control" of Aironet (for
the definition of such an event for purposes of the Aironet Option Plan and
a description of certain other effects of such an event, see the discussion
under "Employment Agreements and Termination of Employment Arrangements"
above), have an exercise price of $3.50 per share (corresponding to the
negotiated arm's-length price paid by third party investors purchasing a
17
<PAGE> 21
minority position in Aironet common stock in a contemporaneous private
placement) and expire March 30, 2008, subject to earlier termination in the
event the grantee ceases to serve as an advisor to Aironet. In April 1998,
subsequent to the end of the most recent fiscal year required to be
disclosed in the Summary Compensation Table above, the pool was fully
allocated, based on a review of the designated recipients and the allocation
among them by the Compensation Committee of Telxon's Board of Directors,
pursuant to which the following named executive officers received options
for the respective number of shares of Aironet common stock, with the stated
percentage representing that which the respective grant bears to the total
number of options granted through the pool to Telxon officers and employees
and to all other Aironet employees, directors and advisors under the Aironet
Option Plan during Fiscal 1998: Mr. Brick, 70,000 shares (14%); Mr.
Cleveland, 40,000 shares (8%); Mr. Haver, 50,000 shares (in addition to the
25,000 share Telxon stock option shown for him in the body of the table)
(10%); and Mr. Wipff, 20,000 shares (4%).
Although there has not been a trading market for Aironet common stock, there
is only a limited history of exercises under the Aironet Option Plan and
exercisability of the options described in this footnote (4) are subject to
the preconditions described in the preceding paragraph, present values of
these options as of the date of its grant can be calculated using the
Black-Scholes option valuation model under the following assumptions
utilized by Aironet in the preparation of the disclosures in its separate
audited financial statements under Financial Accounting Standards No. 123
("FAS 123"): (a) though reflective of the terms of the minority investment
made by third party investors in the March 1998 private placement of Aironet
common stock made contemporaneously with these option grants and not
necessarily representative of the per share price that would exist were
there (which there neither then was nor currently is) a regular trading
market for such stock, the $3.50 per share private placement price is
assumed as the value of the underlying Aironet common stock; (b) given the
limited history of exercises under the Aironet Option Plan, the same five
year period adopted by Telxon as discussed in footnote (3) above is used as
the period for which executives may be expected to hold these options prior
to exercise; (c) stock price volatility of 56%; (d) an interest rate of
5.54% (based on the published yield as of the grant date of Treasury Strips
maturing as of the end of the holding period assumed in (b) above in this
paragraph); and (e) no dividends are paid by Aironet during that assumed
holding period. Based on those assumptions, the calculated grant date
present values of these Aironet stock options would be as follows: Mr.
Brick, $132,258; Mr. Cleveland, $75,576; Mr. Haver, $94,470; and Mr. Wipff,
$37,788.
AGGREGATED OPTION EXERCISES IN FISCAL 1998
AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
EXERCISES DURING
FISCAL 1998 FISCAL YEAR-END
---------------------- ----------------------------------------------------------
SHARES NUMBER OF VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank E. Brick........ -- -- 416,666+ 83,334+(3) $4,845,823 $991,677
James G. Cleveland.... -- -- 84,332+ 75,668+(3) $ 799,326 $554,175
Dan R. Wipff.......... 11,519 $139,668 10,833+ 10,417+(3) $ 114,997 $106,253
Kenneth W. Haver...... -- -- 75,664+ 74,336+(3) $ 743,477 $523,273
David D. Loadman...... -- -- 83,925+ 67,765+ $ 843,160 $514,156
-- -- 40,000* 20,000* $ 65,600(4) $ 32,800(4)
</TABLE>
- ---------------
+ Options for the purchase of the indicated number of shares of Telxon Common
Stock granted to the named executive officer pursuant to the Employee Option
Plan.
18
<PAGE> 22
* Option for the purchase of the indicated number of shares of common stock of
the Company's Aironet subsidiary granted to Mr. Loadman as an advisor to
Aironet pursuant to the Aironet Option Plan.
(1) Excess of the closing price for Telxon 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.
(2) Aggregate fair market value, based on the amount by which the closing sale
price for Telxon Common Stock as reported on the Nasdaq NNM for March 31,
1998 exceeded the exercise price, of all unexercised "in-the-money" (fair
market value per Share in excess of exercise price) Telxon stock options
then held. See footnote (4) below regarding the valuation of Aironet stock
options.
(3) In addition to his holdings of Telxon stock options as of the end of Fiscal
1998 as shown in the body of the table, the named executive officer, as an
advisor to Aironet, received an option to purchase Aironet stock pursuant to
an option pool established under the Aironet Option Plan during Fiscal 1998
as described in footnote (4) of the table of Option Grants in Fiscal 1998
above. See footnote (4) below regarding the valuation of Aironet stock
options.
(4) Consistent with the assumptions made by Aironet in the FAS 123 calculations
discussed in footnote (4) to the table of Option Grants in Fiscal 1998 above
and subject to the qualifications there noted, the value of Aironet common
stock as of March 31, 1998 is assumed to be $3.50 per share. Since such
assumed price is equal to the exercise price of the Aironet stock options
described in footnote (3) immediately above, those stock options were not
"in-the-money" as of the time of the creation of the option pool at the end
of Fiscal 1998.
RELATED PARTY TRANSACTIONS
In August 1995, the Company announced a program of providing key Telxon
employees with a long-term incentive opportunity to purchase stock in its
technology subsidiaries, thereby encouraging them to support the development of
the subsidiaries and their businesses with the same effort and dedication as in
their service to Telxon so as to more closely align their objectives with the
long-term goals of the Company as a whole. Such investments are subject to
certain risks and restrictions and are based on outside opinions of the issuing
subsidiary's market value. During the fiscal year ended March 31, 1996 ("Fiscal
1996"), the Company sold shares of common stock in its Metanetics Corporation
subsidiary ("Metanetics") under the program at a price per share equal to that
paid in a contemporaneous sale negotiated at arm's length with a third party
investor. Certain of those program purchases, including that of Frank E. Brick,
the Company's President and Chief Executive Officer and a director, were made
with loans approved by the Telxon Board of Directors, due September 30, 1998,
bearing interest at eight percent per annum and secured by the stock purchased
with the loan proceeds. The original principal amount of Mr. Brick's loan, which
remains outstanding in full, was $16,618, and the largest amount of indebtedness
thereunder (principal plus accrued interest) outstanding during Fiscal 1998 was
$19,280 and with additional interest increased at June 30, 1998 to $19,612. Mr.
Brick currently owns 0.8%, and the Company currently owns 60.3%, of Metanetics'
outstanding common shares.
In December 1993 and January 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 the 25,000 Share portion
of the 50,000 Shares awarded to him in October 1993 under the Restricted Stock
Plan with respect to which he had elected under the applicable regulations under
the Internal Revenue Code to be taxed as of the time of the award. The loans are
secured by the restricted stock and originally bore interest at two percent in
excess of the prime rate, adjusted quarterly. In January 1997, Mr. Brick
borrowed an
19
<PAGE> 23
additional $30,932 from the Company for his use in the payment of his tax
obligations with respect to 5,000 additional Shares of his restricted stock
award which vested during Fiscal 1997 but were not included in his earlier tax
election. While Mr. Brick repaid the tax loans in full in July 1997, they were
subsequently readvanced to him, and in December 1997 he borrowed an additional
$52,082 for his use in the payment of his tax obligations with respect to 10,000
additional Shares of his restricted stock award which vested during Fiscal 1998
but were not included in his earlier tax election. All of the Fiscal 1998
borrowings, which bear interest at a rate of one percent in excess of the prime
rate and are due March 31, 2000, remain outstanding in full. The largest
aggregate amount of indebtedness (principal and accrued interest) outstanding
during Fiscal 1998 under these tax loans was $279,930 and with additional
interest increased at June 30, 1998 to $285,431.
In November 1997, Dan R. Wipff, the President and Chief Executive Officer
of the Company's Telxon Products manufacturing division, received a $120,000
personal loan from the Company. The loan is due November 30, 2000, bears
interest at a rate of one percent in excess of the prime rate and remains
outstanding in full. The largest aggregate amount of indebtedness (principal and
accrued interest) outstanding during Fiscal 1998 under the loan was $124,002 and
with additional interest increased at June 30, 1998 to $126,903.
In connection with the consolidation and relocation of the Company's
engineering and research and development functions from Akron, Ohio to the
Company's new World Technology Center in The Woodlands, Texas (north of
Houston), the Company made interest free bridge loans aggregating $140,000 in
principal amount to David L. Loadman, the Company's Senior Vice President,
Global Product and Systems Development, and Chief Technical Officer, in July
1997 to assist him in the relocation of his family. The loans are due December
31, 1998. Since the end of Fiscal 1998, payments and credits for unreimbursed
relocation costs have reduced the outstanding balance of these loans to $71,291.
In December 1995, 1996 and 1997, the Company made loans of $8,019, $4,192
and $5,706, respectively, to Mr. Loadman for his use in the payment of his tax
obligations with respect to the three 1,000 Share installments of his restricted
stock award which vested during Fiscal 1996, 1997 and 1998. These borrowings,
bearing interest at a rate of one percent in excess of the prime rate, remain
outstanding in full. The largest aggregate amount of indebtedness (principal and
accrued interest) outstanding during Fiscal 1998 under these tax loans was
$19,584 and with additional interest increased at June 30, 1998 to $19,969.
During Fiscal 1998, the Company paid to the law firm of Goodman Weiss
Miller LLP, of which Robert A. Goodman, a director and Secretary of the Company,
is senior partner, $1,691,226 for legal services and $159,539 in reimbursement
of expenses. It is anticipated that payments will continue to be made to said
firm in the future for additional services. In addition, in January 1998, the
Company entered into a letter agreement engaging the law firm to represent the
Company in any potential change in control transaction involving the Company.
The firm would provide the full range of services reasonably associated with
such a transaction which it is in a position to provide, with Mr. Goodman and
his partner, Steven J. Miller, to be primarily responsible for and involved in
the engagement. In recognition of the magnitude of the time commitment that
would be involved in such an event and the intensity and duration of such an
engagement, and the significance of the firm's role and the importance of its
expertise and its contribution to the results obtained, the agreement
contemplates that the fees payable to the firm in respect of such services would
include a value added component of approximately $1.5 million in addition to
customary hourly time charges. The terms of this agreement, including the amount
of the value added component, were determined based on the reasonable business
judgment of the Company's Board taking into account the factors set forth above.
This letter agreement becomes inoperative, however, in the event that the
consulting agreement described in the next paragraph becomes effective prior to
the commencement of a change in control transaction to which this letter
agreement would otherwise apply.
20
<PAGE> 24
In January 1998, the Company, in order to assure itself of the continued
availability to it of Mr. Goodman's legal services, entered into a letter
agreement with Mr. Goodman in which he has agreed to provide advice to the
Company on a non-exclusive basis regarding legal matters relating to the
Company's business after he ceases full-time practice with his law firm. The
consulting engagement will not take effect until the earliest of the date Mr.
Goodman withdraws from his current law firm, becomes "of counsel" thereto, or
the date on which Mr. Goodman's firm ceases to be the Company's primary outside
counsel and will expire on the tenth anniversary of the commencement date,
unless sooner terminated in accordance with the consulting agreement. Consulting
fees of $150,000 per annum (the "Consulting Payments") will be paid by the
Company over the term of the agreement, along with reimbursement of reasonable
expenses incurred by Mr. Goodman. Earlier termination may occur (1) by Mr.
Goodman for "Good Reason", defined as a material breach of the agreement by the
Company which is not cured within ten (10) business days of receipt by the
Company of written notice, (2) by the Company for "Cause", defined as a material
breach of the agreement by Mr. Goodman which is not cured within ten (10)
business days of receipt by Mr. Goodman of written notice, (3) by death or
disability of Mr. Goodman or (4) by a "Change in Control" of the Company. For
purposes of the consulting agreement, the occurrence of any of the following
shall constitute a "Change in Control": (i) the acquisition, directly or
indirectly, of at least 30% of the outstanding common stock of, or voting power
in, the Company calculated on a fully diluted basis; (ii) a merger or
consolidation of the Company with any company other than one in which the
Company then owns at least a majority of the outstanding common stock or voting
power; (iii) a sale (whether in one or a series of transactions) of all or
substantially all of the assets of the Company; (iv) any recapitalization,
restructuring or liquidation of the Company; or (v) events during any period of
two consecutive years as a result of which individuals who at the beginning of
any such period constitute the directors of the Company cease for any reason to
constitute at least a majority thereof, provided, however, that for purposes of
this clause (v), each director who is first appointed or elected by the Board or
whose nomination for election by the Company's stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date of the consulting agreement or
whose appointment, election or nomination was previously so approved or
recommended will be deemed to have been a Director of the Company at the
beginning of such period. In the event of a termination by Mr. Goodman for Good
Reason or termination because of death, disability or the occurrence of a Change
in Control, Mr. Goodman is entitled to a lump sum cash payment of the unpaid
balance of the Consulting Payments, payable within 10 days of such termination.
If the Company terminates the consulting agreement for Cause, Mr. Goodman is
entitled to no further compensation under the consulting agreement. The
consulting agreement will also be of no effect if the consulting period has not
commenced prior to the commencement of a change in control transaction to which
the letter agreement described in the preceding paragraph applies.
21
<PAGE> 25
STOCK PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total returns during
the five fiscal year period ended March 31, 1998 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 RETURNS TO SHAREHOLDERS
<TABLE>
<CAPTION>
S&P HIGH-
TECH
MEASUREMENT PERIOD TELXON COMPOSITE S&P 500
(FISCAL YEAR COVERED) CORPORATION INDEX INDEX
<S> <C> <C> <C>
MAR-93 100.00 100.00 100.00
MAR-94 126.35 117.62 101.47
MAR-95 148.97 148.84 117.27
MAR-96 212.91 200.95 154.92
MAR-97 152.90 271.66 185.63
MAR-98 265.79 410.57 274.73
</TABLE>
22
<PAGE> 26
STOCK OWNERSHIP
The following table sets forth certain information with respect to the
beneficial ownership of the outstanding Shares, as of June 30, 1998, by all
directors 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. Based on the most recent information available to the
Company, the Company believes that there are not currently any stockholders who
beneficially own more than five percent of its outstanding Shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
NAME AND ADDRESS(1) --------------------------
OF BENEFICIAL OWNER NUMBER PERCENTAGE(2)
------------------- --------- -------------
<S> <C> <C>
Richard J. Bogomolny.................................. 76,666(3) *
Frank E. Brick........................................ 487,483(4) 2.9%
James G. Cleveland.................................... 98,929(5) *
John H. Cribb......................................... 27,500(6) *
Robert A. Goodman..................................... 107,190(7) *
Kenneth W. Haver...................................... 90,730(8) *
David D. Loadman...................................... 104,355(9) *
Raj Reddy............................................. 88,600(10) *
Norton W. Rose........................................ 80,500(11) *
Dan R. Wipff.......................................... 86,502(12) *
All directors and executive officers as a group
(11 persons)........................................ 1,263,787(13) 7.4%
</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 16,111,215 Shares outstanding as of June 30, 1998,
as adjusted with respect to the Shares which may be acquired within 60 days
(measured from June 30, 1998) by exercise of options by the person(s) whose
percentage ownership is being computed.
(3) Includes 26,666 Shares which he may acquire within 60 days by exercise of
options.
(4) Includes 433,333 Shares which he may acquire within 60 days by exercise of
options. Also includes 10,000 Shares awarded to Mr. Brick under the
Restricted Stock Plan which will vest on October 27, 1998, provided that he
is then employed by the Company, and are subject to transfer restrictions
during the vesting period.
(5) Includes 96,999 Shares which he may acquire within 60 days by exercise of
options.
(6) Includes 1,000 Shares owned by Mr. Cribb's wife as to which Shares Mr.
Cribb disclaims beneficial ownership and 17,500 Shares which he may acquire
within 60 days by exercise of options.
(7) Includes 8,900 Shares owned by Mr. Goodman's wife as to which Shares Mr.
Goodman disclaims beneficial ownership and 85,000 Shares which he may
acquire within 60 days by exercise of options.
(8) Includes 86,665 Shares which he may acquire within 60 days by exercise of
options and 997 Shares (rounded) allocated to Mr. Haver's account under the
Company's 401(k) plan. Also includes 2,000 Shares awarded to Mr. Haver
under the Restricted Stock Plan, 1,000 of which have vested since June 30,
1998, with the remaining Shares vesting on July 17, 1999, provided that he
is then employed by the Company, and being subject to transfer restrictions
during the vesting period.
(9) Includes 98,355 Shares which he may acquire within 60 days by exercise of
options. Also includes 2,000 Shares awarded to Mr. Loadman under the
Restricted Stock Plan, 1,000 of
23
<PAGE> 27
which have vested since June 30, 1998, with the remaining Shares vesting on
July 17, 1999, provided that he is then employed by the Company, and being
subject to transfer restrictions during the vesting period.
(10) Includes 66,000 Shares which he may acquire within 60 days by exercise of
options.
(11) Includes 70,000 Shares which he may acquire within 60 days by exercise of
options.
(12) Includes 14,583 Shares which he may acquire within 60 days by exercise of
options.
(13) Includes 1,004,433 Shares which may be acquired within 60 days by exercise
of options and 16,000 Shares awarded under the Restricted Stock Plan, of
which 2,000 Shares have vested since June 30, 1998, and provided the
respective awardees are then employed by the Company, 10,400 Shares will
vest during the remaining portion of the current fiscal year ending March
31, 1999; 2,400 Shares will vest in the fiscal year ending March 31, 2000,
and 400 Shares will vest in each of the fiscal years ending March 31, 2001
through 2003.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of 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 SEC 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 SEC 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 with respect to Fiscal 1998 were complied with, except
that Len Abeita, a former reporting officer, was late in filing his initial
ownership report and each of Dr. Raj Reddy, one of the directors, and Gary
Grand, a reporting officer, were late in filing a transaction report for his
exercise of a Company stock option and, in the case of Mr. Grand's exercise,
which was made on a broker-assisted cashless basis, the related sale of the
option shares. The Company does not believe it had any greater than ten percent
beneficial owners at any time during Fiscal 1998 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 SEC under Section 13 or 16(a) of
the Exchange Act.
2. STOCKHOLDER TAKEOVER BYLAW PROPOSAL
Mr. Wyser-Pratte has given notice that he will propose adoption of a bylaw
that would, among other things, (i) permit stockholders owning 10% in interest
of the Company to call a special meeting of stockholders at which a stockholder
vote will be taken to determine whether an acquisition proposal is in the
stockholders' best interests, and (ii) require the Company's Board of Directors
to redeem the rights (the "Rights") issued under the Company's stockholder
rights plan (the "Rights Plan") upon such a determination that such acquisition
proposal is in the stockholders' best interests. According to the Wyser-Pratte
Proxy Materials, Mr. Wyser-Pratte's proposal in this regard (the "Takeover
Proposal") is as follows:
"RESOLVED, that the Shareholders hereby amend the Company's Bylaws (i)
by adding the words, "Except as provided in Article X," to the beginning of
Article I, Section 3(ii) by changing the existing first word of Article I,
Section 3 from "Special" to "special" and (iii) by adding a new Article X,
which shall read as follows:
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ARTICLE X
TREATMENT OF ACQUISITION PROPOSALS
Section 1. Notwithstanding anything in these Bylaws to the
contrary, following the public announcement of any Acquisition Proposal,
stockholders owning 10% in interest of the voting shares of the
Corporation may call, by written notice to the Secretary of the
Corporation at the Corporation's principal place of business, a special
meeting of stockholders of the Corporation at which a stockholder vote
shall be taken to determine whether the Acquisition Proposal is in the
stockholders' best interests. The date for such special meeting shall
not be less than ten nor more than ninety days after the date such
special meeting is duly called by such stockholders. "Acquisition
Proposal" means any offer or proposal, made in writing by press release,
letter to the Corporation or its shareholders or any other means, to
acquire the Corporation or all of its shares or all or substantially all
of its assets, for cash or securities or any other consideration or
combination thereof, by means of merger or other business combination
and/or acquisition of shares, including, without limitation, any tender
offer or exchange offer which is part of such offer or proposal and
including any amendments to such offer or proposal; provided, however,
that if any such offer or proposal is amended in any respect after
shareholders have duly called a special meeting in accordance with this
Article X but before the date of such special meeting, then such special
meeting shall be held in accordance with the time limit prescribed by
this Article X and Article Sixth, Paragraph C of the Corporation's
certificate of incorporation based on the date on which shareholders
gave the written notice requiring such meeting to be held, but the
Acquisition Proposal considered and voted upon by the shareholders at
such special meeting shall give effect to all such amendments.
Section 2. If the stockholders determine at such special meeting by
the affirmative vote of a majority in interest of the shares represented
and entitled to vote at the meeting that the Acquisition Proposal is in
the best interests of stockholders, then the Acquisition Proposal shall
be deemed to be "friendly" rather than "hostile" and the board of
directors shall Withdraw the Poison Pill with respect to such
Acquisition Proposal. "Withdraw the Poison Pill" shall mean: redeem the
outstanding rights under the Rights Agreement between the Corporation
and Key National Association, as Rights Agent, or take other action so
that the existence of such rights does not interfere with the
consummation of such Acquisition Proposal or any acquisition of the
Company's shares which forms a part of such Acquisition Proposal.
Section 3. If any particular provision of this Article X be
adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable so that the provisions of this Article X are
enforced to the maximum extent possible.
Section 4. This Article X may not be altered or repealed except by
a unanimous board vote of all the directors then in office or by the
shareholders."
YOUR BOARD OF DIRECTORS UNANIMOUSLY URGES YOU TO VOTE AGAINST THIS
"TAKEOVER PROPOSAL," WHICH IS DESIGNATED IN THE PROXY AS PROPOSAL 2, FOR THE
FOLLOWING REASONS.
If approved, the Takeover Proposal would give a stockholder owning ten
percent of the Company's Shares the unilateral power to force the Company to
hold a special meeting to advance the stockholder's own takeover agenda, at the
expense of the Company and its other stockholders. The Takeover Proposal does
not require an offer to meet any criteria, objective or otherwise, in order to
be considered at a special meeting, and would therefore compel the Company to
hold a special meeting to consider any acquisition proposal, no matter how
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frivolous or self-serving. The Company's obligation to hold a special meeting
(with the resulting expenses and associated diversion of management attention
and resources) would exist even in instances where the Company's Board of
Directors and an overwhelming majority of its stockholders believe the
acquisition proposal is contrary to the best interests of the Company and its
stockholders as a whole.
In addition, the Company believes that the Board of Directors should not be
forced to redeem the Rights issued under the Company's Rights Plan in
circumstances where the Board determines that such an action would be contrary
to the best interests of the Company and its stockholders. The Rights Plan is
designed to deter coercive takeover tactics and to otherwise encourage potential
acquirors to negotiate directly with the Company's Board of Directors. Your
Board of Directors believes that it is in the best position to negotiate with a
potential acquiror of the Company on the stockholders' behalf, to evaluate the
adequacy of any potential offer and to protect stockholders against potential
abuses during a takeover, such as partial and two-tiered tender offers and
creeping stock accumulation programs, which do not treat all stockholders fairly
and equally. The Rights Plan provides the Board with the requisite time and
flexibility to negotiate on behalf of all of the Company's stockholders, thereby
enhancing the Board's ability to negotiate the highest possible bid from a
potential acquiror, to develop alternatives which may better maximize
stockholder value, to preserve the long-term value of the Company for its
stockholders, and to ensure that all stockholders are treated fairly and
equally. The Rights Plan is not intended to prevent a takeover on terms that are
fair and equitable to all stockholders, nor is it intended as a deterrent to a
stockholder's initiation of a proxy contest.
All of the Company's directors are especially sensitive to their fiduciary
duties under Delaware law which requires that they act in the best interest of
the Company and all of the Company's stockholders. In contrast, the Company
believes that Mr. Wyser-Pratte is motivated only by his desire to seek
short-term gain and publicity, and has little or no consideration for whether
other Company stockholders receive fair value for their investment.
In addition to its belief that the Takeover Proposal is ill-advised,
against the best interests of the Company's stockholders and grounded in Mr.
Wyser-Pratte's self-interest, the Company further believes, after consultation
with, and based on the opinion of, its Delaware special legal counsel, Skadden,
Arps, Slate Meagher & Flom LLP ("Delaware Counsel"), that a Delaware court
presented with the question of the validity of the bylaw amendment included in
the Takeover Proposal would hold that it is invalid and unenforceable under
Delaware law on several grounds discussed below. Though the Board did not
request Delaware Counsel to put in writing its opinion regarding the invalidity
of the Takeover Proposal under Delaware law, Delaware Counsel has advised the
Board that its oral opinion to the Board should be given the same weight as a
formal written opinion on this matter. While the Board has filed a complaint
against Mr. Wyser-Pratte and Wyser-Pratte & Co., Inc. seeking a declaratory
judgement confirming the Board's belief, based on the opinion of Delaware
Counsel, that the Takeover Proposal is invalid (see "CERTAIN LITIGATION" below),
the Board cannot assure stockholders that the Takeover Proposal will ultimately
be invalidated by a court of competent jurisdiction insofar as the Delaware
courts have not directly addressed the validity of a bylaw comparable to that
included in the Takeover Proposal.
Delaware Counsel has advised the Board that Mr. Wyser-Pratte's Takeover
Proposal should be invalid under Delaware law because Section 141(a) of the DGCL
clearly and unambiguously states that a corporation's business and affairs must
be managed by or under the direction of a board of directors except as provided
in the company's certificate of incorporation. Under the bylaw amendment
included in the Takeover Proposal, the Board would be stripped of its important
obligation to determine whether an acquisition proposal is in the best interests
of the Company and its stockholders, and whether to take action in response to
an inadequate or otherwise threatening proposal. Mr. Wyser-Pratte would have the
stockholders determine
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whether the acquisition proposal is "friendly" and obligate the Board to redeem
the Rights based on the decision of the stockholders. Thus, the Takeover
Proposal could require the Company to redeem the Rights even under circumstances
where the Board of Directors may believe that it is in the best interests of the
Company and the stockholders to maintain the Rights Plan intact. In short,
because Mr. Wyser-Pratte's Takeover Proposal would limit the ability of the
Board to manage the business and affairs of the Company, the Takeover Proposal
is an impermissible restriction on the Board's authority and responsibility and
should be held to be invalid under Delaware law.
The bylaw amendment included in the Takeover Proposal should also be
invalid under the DGCL because it is a restriction on the Board of Directors
and, as such, must be set forth in the Company's Charter in order to be legally
valid. Section 109 of the DGCL provides that the bylaws of a corporation may
contain any provision "not inconsistent with law" regarding, among other things,
the powers of directors. This provision should be construed in a manner
consistent with the provisions of Section 141(a) of the DGCL mandating that a
restriction or limitation on the authority of the board of directors appear in
the certificate of incorporation. Any other construction would risk evisceration
of Section 141(a) in a manner that could permit complete abridgment of
management power by the stockholders through a series of bylaws. The Takeover
Proposal bylaw would mandate the Company's responses to an acquisition proposal
thereby delegating the determination of whether an acquisition proposal is in
the best interests of the stockholders to the stockholders themselves. Such a
limitation on a board of directors' powers would have to be included in the
company's certificate of incorporation in order to be valid under the DGCL.
Therefore, the Board believes that a bylaw to such effect likely would be held
to be invalid under Delaware law.
Finally, the Board has been advised that Section 157 of the DGCL vests the
power to adopt a rights plan in the directors, and not the stockholders. Section
157 of the DGCL provides that "subject to any provisions in the certificate of
incorporation," corporations may create and issue rights to be evidenced by such
instruments "as shall be approved by the board of directors." Rights plans have
been upheld by the Delaware courts to be legally authorized by Section 157 of
the DGCL and as a proper exercise of the directors' business judgment. Like
Section 141(a) of the DGCL, the only relevant exception to the Board's authority
to issue rights is a provision in the certificate of incorporation limiting such
power. Absent such a provision, it is the board of directors, not the
stockholders, that has sole authority with respect to rights plans. Because
Section 157 of the DGCL vests the power to adopt a rights plan in the directors,
and not the stockholders, a bylaw (as distinguished from a provision in the
certificate of incorporation) adopted by stockholders purporting to limit that
power, such as that included in the Takeover Proposal, would be contrary to
Delaware law.
3. STOCKHOLDER BOARD UNANIMITY BYLAW PROPOSAL
Mr. Wyser-Pratte has given notice that he will propose the adoption of a
bylaw that would require a unanimous vote of all directors then in office in
order to take certain "Defensive Actions" unless such actions are approved by
the Company's stockholders. According to the Wyser-Pratte Proxy Materials, Mr.
Wyser-Pratte's proposal in this regard (the "Board Unanimity Proposal") is as
follows:
"RESOLVED, that the Shareholders hereby amend the Company's Bylaws by
adding a new Article X, which shall read as follows:
Notwithstanding any provision to the contrary contained in these
Bylaws, the unanimous vote of all the directors then in office shall be
required to approve any Defensive Action by the board of directors,
provided, however, that any such Defensive Action may be authorized by
the vote of a majority of the directors present at a meeting at which a
quorum is present if such authorization is ratified by the affirmative
vote of a
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majority in interest of the shares represented and entitled to vote at a
shareholder meeting at which a quorum is present. Defensive Action shall
mean: any action by the board with the purpose or effect, in whole or in
part, of impeding a change in control of the Company or increasing the
board's power to impede such a change in control in the future,
including without limitation (1) a decision by the board not to redeem
the outstanding Rights (the "Rights") under the Amended and Restated
Rights Agreement between the Company and Key National Association, as
Rights Agent (the "Poison Pill") or not to take other action so that the
existence of such Rights does not interfere with the acquisition of the
Company's shares or an offer to acquire such shares, (2) the extension
of the expiration date of the Poison Pill past the Final Expiration Date
(as defined therein) or the addition of a "Dead Hand" provision to such
Pill, (3) the expenditure of any corporate funds on a proxy contest
against a shareholder of the Company (including litigation in connection
with such proxy contest), unless the Company agrees to reimburse all
such costs incurred by such shareholder if 10% of the Company's shares
are voted in favor of any of such shareholder's proposals or (4) the
amendment of the Shareholders Interests Protection Bylaw: provided,
however, that subject to clauses (2), (3) and (4) of this sentence, if
an offer is made to acquire the Company or all of the Company's shares,
and the Board determines in accordance with applicable law that such
offer will maximize the company's value at a sale for the shareholders'
benefit, no action taken by the Board to facilitate such offer shall be
a Defensive Action. A "Dead Hand" provision shall mean: any provision of
the Rights agreement between the Company and Key National Association,
as Rights Agent, or any related document (the "Poison Pill") that limits
in any way the voting power of directors elected after a certain date or
event on matters relating to the Poison Pill, compared to either the
voting power of directors elected prior to such date or event or the
voting power of directors elected on the recommendation of directors
elected prior to a specified date or event."
YOUR BOARD OF DIRECTORS UNANIMOUSLY URGES YOU TO VOTE AGAINST THIS "BOARD
UNANIMITY PROPOSAL," WHICH IS DESIGNATED IN THE PROXY AS PROPOSAL 3, FOR THE
FOLLOWING REASONS.
The Board of Directors believes that this proposal is ill-advised because
it could result in situations in which the Board would be prevented from taking
action even though a clear majority on the Board believed the action being
considered was in the best interests of the Company and its stockholders. As Mr.
Wyser-Pratte acknowledges in the Wyser-Pratte Proxy Materials, "[if] this bylaw
is adopted and Professor Macey is elected to the board, Professor Macey's vote
would be required to approve any Defensive Action by the board." The Board of
Directors believes that, in all events, it is inappropriate and inadvisable to
give any single board member a veto power over the Board's decisions. More
specifically, the Board of Directors believes it is irresponsible to vest in a
single director the power unilaterally to paralyze the Board from taking
defensive action in the context of an unsolicited takeover proposal. Mr.
Wyser-Pratte's proposed bylaw would enable stockholders having only a small
minority of the shares to seize negative control of the Company in takeover
matters, through the simple expedient of electing (by cumulative voting) only a
single director at a meeting of stockholders, which director could then block
actions which the Board of Directors believes are necessary to protect the
Company's stockholders.
The Board also believes that the unanimity requirement is inadvisable
because the scope of the matters subject to its requirements is unclear and
could create undesirable uncertainty as to whether the unanimity requirement
applied to a particular action. The bylaw defines "Defensive Action" to include,
with certain exceptions, "any action with the purpose or effect, in whole or in
part, of impeding a change in control of the Company or increasing the board's
power to impede such a change in control in the future." The Board believes that
almost any significant
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corporate action could be said to have some effect on the possibility of a
change of control, and therefore virtually any business matter with which Mr.
Wyser-Pratte's nominee (if elected) or any other single director disagreed could
be subject to challenge as not having met the requirement of the bylaw.
In addition, the Board believes that Mr. Wyser-Pratte's proposed unanimity
requirement, as drafted, procedurally could prevent the Board from taking action
even when there is no disagreement among the directors regarding the "Defensive
Action" in question. For example, because the unanimity requirement is expressed
in terms of all members of the Board "then in office," the Board would be
paralyzed if one or more directors were unable to participate in the Board
meeting. Similarly, the unanimity requirement could prevent action from being
taken when one or more directors felt it necessary to abstain from voting on a
particular matter, for example because of a personal interest in the matter. The
Board believes it is highly imprudent to put in place such a procedural
requirement that could disable the Board from acting merely because of
unavoidable absence, or the appropriate abstention, of a single director.
The Board of Directors further believes the Board Unanimity Proposal is
inadvisable because it includes within the scope of "Defensive Actions" subject
to the unanimity requirement "the expenditure of any corporate funds on a proxy
contest against a shareholder of the Company (including litigation in connection
with such proxy contest), unless the Company agrees to reimburse all such costs
incurred by such shareholder if 10% of the Company's shares are voted in favor
of any of such shareholder's proposals." The Board believes such a requirement
would impermissibly interfere with its responsibility to exercise its business
judgment concerning the propriety of expenditures by the Company. The Board also
believes that it is not appropriate to give a proponent an automatic claim to
the Company's assets to fund litigation against the Company and other activities
in connection with a proxy contest based on a mere 10% vote in favor of a
proposal opposed by the Board.
The Board of Directors does not believe that the Board Unanimity Proposal
is rendered acceptable merely because it permits action to be taken by a less
than unanimous Board vote if the action is ratified by the Company's
stockholders. First, such a requirement to obtain stockholder approval could
improperly interpose a decision by stockholders in a matter properly the
responsibility of the Board of Directors. Second, the extensive time necessary
to obtain stockholder approval, including preparation of proxy materials, review
by the SEC, printing, mailing and allowing an adequate time for solicitation,
could in many circumstances mean that action could not be taken in time for it
to be effective. This is especially the case with respect to action on matters
that might be viewed as defensive because there could well be circumstances
beyond the control of the Company that require very prompt action by the Board.
Moreover, the circumstances could change in the course of attempting to obtain
stockholder approval, possibly necessitating preparation of supplemental proxy
materials and postponement or delays in the date on which a meeting of
stockholders could be held.
In addition to its belief that the Board Unanimity Proposal is ill-advised
and against the best interest of the Company's stockholders, the Company further
believes, after consultation with, and based on the opinion of, Delaware
Counsel, that a Delaware court presented with the question of the validity of
the Board Unanimity Proposal would hold that it is invalid and unenforceable
under Delaware law for many of the same reasons that the Board believes that the
Takeover Proposal is invalid (see "2. STOCKHOLDER TAKEOVER BYLAW PROPOSAL"
above). Though the Board did not request Delaware Counsel to put in writing its
opinion regarding the invalidity of the Board Unanimity Proposal under Delaware
law, Delaware Counsel has advised the Board that its oral opinion to the Board
should be given the same weight as a formal written opinion on this matter.
While the Board has filed a complaint against Mr. Wyser-Pratte and Wyser-Pratte
& Co., Inc. seeking a declaratory judgment confirming the Board's belief, based
on the opinion of Delaware Counsel, that the Board Unanimity Proposal is invalid
(see "CERTAIN LITIGATION" below), the Board cannot assure stockholders that the
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Board Unanimity Proposal will ultimately be invalidated by a court of competent
jurisdiction insofar as the Delaware courts have not directly addressed the
validity of a bylaw comparable to the Board Unanimity Proposal.
4. STOCKHOLDER SPECIAL MEETING BYLAW PROPOSAL
Mr. Wyser-Pratte has given notice that he intends to present the following
proposal at the Annual Meeting regarding the calling of special meetings of
stockholders (the "Special Meeting Proposal"):
"RESOLVED, that in accordance with Article IX of the Bylaws of the
Company, the Shareholders of the Company hereby amend Article I, Section 3
of the Bylaws so that it reads in its entirety as follows:
Special meetings of the stockholders or any class thereof entitled
to vote may be called by the Chairman of the Board, by the Chief
Executive Officer, by the President, by the Board of Directors or by
shareholders holding 25% in interest of the outstanding shares of the
Corporation. In the case of a meeting called by shareholders, such
meeting shall be called by written notice to the Secretary of the
Corporation at the Corporation's principal place of business. This Bylaw
may not be altered or repealed except by a unanimous board vote of all
the directors then in office or by the shareholders."
YOUR BOARD OF DIRECTORS UNANIMOUSLY URGES YOU TO VOTE AGAINST THIS "SPECIAL
MEETING PROPOSAL," WHICH IS DESIGNATED IN THE PROXY AS PROPOSAL 4, FOR THE
FOLLOWING REASONS.
The Board believes that the annual meeting of stockholders ordinarily
presents an adequate opportunity for a stockholder to present matters for
consideration by the stockholders as a whole. The Company's Bylaws set forth
procedures and requirements so that stockholder proposals can be presented in an
orderly manner. In addition, rules of the SEC allow stockholders to have their
proposals, subject to certain exclusions, included in the proxy soliciting
material that is printed and distributed on behalf of the Board of Directors,
thereby sparing the stockholder proponent the expense of conducting his or her
own solicitation. Given the existing opportunities for stockholder proposals and
the time, expense and potential distraction that a special meeting would
involve, the Board does not believe it advisable to add a procedure for allowing
stockholders to call a special meeting between annual meetings unless there is a
significant level of support for such a special meeting. The Board believes that
a majority of the votes which stockholders are entitled to cast (as is currently
required by the Company's Bylaws) is an appropriate measure of the level of
support that would warrant the calling of such a meeting.
5. STOCKHOLDER BUSINESS COMBINATION STATUTE PROPOSAL
Mr. Wyser-Pratte has given notice of his intention to present the following
proposal at the Annual Meeting (the "Business Combination Statute Proposal"):
"RESOLVED, that pursuant to Section 203(b)(3) of the Delaware General
Corporation Law, the Shareholders hereby amend the Company's Bylaws by
adding a new Article XI which shall read as follows:
Section 1. The corporation shall not be governed by Section 203 of
the Delaware General Corporation Law.
Section 2. If any particular provision of this Bylaw be adjudicated
to be invalid or unenforceable, such provision shall be deemed amended
to delete therefrom the portion thus adjudicated to be invalid or
unenforceable so that the provisions of this Bylaw are enforced to the
maximum extent possible.
Section 3. This Bylaw may not be altered or repealed except by a
unanimous vote of all the directors then in office or by the
shareholders."
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YOUR BOARD OF DIRECTORS UNANIMOUSLY URGES YOU TO VOTE AGAINST THIS
"BUSINESS COMBINATION STATUTE PROPOSAL," WHICH IS DESIGNATED IN THE PROXY AS
PROPOSAL 5, FOR THE FOLLOWING REASONS.
The Board of Directors believes that passage of this resolution would not
be in the best interests of the Company and its stockholders. By virtue of being
incorporated in Delaware, the Company became subject to the provisions of
Section 203 of the DGCL ("Section 203" or the "Business Combination Statute")
when that statute became effective on February 2, 1988. The Business Combination
Statute provides, in effect, that if any person acquires beneficial ownership of
15% or more of the Company's outstanding shares (thereby becoming an "Interested
Shareholder"), the Company may not engage in a business combination with the
Interested Shareholder for three years thereafter, subject to certain
exceptions. Among the exceptions are (a) the Board's prior approval of the
business combination or the transaction by which such person became an
Interested Shareholder; (b) the acquisition of at least 85% of the Company's
shares (subject to certain exclusions) in the transaction in which such person
becomes an Interested Shareholder; and (c) the approval of such business
combination by the Board of Directors and by the holders of 66 2/3% of the
outstanding stock not owned by the Interested Shareholder. Moreover, the
Business Combination Statute provides that the Company's stockholders may, by a
vote of a majority of the outstanding shares, adopt an amendment to the Restated
Certificate of Incorporation or Bylaws electing not to be governed by the
Business Combination Statute. Such amendment would become effective twelve
months after adoption and would not apply to a business combination with a
person who became an Interested Shareholder prior to the adoption of such
amendment. The Business Combination Statute further provides that any bylaw
providing for the election not to be governed by Section 203 may not be further
amended by the Company's Board of Directors.
In its legislative synopsis that accompanied the passage of the statute,
the Delaware General Assembly stated that "Section 203 is intended to strike a
balance between the benefits of an unfettered market for corporate shares and
the well documented and judicially recognized need to limit abusive takeover
tactics." The Board of Directors believes that Section 203 enhances the
likelihood that stockholders will receive a full and fair offer, if an offer is
to be made, because it better enables a board to negotiate to improve the terms
of any such offer on behalf of all stockholders. In addition, the 85% threshold
is intended to ensure that offerors make their best offer. The statute was the
result of extensive hearings participated in by a national audience. The Board
believes that Section 203 protects stockholders against inadequate offers and
abusive tactics employed by large stockholders. Accordingly, the Board believes
that electing not to be governed by Section 203 could expose stockholders to
additional risks of coercive takeover tactics and would not be in the best
interests of the Company and its stockholders.
In addition, it is the Company's position that Mr. Wyser-Pratte did not
timely notify the Company of his Business Combination Statute Proposal in
accordance with the requirements of Article Sixth, Paragraph B of the Company's
Charter. Under the Company's Charter, Mr. Wyser-Pratte was required to notify
the Company of the Business Combination Statute Proposal on or before June 12,
1998. On June 11, 1998, Mr. Wyser-Pratte notified the Company of his intention
to submit a proposal that included only Sections 1 and 3 of the Business
Combination Statute Proposal, but not Section 2. On June 18, 1998, Mr.
Wyser-Pratte filed preliminary proxy materials with the SEC (the "June 18
Wyser-Pratte Proxy Materials") that included only Section 1 of the Business
Combination Statute Proposal. The June 18 Wyser-Pratte Proxy Materials included
neither Section 2 nor Section 3 as set forth in the current proposal. Only on
July 20, 1998, more than a month after the date required under the Company's
Charter for notice to the Company, did Mr. Wyser-Pratte file with the SEC
revised preliminary proxy materials (the "July 20 Wyser-Pratte Proxy Materials")
containing the Business Combination Statute Proposal in the form included in
this Proxy Statement.
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Moreover, as Mr. Wyser-Pratte noted in the July 20 Wyser-Pratte Proxy
Materials, Section 203 (b)(3) of the DGCL denies the board of a Delaware
corporation the power to amend any bylaw adopted by its stockholders electing
not to be governed by Section 203 of the DGCL. As a result, Section 3 of the
Business Combination Statute Proposal, which purports to grant the Company's
Board the power by unanimous action to repeal such an election, is invalid under
the DGCL. While Mr. Wyser-Pratte has added Section 2 of the Business Combination
Statute Proposal (the "Savings Clause") in an attempt to segregate the valid
portions, it is the Company's position, without addressing the doubtful validity
in the circumstances of the Savings Clause under Delaware law, that the Company
was not timely notified of Mr. Wyser-Pratte's intention to include the Savings
Clause in this proposal.
The Company has filed a complaint against Mr. Wyser-Pratte and Wyser-Pratte
& Co., Inc. seeking a declaratory judgement that the Business Combination
Statute Proposal is invalid. See "CERTAIN LITIGATION" below.
6. STOCKHOLDER BYLAW REPEAL PROPOSAL
Mr. Wyser-Pratte has given notice of his intention to present the following
proposal at the Annual Meeting (the "Repeal Proposal"):
"RESOLVED, that any Bylaws adopted by the board of directors since
June 11, 1998 be, and they hereby are, repealed."
YOUR BOARD OF DIRECTORS UNANIMOUSLY URGES YOU TO VOTE AGAINST THIS "REPEAL
PROPOSAL," WHICH IS DESIGNATED IN THE PROXY AS PROPOSAL 6, FOR THE FOLLOWING
REASONS.
Because the Company's Board of Directors has not amended the Bylaws since
June 11, 1998, this proposal has no effect. Although the Board has no current
intention to adopt any amendment to the Bylaws, it reserves to the right to do
so should it deem such action to be in the best interests of the Company and its
stockholders, as is permitted under Delaware law, the Restated Certificate of
Incorporation and the Bylaws. If the Repeal Proposal is properly presented at
the Annual Meeting and validly approved by the requisite stockholder vote, the
Company believes that the Repeal Proposal would have the effect of repealing any
bylaw amendment adopted between June 11, 1998 and the date of the Annual
Meeting. To the extent that the Repeal Proposal is intended to be applicable to
time periods following the Annual Meeting, the Company believes it is
inconsistent with the Company's Charter and, therefore, invalid.
7. STOCKHOLDER EXPENSE REIMBURSEMENT PROPOSAL
Mr. Wyser-Pratte has given notice of his intention to present the following
proposal at the Annual Meeting (the "Expense Reimbursement Proposal"):
"RESOLVED, that the shareholders recommend to the board that the
Company reimburse all of Guy Wyser-Pratte's expenses (including any
litigation expenses) in connection with the solicitation of proxies for
this shareholders meeting provided that either or both of the following
have occurred at the Company's 1998 Annual Meeting (i) Professor Jonathan
R. Macey is elected to the Company's board of directors and (ii) at least
one of the bylaw amendment proposals set forth in Mr. Wyser-Pratte's proxy
materials is adopted by the Company's shareholders."
YOUR BOARD OF DIRECTORS UNANIMOUSLY URGES YOU TO VOTE AGAINST THIS "EXPENSE
REIMBURSEMENT PROPOSAL," WHICH IS DESIGNATED IN THE PROXY AS PROPOSAL 7, FOR THE
FOLLOWING REASONS.
32
<PAGE> 36
The Board of Directors recommends a vote against Mr. Wyser-Pratte's
proposal that he be reimbursed for his expenses in connection with his
solicitation of proxies, including any litigation expenses. Mr. Wyser-Pratte has
stated that if the Board does not reimburse his expenses, he intends to seek a
court order requiring the Board to reimburse these expenses. Although Mr.
Wyser-Pratte states that the purpose of his proposals is to advance stockholder
interests, the Board believes that the interests of Mr. Wyser-Pratte are
different from those of the Company's stockholders generally and that there is
no reason for Mr. Wyser-Pratte to receive special treatment by having his
expenses reimbursed.
CERTAIN LITIGATION
On July 13, 1998, the Company filed a complaint in the United States
District Court for the District of Delaware seeking declaratory and injunctive
relief against Mr. Wyser-Pratte and Wyser-Pratte & Co., Inc. In the action, the
Company seeks judgment (i) declaring that Mr. Wyser-Pratte's Takeover Proposal
and Board Unanimity Proposal each violate Section 141(a) of the DGCL and are
therefore void; and (ii) declaring that Mr. Wyser-Pratte's Business Combination
Statute Proposal is untimely under Article Sixth, Paragraph B of Telxon's
Charter and therefore invalid. The complaint also seeks injunctive relief
requiring Mr. Wyser-Pratte and Wyser-Pratte & Co., Inc. to correct false and
misleading statements made in the Wyser-Pratte Proxy Materials. The Company
claims that the Wyser-Pratte's Proxy Materials (a) fail fully to disclose
information regarding Mr. Wyser-Pratte personal economic interest in his
proposals; (b) are misleading with respect to the justifications and support for
Mr. Wyser-Pratte's proposals; and (c) are inherently misleading with respect to
the scope and effect of Mr. Wyser-Pratte's proposals. The Company's complaint
states that corrective disclosures by Mr. Wyser-Pratte are necessary to cure the
false and misleading statements and omissions made in the Wyser-Pratte Proxy
Materials so that the Company's stockholders will have the benefit of full and
accurate disclosure concerning the proxy solicitation when they are deciding how
to cast their votes at the Annual Meeting. On July 20, 1998, the defendants, Guy
P. Wyser-Pratte and Wyser-Pratte & Co., Inc., filed a motion to dismiss the
complaint for improper venue or, in the alternative, to transfer the action to
the United States District Court for the Southern District of New York. The
defendants also argue that the Company's state law declaratory judgment claims
should be dismissed as unripe, and that the Company's disclosure claims under
the federal securities laws should be dismissed as moot. On August 3, 1998, the
Company filed its Answer and Brief in Opposition to the defendants' motion to
dismiss. The Company believes that the defendants' motion to dismiss is without
merit and intends to vigorously contest it.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP (the successor to Coopers & Lybrand L.L.P.) has
been reappointed as the independent public accountants to examine the Company's
financial statements for the fiscal year ending March 31, 1999. Coopers &
Lybrand L.L.P. has served as the Company's independent auditors since October
1990. Representatives of PricewaterhouseCoopers LLP 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.
The Company's Fiscal 1998 consolidated financial statements, as audited by
PricewaterhouseCoopers LLP, are included in the Company's 1998 Annual Report to
Stockholders accompanying or preceding this Proxy Statement and are also
included in the Annual Report on Form 10-K for Fiscal 1998 filed by the Company
with the SEC (the "Form 10-K"). THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO
EACH PERSON WHOSE PROXY IT SOLICITS, A COPY OF THE FORM 10-K (OTHER THAN THE
EXHIBITS THERETO) UPON THE WRITTEN REQUEST OF SUCH PERSON TO ALEX L. CSISZAR,
INVESTOR RELATIONS DEPARTMENT, TELXON CORPORATION, P.O. BOX 5582, AKRON, OHIO
44334-0582.
33
<PAGE> 37
SOLICITATION OF PROXIES
The solicitation of proxies in the accompanying form may be made by or on
behalf of the Board of Directors of the Company by mail, advertisement,
telephone or other methods and in person. Directors, officers, investor
relations personnel and other employees of the Company may participate in the
solicitation, for which they will not receive any additional compensation. The
Company will request banks, brokerage houses and other custodians, nominees and
fiduciaries to forward all Company solicitation materials to their customers or
other beneficial owners of the Shares which they hold of record and will
reimburse such record holders for customary clerical and mailing expenses they
incur in so forwarding such materials.
The Company has also retained Innisfree M&A Incorporated ("Innisfree") to
solicit proxies on behalf of the Board of Directors for a fee of $200,000 plus
reimbursement of out-of-pocket expenses.
The cost of soliciting proxies on behalf of the Board of Directors is being
borne by the Company. Such costs will include expenditures for printing,
postage, legal, accounting, public relations, soliciting, advertising and other
incidental matters and are estimated to be approximately $500,000 in addition to
the amounts payable to Innisfree described in the preceding paragraph (which
estimate does not include the amounts normally expended by the Company for the
solicitation of proxies at its annual meetings and related incidental matters
and costs represented by salaries and wages of regular employees and officers).
Total costs incurred to date in connection with the proxy solicitation for the
Annual Meeting are approximately $200,000.
Certain information concerning the directors (including the Board of
Directors' nominees to the Company's Board of Directors), the executive officers
and certain employees of the Company who may assist in soliciting proxies from
stockholders of the Company in respect of the Annual Meeting is set forth in the
attached Schedule I. The attached Schedule II sets forth certain information
relating to the Shares owned by such parties and certain contracts and
transactions between any of them and the Company.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In order for a stockholder proposal to be considered at the 1999 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 17, 1999. 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 1999 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 1999 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 April 13, 1999.
By Order of the Board of Directors,
Robert A. Goodman
Secretary
August 11, 1998
34
<PAGE> 38
IMPORTANT
If you hold your Shares in your own name, please sign, date and return the
enclosed WHITE proxy card today in the postage-paid envelope provided. If your
Shares are held in "street name," only your broker or bank can vote your Shares
and only upon your specific instructions; please return the enclosed WHITE proxy
card to your broker or bank and contact the person responsible for your account
to ensure that a WHITE proxy is voted on your behalf.
Do not sign any proxy card you may receive from Mr. Wyser-Pratte.
If you have any questions, or need assistance in voting your Shares, please
contact the firm assisting us in the solicitation of proxies:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20(th) Floor
New York, New York 10022
TOLL-FREE: (888) 750-5834
BANKS AND BROKERS CALL COLLECT: (212) 750-5833
35
<PAGE> 39
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS, DIRECTOR NOMINEES,
EXECUTIVE OFFICERS AND CERTAIN EMPLOYEES OF THE COMPANY
The tables in this Schedule I set forth the name and present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is carried on, of (1)
the directors (including the Board of Directors' nominees to the Company's Board
of Directors), and the executive officers of the Company, and (2) certain
employees of the Company who may assist in soliciting proxies from stockholders
of the Company. Unless otherwise indicated below, the principal business address
of each such person is 3330 West Market Street, Akron, Ohio 44333, and such
person is an employee of the Company.
DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
PRESENT OFFICE OR OTHER PRINCIPAL
NAME AND PRINCIPAL BUSINESS ADDRESS OCCUPATION OR EMPLOYMENT
----------------------------------- --------------------------------------------
<S> <C>
Richard J. Bogomolny Director (retired from active employment)
Frank E. Brick President, Chief Executive Officer and a
Director
John H. Cribb Vice Chairman of the Board of Directors and
a Director (retired from active employment)
Robert A. Goodman Secretary, General Counsel and a Director
100 Erieview Plaza, 27th Floor (see accompanying Proxy Statement for
Cleveland, OH 44114 occupational information)
Dr. Raj Reddy Chairman of the Board of Directors and a
5325 Wean Hall Director (see accompanying Proxy Statement
Pittsburgh, PA 15213 for occupational information)
Norton W. Rose Director (see accompanying Proxy Statement
3601 Green Road, Suite 310 for occupational information)
Beachwood, OH 44122
James G. Cleveland President, North America Division
Dan R. Wipff President and Chief Executive Officer,
6333 Rothway Street Telxon Products Division
Houston, TX 77040
Kenneth W. Haver Senior Vice President, Finance and
Administration, and Chief Financial Officer
David D. Loadman Senior Vice President, Global Product and
8302 New Trails Drive Systems Development, and Chief Technical
The Woodlands, TX 77381 Officer
David W. Porter Senior Vice President, Global Operations
</TABLE>
CERTAIN EMPLOYEES OF THE COMPANY WHO MAY ALSO SOLICIT PROXIES
<TABLE>
<CAPTION>
PRESENT OFFICE OR OTHER PRINCIPAL
NAME AND PRINCIPAL BUSINESS ADDRESS OCCUPATION OR EMPLOYMENT
----------------------------------- ----------------------------------------------
<S> <C>
Alex L. Csiszar Vice President, Investor Relations
Glenn S. Hansen Vice President, Legal Administration and
Corporate Counsel
Harley R. Hill Vice President-Treasurer
</TABLE>
<PAGE> 40
SCHEDULE II
SHARES HELD BY DIRECTORS, DIRECTOR NOMINEES, EXECUTIVE OFFICERS
AND CERTAIN EMPLOYEES OF THE COMPANY AND CERTAIN
CONTRACTS AND TRANSACTIONS BETWEEN ANY OF THEM AND THE COMPANY
SHARE OWNERSHIP
The Shares of the Company's Common Stock beneficially owned by the
Company's directors (including the Board of Directors' nominees to the Company's
Board of Directors) and Messrs. James G. Cleveland, Dan R. Wipff, Kenneth W.
Haver and David D. Loadman are set forth in the accompanying Proxy Statement. In
acquiring 11,519 of the Shares shown in the Proxy Statement as beneficially
owned by Mr. Wipff through exercise of a stock option granted him under the
Employee Option Plan, he borrowed the exercise price pursuant to a margin loan
under which $146,874 (principal and interest) was outstanding as of June 30,
1998. The Company's remaining executive officer and the other employees of the
Company named in the preceding Schedule I who may assist in soliciting proxies
from Company stockholders beneficially owned the Shares of Company Common Stock
as of June 30, 1998 set forth in the following table. For these purposes, Shares
which one of the above persons has the right to acquire within 60 days of such
date are included as Shares "beneficially owned" by that person.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED
------------------------ -------------------------
<S> <C>
David W. Porter 15,332(1)
Alex L. Csiszar 10,801(2)
Glenn S. Hansen 4,732(3)
Harley R. Hill 5,448(4)
</TABLE>
- ---------------
(1) Consists of 2,000 Shares awarded to Mr. Porter under the Restricted Stock
Plan which will vest in five equal installments of 400 shares each on
October 4, 1998, 1999, 2000, 2001 and 2002, provided that he is then
employed by the Company, and are subject to transfer restrictions during the
vesting period, and 13,332 Shares which he may acquire within 60 days by
exercise of options.
(2) Includes 10,666 Shares which he may acquire within 60 days by exercise of
options.
(3) Includes 3,332 Shares which he may acquire within 60 days by exercise of
options. Also includes 1,000 Shares awarded to Mr. Hansen under the
Restricted Stock Plan which will vest in five equal installments of 200
shares each on October 4, 1998, 1999, 2000, 2001 and 2002, provided that he
is then employed by the Company, and are subject to transfer restrictions
during the vesting period.
(4) Includes 2,834 Shares which he may acquire within 60 days by exercise of
options. Also includes 1,000 Shares awarded to Mr. Hill under the Restricted
Stock Plan which will vest in five equal installments of 200 shares each on
October 4, 1998, 1999, 2000, 2001 and 2002, provided that he is then
employed by the Company, and are subject to transfer restrictions during the
vesting period.
In addition to their beneficial ownership of Shares of the Company's Common
Stock as discussed above: Dr. Reddy and Mr. Loadman beneficially own 10,000 and
40,000 shares, respectively, of the common stock of the Company's Aironet
Wireless Communications, Inc. subsidiary, in both cases representing the Aironet
shares which each has the right to acquire within 60 days of June 30, 1998
pursuant to stock options granted to them under the Aironet Option Plan; and
Messrs. Brick, Cribb, Cleveland, Wipff, Haver and Loadman own 40,000, 30,000,
10,000, 20,000, 20,000 and 15,000 shares, respectively, of the common stock of
the Company's Metanetics Corporation subsidiary.
II-1
<PAGE> 41
PURCHASES AND SALES OF COMPANY SECURITIES
The following table sets forth information concerning all purchases and
sales of securities of the Company made from July 1, 1996 through June 30, 1998
by the Company's directors (including the Board of Directors' nominees of the
Company's Board of Directors), the executive officers of the Company and the
other named employees of the Company who may assist in soliciting proxies from
Company stockholders.
<TABLE>
<CAPTION>
DATE OF NATURE OF NUMBER OF
NAME TRANSACTION TRANSACTION SHARES
---- -------------- ----------- ---------
<S> <C> <C> <C>
Directors and Director Nominees
Robert A. Goodman Aug. 27, 1997 Purchase(1) 13,290
Nov. 4, 1997 Sale 3,946
Nov. 24, 1997 Sale 4,000
Feb. 25, 1998 Sale 1,044
Feb. 27, 1998 Sale 1,000
Dr. Raj Reddy Sept. 30, 1997 Purchase(1) 15,100
Norton W. Rose June 17, 1997 Purchase 5,000
Executive Officers
Dan R. Wipff July 29, 1997 Purchase(1) 11,519
David W. Porter Oct. 4, 1997 Purchase(2) 2,000
Other Employees
Alex L. Csiszar July 1, 1997- Purchases(3) 69
Sept. 16, 1997
Dec. 31, 1996 Purchase(4) 93
June 30, 1997 Purchase(4) 102
Sept. 16, 1997 Sale 212
Dec. 31, 1997 Purchase(4) 63
Jan. 30, 1998 Sale(5) 1,975
Feb. 2, 1998 Sale 372
Feb. 11, 1998 Sale(6) 590
June 30, 1998 Purchase(4) 135
Glenn S. Hansen Dec. 31, 1996 Purchase(4) 158
June 30, 1997 Purchase(4) 184
Aug. 19, 1997 Sale(5) 1,437
Oct. 4, 1997 Purchase(2) 1,000
Dec. 31, 1997 Purchase(4) 58
Jan. 23, 1998 Sale(5) 2,881
Harley R. Hill Dec. 31, 1996 Purchase(4) 494
June 30, 1997 Purchase(4) 607
Oct. 4, 1997 Purchase(2) 1,000
Dec. 1, 1997 Purchase(4) 294
Feb. 3, 1998 Sale(5) 1,959
June 30, 1998 Purchase(4) 219
</TABLE>
- ---------------
(1) Exercise of stock option(s) granted under the Company's Director Option Plan
or Employee Option Plan.
(2) Award under the Company's Restricted Stock Plan.
(3) Ratable bi-weekly open-market purchases under broker payroll deduction plan.
(4) Purchase of Shares through the Company's employee stock purchase plan.
(5) Contemporaneous purchase and sale through broker-assisted cashless exercise
of stock option(s) granted under the Company's Employee Option Plan.
(6) Intra-401(k) plan transfer out of Company stock fund.
II-2
<PAGE> 42
CONTRACTS AND TRANSACTIONS WITH THE COMPANY
Reference should be made to the accompanying Proxy Statement for a
discussion of certain letter agreements made by the Company with Mr. Goodman and
his law firm, Goodman Weiss Miller LLP, regarding certain future transactions.
The accompanying Proxy Statement also describes the employment agreements which
have been made by the Company with each of its executive officers (including Mr.
Brick, who is also a director) except for Mr. Porter; Mr. Porter has an
agreement for his employment by the Company through March 31, 2000 at an annual
base salary of $200,000 and otherwise on the same terms as described in the
Proxy Statement for each of Messrs. Cleveland, Wipff, Haver and Loadman.
The directors, executive officers and other employees named in Schedule I
have the right to acquire the number of Shares in the Company set forth in the
following table pursuant to options granted them under the Director Option Plan
and the Employee Option Plan. The following table lists the total number of
outstanding stock options held by each such named person, including both those
which are currently exercisable and those which will not become exercisable
until later dates (the totals below include the Shares underlying those options
which are currently exercisable or will become exercisable within 60 days of
June 30, 1998 which are disclosed as Shares "beneficially owned" in the
accompanying Proxy Statement or under "Share Ownership" above in this Schedule
II, as further explained in the footnotes to those respective disclosures.
<TABLE>
<CAPTION>
NUMBER OF
NAME OPTION SHARES
---- -------------
<S> <C>
Directors and Director Nominees
Richard J. Bogomolny........................................ 55,000
Frank E. Brick.............................................. 550,000
John H. Cribb............................................... 35,000
Robert A. Goodman........................................... 105,000
Raj Reddy................................................... 86,000
Norton W. Rose.............................................. 90,000
Executive Officers
James G. Cleveland.......................................... 160,000
Dan R. Wipff................................................ 21,250
Kenneth W. Haver............................................ 150,000
David D. Loadman............................................ 151,690
David W. Porter............................................. 40,000
Other Employees
Alex L. Csiszar............................................. 12,500
Glenn S. Hansen............................................. 8,000
Harley R. Hill.............................................. 7,168
</TABLE>
II-3
<PAGE> 43
TELXON LOGO
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS -- SEPTEMBER 15, 1998
P
R The undersigned stockholder hereby appoints Frank E. Brick, Dr.
O Raj Reddy and Norton W. Rose, as Proxies, each with the power to
X appoint his substitute, and hereby authorizes any of them to
Y represent and to vote, as provided below and on the reverse side
hereof, all of the Common Stock of Telxon Corporation which the
undersigned, as of the July 17, 1998 Record Date for the Annual
Meeting, is entitled to vote at the Annual Meeting of
Stockholders to be held on September 15, 1998 or any adjournment
or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED AND TIMELY RETURNED, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE ELECTION OF THE BOARD'S DIRECTOR NOMINEES NAMED IN
PROPOSAL 1 AND "AGAINST" PROPOSALS 2 THROUGH 7.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE BOARD'S
NOMINEES
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Directors -- FOR WITHHELD FOR ALL
Board's Nominees: R. Bogomolny BOTH BOTH EXCEPT:
and J. Cribb [ ] [ ] [ ] -----------------------------------
(Except nominee written above)
</TABLE>
IMPORTANT -- THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN TODAY.
DETACH CARD
<PAGE> 44
(continued from reverse side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSALS 2 THROUGH 7.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Takeover Proposal (as defined in the Company's [ ] [ ] [ ]
Proxy Statement).
3. Board Unanimity Proposal (as defined in the
Company's Proxy Statement). [ ] [ ] [ ]
4. Special Meeting Proposal (as defined in the
Company's Proxy Statement). [ ] [ ] [ ]
5. Business Combination Statute
Proposal (as defined in the Company's
Proxy Statement). [ ] [ ] [ ]
6. Repeal Proposal (as defined in the
Company's Proxy Statement). [ ] [ ] [ ]
7. Expense Reimbursement Proposal (as
defined in the Company's Proxy
Statement). [ ] [ ] [ ]
</TABLE>
IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
Dated:__________________________________ , 1998
Signature(s)___________________________________
_______________________________________________
Title:_________________________________________
PLEASE SIGN EXACTLY AS NAME APPEARS
HEREON. JOINT OWNERS SHOULD EACH SIGN.
WHEN SIGNING AS AN EXECUTOR, CORPORATE
OFFICER OR IN ANY OTHER REPRESENTATIVE
CAPACITY, PLEASE GIVE FULL TITLE AS
SUCH.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE BOARD'S
DIRECTOR NOMINEES NAMED IN PROPOSAL 1 AND "AGAINST" PROPOSALS 2 THROUGH 7.
PLEASE SIGN, DATE AND RETURN THE ABOVE PROXY CARD TODAY USING THE POSTAGE-PAID
ENVELOPE PROVIDED, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING.
