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Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TELXON CORPORATION
.................................................................
(Name of Registrant as Specified In Its Charter)
GUY P. WYSER-PRATTE
.................................................................
(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)(1)
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 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(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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SOLICITATION OF PROXIES
IN CONNECTION WITH THE
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
TELXON CORPORATION
--------------------
PROXY STATEMENT
OF
MR. GUY P. WYSER-PRATTE
Wyser-Pratte & Co., Inc.
63 Wall Street
New York, New York 10005
(212) 495-5350
--------------------
This Proxy Statement and the accompanying [COLOR] Annual Meeting proxy
card are furnished in connection with the solicitation of proxies by Guy P.
Wyser-Pratte ("Mr. Wyser-Pratte") of Wyser-Pratte & Co., Inc. ("WPC") to be used
at the annual meeting of shareholders of Telxon Corporation, a Delaware
corporation ("Telxon" or the "Company"), to be held at [......... ] on [ ......]
and any adjournments or postponements thereof (the "Annual Meeting"). This Proxy
Statement and the enclosed proxy card are first being sent to shareholders on or
about _______ __, 1998. The solicitation is being made by Mr. Wyser-Pratte on
behalf of Mr. Wyser-Pratte and WPC. According to the Company's proxy materials,
the Company's board of directors has set _______ __, 1998 as the record date for
determining shareholders entitled to notice of and to vote at the meeting.
SUMMARY AND INTRODUCTION
Between April and June of 1998, Symbol Technologies, Inc. ("Symbol")
made a series of offers to acquire the Company. Its last offer was for $40 per
share in cash or $42 per share in cash and Symbol shares, subject to due
diligence. The $40 all cash offer was more than 60% above the market price of
the stock on April 8 when Symbol made its initial proposal and the $42 hybrid
cash and stock offer represented a nearly 70% premium. However, the Telxon board
rejected the $40 cash offer and admitted that it did not even consider the $42
cash and stock offer. On June 8, 1998, the day Symbol withdrew its acquisition
proposal, the Telxon stock closed more than $10 per share below Symbol's $42
offering price. Symbol stated on June 11, 1998 that it remains interested in a
negotiated acquisition of the Company, subject to due diligence.
Because the Symbol acquisition proposal represented an extremely large
premium over the prior market price of the Telxon stock, Mr. Wyser-Pratte
believes that the Telxon board should have given the shareholders an opportunity
to accept or reject the proposal, after the board had negotiated the best
possible offer from Symbol. The Telxon directors not only rejected the Symbol
offer unilaterally, they failed to explain to shareholders why a sale at $40 in
cash was not in their best interests or why the $42 cash and stock offer had not
even been presented to the board. Nor did they announce any steps to develop an
alternative value-maximizing transaction that would bring shareholders more than
$40 for their shares.
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Mr. Wyser-Pratte also believes that the present Telxon board lacks the
qualifications to decide whether the Company should be sold or to direct the
sale of the Company. The directors' total stock ownership (excluding options) is
less than 1% of the outstanding shares and only one of the six directors is
completely independent, in Mr. Wyser-Pratte's opinion. Two of the directors are
present or past executives of the Company; and three have special business
arrangements with the Company.
Mr. Wyser-Pratte believes that shareholders should take a two-pronged
approach to repairing the damage that was done by the board's response to the
Symbol acquisition proposal and to enable Symbol to pursue its interest in an
acquisition of the Company.
Shareholders should eliminate the present board's power to block
offers or proposals to acquire all of the Company's shares ("Acquisition
Proposals") that shareholders wish to accept. Shareholders can not accomplish
this goal by voting the board out of office at the Annual Meeting. The Company
has a "staggered" board on which only a minority of the directors come up for
re-election each year. The staggered board is mandated by the Company's Restated
Certificate of Incorporation (the "Certificate of Incorporation"), which cannot
be amended without board approval. Therefore, in order to eliminate the board's
power to unilaterally block Acquisition Proposals that shareholders wish to
accept, Mr. Wyser-Pratte is presenting resolutions at the Annual Meeting to
adopt bylaws that would give shareholders the power to accept an Acquisition
Proposal, whether or not the proposal was approved by the board.
Shareholders should also demand that the board drop its opposition to
a sale of the Company at $40 per share. Instead, the board should seek
opportunities to sell the Company to Symbol or another buyer at the highest
possible price. Mr. Wyser-Pratte intends to nominate Professor Jonathan R. Macey
for a seat on the board. Professor Macey supports Mr. Wyser-Pratte's corporate
governance proposals and agrees that, subject to their fiduciary duties, the
directors should pursue opportunities to sell the Company for at least $40 per
share.
The Wyser-Pratte bylaw proposals would make the following changes in
the Company's corporate governance system:
SHAREHOLDER FRIENDLY BYLAW: If an Acquisition Proposal is made to
acquire the Company, the holders of 10% or more of the outstanding shares would
have the right to call a Special Meeting to vote on the Acquisition Proposal. If
the shareholders determined by a majority vote that the Acquisition Proposal is
in their best interests, the Acquisition Proposal would be deemed "friendly"
rather than "hostile," and the board would be required to stop using the
Company's Amended and Restated Rights Agreement between the Company and Keybank
National Association as Rights Agent (the "Poison Pill") against the Acquisition
Proposal (the "Shareholder Friendly Bylaw").
SHAREHOLDER INTERESTS PROTECTION BYLAW. The board would have to act
unanimously or obtain shareholder approval to take Defensive Actions (defined
below) against a takeover bid (the "Shareholder Interests Protection Bylaw"). If
Professor Macey is elected to the board, and the Shareholder Interests
Protection Bylaw is adopted, he would be able to block a board vote that favors
Defensive Actions he opposes; and in such event, the board would not be able to
take such Defensive Actions without shareholder approval.
Mr. Wyser-Pratte is also making proposals that would, if adopted:
allow holders of 25% of the Shares to call a special meeting, and would
opt out of Section 203 of the Delaware General Corporation Law;
repeal any bylaws adopted by the board since June 11, 1998; and
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recommend to the board that the Company reimburse Mr. Wyser-Pratte's
expenses in connection with this proxy solicitation if one of his bylaw
proposals is adopted or Professor Macey is elected to the board.
Mr. Wyser-Pratte is a Telxon shareholder who has only one interest in
his proposals: to maximize the value of the Company's shares. Although he
beneficially owns less than 5% of the stock, he is financing the cost of this
proxy contest without assurance of reimbursement because he believes that the
Telxon board will not put shareholder interests first unless there is a change
in the Company's corporate governance system.
REASONS FOR SOLICITATION
Mr. Wyser-Pratte believes that proper corporate governance requires
that shareholders make the ultimate decision on whether to accept an Acquisition
Proposal at a substantial premium above the prior market price. The board may
properly seek to raise the price through negotiations; but shareholders should
have the final word on whether the Acquisition Proposal is accepted.
Under these principles the Telxon board, after obtaining a final offer
from Symbol of $40 in cash or $42 in cash and securities, should have put the
offer to a shareholder vote. Mr. Wyser-Pratte believes that the high price
Symbol was offering gave the board an obligation to allow shareholders to accept
the proposal. Symbol's final all cash offer was more than 60% above the closing
price of the stock on April 8 when Symbol made its initial proposal and the
hybrid $42 per share cash/stock offer was almost 70% above that closing price.
Prior to the Symbol offer the Telxon stock had always traded for less than $30
per share.
Nevertheless, the Telxon board rejected the $40 cash offer and said
that combination cash/stock $42 offer "did not contain enough information to be
considered by the Telxon board." There was no explanation of why, if additional
information about the $42 offer was required, Telxon management did not obtain
the information and present it to the board. The Telxon board's press release
stated that "Symbol is unwilling to offer Telxon's shareholders a proposal that
gives them fair value for their shares;" but the board failed to explain why a
$40 or $42 price was not fair value for the Telxon shares or to announce any
plans for an alternative value-maximizing transaction that would give
shareholders an opportunity to receive more than $40 for their shares. On June
8, 1998, the day Symbol announced the withdrawal of its offer, the Telxon shares
closed at 32 1/16; and Mr. Wyser-Pratte believes the shares would be trading
even lower but for the expectation of a possible sale of the Company.
Mr. Wyser-Pratte believes it may still be possible to sell the Company
for $40 per share or more to Symbol or another purchaser. A Symbol spokesman
stated on June 11, 1998: "We are encouraged that Telxon shareholders are taking
independent action and we remain very interested in a negotiated acquisition
subject to due diligence." To accomplish a sale of the Company, however,
shareholders must either persuade the board to support a sale at $40 or more or
change the Company's corporate governance system so that the board no longer has
the power to block an Acquisition Proposal favored by shareholders.
Shareholders do not have the alternative of replacing the board at the
Annual Meeting with a slate of nominees who, subject to their fiduciary duties,
would pursue opportunities to sell the Company for $40 per share or more. The
Certificate of Incorporation mandates a "staggered" board in which directors
have three year terms and only a minority of the directors come up for
re-election at any annual meeting. Mr. Wyser-Pratte believes that shareholders
can not afford to wait until the 1999 annual meeting to change the Company's
policy. Furthermore, because of the Company's cumulative voting system, a simple
majority of shareholders might not be able to change control of the board by the
1999 annual meeting even if shareholders were prepared to wait that long. To
replace a majority of the directors by the 1999 annual meeting, shareholders
supporting a sale of the Company would have to elect
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two directors at both the 1998 and 1999 annual meeting. Under the cumulative
voting system prescribed by the Company's Certificate of Incorporation, which
cannot be amended without board approval, a super-majority vote of two-thirds of
the shares represented at the meeting could be required to elect two directors
at each meeting. Given these obstacles to replacing a majority of the Telxon
board, Mr. Wyser-Pratte is proposing bylaw amendments that would eliminate the
board's power to block Acquisition Proposals favored by shareholders.
Mr. Wyser-Pratte believes that the current Telxon directors are poorly
qualified to control the sale of the Company. Their total stock ownership,
exclusive of options, is less than 1% of the outstanding shares. Furthermore,
Mr. Wyser-Pratte believes that the board is composed primarily of insiders and
other directors who Mr. Wyser-Pratte believes are not independent. Mr.
Wyser-Pratte believes that only one of the six directors--Mr. Richard J.
Bogomolny, a retired super market executive--is completely independent. Two of
the six are insiders:
Mr. Frank E. Brick is the Company's president and chief executive
officer.
Mr. John H. Cribb is a retired Telxon executive.
The remaining three directors all have special business arrangements
with the Company that, in Mr. Wyser-Pratte's opinion, compromise their
independence:
Mr. Robert A. Goodman is the Company's general counsel. His law firm
received $2,780,220 in legal fees from the Company in fiscal 1997.
Dr. Raj Reddy, a professor of computing sciences, is chairman of the
board of the Company. As chairman of one of the Company's
privately-owned subsidiaries, Dr. Reddy received stock options in that
subsidiary in fiscal 1997 in addition to his normal compensation as a
director of the Company.
Mr. Norton W. Rose is a consultant and executive recruiter. According
to the Company's 1997 proxy statement, Mr. Rose was to provide an
estimated 90 days of services to the Company in fiscal 1997 and fiscal
1998 for which he was to be paid $3,500 per day plus a $150,000
severance benefit (resulting in total compensation of $465,000 in that
period).
In Mr. Wyser-Pratte's opinion the present Telxon board lacks the
requisite expertise, independence and financial stake to adequately represent
the shareholders' interests in the sale of the Company. Therefore, shareholders
need to give themselves the ultimate power to approve an Acquisition Proposal to
acquire the Company.
PLEASE SUPPORT OUR EFFORTS TO REFORM THE COMPANY'S CORPORATE GOVERNANCE
SYSTEM. YOU ARE URGED TO VOTE IN FAVOR OF THESE PROPOSALS BY PROMPTLY SIGNING,
DATING AND MAILING THE [COLOR] PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.
ONLY YOUR LATEST-DATED PROXY WILL COUNT AT THE ANNUAL MEETING.
THEREFORE, DO NOT SIGN ANY PROXY THAT MANAGEMENT MAY DELIVER TO YOU.
If you have any questions concerning this Proxy Statement or need
assistance in voting your Common Stock, feel free to call our proxy solicitor,
[ ] (the "Proxy Solicitor") toll-free at 1 800 [ ] or Eric Longmire,
Senior Managing Director of WPC, at (212) 495-5357.
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SHAREHOLDER PROPOSALS
PROPOSAL TO AMEND THE BYLAWS TO ALLOW SHAREHOLDERS TO DETERMINE WHETHER A
PROPOSAL TO ACQUIRE THE COMPANY SHALL BE TREATED AS FRIENDLY OR HOSTILE
(ITEM 1 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO AMEND THE
BYLAWS TO ALLOW SHAREHOLDERS TO DETERMINE WHETHER A PROPOSAL TO ACQUIRE THE
COMPANY SHALL BE TREATED AS FRIENDLY OR HOSTILE:
"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 work of Article I,
Section 3 from "Special" to "special" and (iii) by adding a new Article X, which
shall read as follows:
`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, 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 B 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.
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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.' "
The Poison Pill is one of the Company's principal anti-takeover
devices. The Poison Pill makes it economically infeasible to acquire control of
the Company in a transaction which is opposed by the board -- even if all, let
alone a majority, of the shareholders were to favor the acquisition. The Poison
Pill has this effect because it dilutes the ownership of stock by any purchaser
who acquires more than a threshold amount of the Company's stock without the
board's approval (see "OPERATION OF THE POISON PILL" below).
Mr. Wyser-Pratte approves of the limited use of the Poison Pill to
delay completion of an Acquisition Proposal for a reasonable period of time so
that so that there is an opportunity for higher bids to emerge and for the board
to communicate its views to shareholders. He believes, however, that the board
should normally refrain from permanently blocking an Acquisition Proposal that
is favored by the Company's shareholders. Mr. Wyser-Pratte believes that
shareholders are generally able to judge for themselves whether an Acquisition
Proposal is in their best interests, provided that they are given adequate
information. Therefore, Mr. Wyser-Pratte is proposing that shareholders adopt an
amendment (the "Shareholder Friendly Bylaw") to the Telxon bylaws. The
Shareholder Friendly Bylaw would create a new policy at Telxon whereby once a
proposal was made to acquire the Company or a controlling interest in the
Company, 10% of the Company's shareholders would have the right to call a
special meeting of shareholders to conduct a shareholder vote on the question of
whether or not the Acquisition Proposal was in the best interests of the
shareholders. If the shareholders determine that such Acquisition Proposal was
in their best interests, such Acquisition Proposal would be deemed to be a
"friendly" proposal, and the Company's board would be required to cease using
the Poison Pill to block the acquisition of shares pursuant to the Acquisition
Proposal. The shareholder vote would give the board an opportunity to persuade
shareholders that the continued use of the Poison Pill to block the Acquisition
Proposal was in the best interests of shareholders and that the Acquisition
Proposal should be deemed to be "hostile."
Mr. Wyser-Pratte believes that the Shareholder Friendly Bylaw will give
the ultimate decision about whether shareholders can sell their shares to those
most directly affected by the decision -- the owners of the Company. Under the
Shareholder Friendly Bylaw a board of directors that wants to continue using the
Poison Pill to block the acquisition of shares pursuant to an Acquisition
Proposal would be subject to a shareholder referendum on the board's blocking
policy. Although the board could temporarily block the acquisition of shares
pursuant to an unsolicited Acquisition Proposal and try to convince shareholders
of the merits of its position, the shareholders would have the ultimate ability
to exercise their property rights and business judgment to decide for themselves
whether they want to sell their shares -- and would be able to do so without
being hindered by the board's use of the Poison Pill. If shareholders exercised
their right under the Shareholder Friendly Bylaw to call a shareholders meeting
to vote on an Acquisition Proposal, the board would be required by the
Certificate of Incorporation to schedule the shareholders meeting no more than
ninety days after the meeting was called; and the board would be required to
stop using the Poison Pill to block the Acquisition Proposal if shareholders
voted that the Acquisition Proposal was in their best interests.
The Shareholder Friendly Bylaw would not affect the ability of the
Board under Sections 251 and 271 of the Delaware General Corporation Law to
approve or disapprove of a proposed merger or sale of all or substantially all
of the assets of the Company. The Bylaw follows an approach to tender offer
regulation that is followed in Canada, the United Kingdom and other European
Countries in that it prevents the board from unilaterally electing to block the
acquisition of shares pursuant to a qualified
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Acquisition Proposal for an indefinite period of time, but allows the board to
protect shareholder interests by blocking Acquisition Proposals that do not
provide a control premium to all shareholders or delaying the consummation of a
bid while the board seeks a better offer or tries to persuade stockholders that
the Acquisition Proposal is not in their best interests. The idea of allowing
shareholders to control the use of the Poison Pill after a period of time is not
new. The Poison Pill described in Georgia Pacific Corp. v. Great Northern
Nekoosa Corp., 727 F. Supp. 31 (D. Me. 1989) followed a similar approach. There
the board was required, within 90 to 120 days after receiving an Acquisition
Proposal, to hold a shareholder referendum on whether to accept the Acquisition
Proposal and redeem the company's poison pill. Under Telxon's Certificate of
Incorporation, the board sets the date of all special meetings, but such date
cannot be later than 90 days after the meeting is called. Similarly, the "second
generation" pill, described in Amanda Acquisition Corp. v. Universal Foods Corp.
708 F. Supp. 984 (E.D. Wis. 1989), allows a bidder, under certain circumstances,
to require the board to hold a special meeting of shareholders within 120 days
of the bidder's offer so that shareholders may consider the offer, and, if the
shareholders vote to request that the board accept the proposal, the pill is
automatically withdrawn with respect to such offer to enable the bidder to
consummate a cash tender offer in the next 60 days at a price not less than
previously proposed. See Id. at 1007.
The Shareholder Friendly Bylaw is also similar to the "chewable" pill
which prevents the board from using the pill to block tender offers or exchange
offers that meet certain criteria. Mr. Wyser-Pratte recently settled a proxy
contest with an agreement for Pennzoil Company to adopt a chewable pill and
other large companies such as Texaco, Lockheed and USX also have chewable pills.
OPERATION OF POISON PILL. Telxon's Poison Pill operates in the
following fashion: Pursuant to the Poison Pill, each certificate for shares of
Common Stock also represents the same number of rights ("Rights"). Each Right,
when exercisable, entitles the registered holder to purchase one share of Common
Stock at a price of One Hundred Dollars ($100.00) per share (the "Purchase
Price"). Both the Purchase Price and the number of shares issuable upon the
exercise of each right are subject to adjustments upon the occurrence of certain
events including, without limitation, in the event that any person shall become
the beneficial owner of 15% or more of the Company's outstanding common stock.
In such event, each holder of a right shall have the right to purchase at the
purchase price a number of shares equal to the quotient obtained by dividing (i)
the product of (x) the then current purchase price and (y) the number of shares
issuable upon the exercise of a right by (ii) 50% of the 30 day average trading
price of the Company's shares. Unless they become exercisable upon the
occurrence of certain events as described below or unless earlier redeemed by
the Company, the Rights will expire on July 31,2006.
If the Company is party to a merger or other business combination
transaction (not approved by the Company's board) in which the Company is not
the surviving corporation, or where the Common Stock is changed or exchanged, or
50% or more of the Company's assets or earning power are sold, each holder of a
Right will have the right to receive shares of publicly traded common stock of
the acquiring company having a market value of two times the Purchase Price of
the Right or, in specified circumstances, cash in an amount determined under the
Poison Pill.
If the Company is the surviving corporation in a merger and the Common
Stock is not changed or exchanged, or if any acquiring person engages in certain
self-dealing transactions specified in the Poison Pill, or becomes the
beneficial owner of 15% or more of the outstanding Common Stock, each holder of
a Right (other than the acquiring person) will have the right to receive Common
Stock having a market value of two times the then current Purchase Price of the
Right.
The Poison Pill discourages Acquisition Proposals not solicited by the
Company's board of directors by effectively allowing the Company's stockholders
to purchase additional shares of Common Stock at a discount following an
acquisition of a large block of the Company's outstanding Common Stock by a
party not approved by the Company's board and by increasing the value of
consideration to be received by stockholders in certain transactions following
such an acquisition. The Rights may be
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redeemed pursuant to the Poison Pill. The terms of the Rights may be amended by
the Company's board without the consent of the shareholders.
THE FOREGOING IS A SUMMARY OF THE RELEVANT MATERIAL PROVISIONS OF THE POISON
PILL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE THERETO. THE DESCRIPTION OF
THE RIGHTS SET FORTH AS ITEM 5 OF THE COMPANY'S CURRENT REPORT ON FORM 8-K,
DATED AUGUST 5, 1996, IS ATTACHED HERETO AS EXHIBIT A.
Under the Shareholder Friendly Bylaw, the board can temporarily use the
Poison Pill to block an Acquisition Proposal. However, if the Company received
an Acquisition Proposal that shareholders, by referendum at a special meeting,
determined was in their best interests and therefore deemed "friendly", the
Board would be required to either redeem the Rights or amend the Poison Pill so
that it would no longer be an impediment to the acquisition of shares pursuant
to such an Acquisition Proposal. The board would be required to take such action
even if the Board believed in the exercise of its fiduciary duties that the
Acquisition Proposal was not advantageous for the shareholders of Telxon. Mr.
Wyser-Pratte believes that this result is in the best interest of shareholders
because the shareholders, rather than the board of directors, should have the
ultimate decision on whether to accept the Acquisition Proposal.
IMPACT ON BOARD'S EXERCISE OF FIDUCIARY DUTIES. The Shareholder
Friendly Bylaw would enable the Company's shareholders, including Mr.
Wyser-Pratte, who wished accept an Acquisition Proposal opposed by the Board to
require the Board to stop using the Poison Pill to block the acquisition of
shares pursuant to the Acquisition Proposal by the affirmative vote of a
majority in interest of the shares represented and entitled to vote at the
meeting. While the Shareholder Friendly Bylaw could require the Board to
terminate such use of the Poison Pill, whether or not the Acquisition Proposal
was advantageous for the Company's shareholders, Mr. Wyser-Pratte believes that
the shareholders' vote that the Acquisition Proposal was in their best interests
would be prima facie evidence that the Acquisition Proposal was advantageous for
the Company's shareholders, and therefore, in his opinion, the adoption of the
Shareholder Friendly Bylaw is in the shareholders' best interests.
The Shareholder Friendly Bylaw has no effect on the board's use of the
Poison Pill unless shareholders affirmatively vote that an Acquisition Proposal
is in their best interests at a duly called and held special meeting. If an
Acquisition Proposal is made at a price which is unattractive to shareholders,
or which is unrealistically low in light of the value the Company can achieve
for shareholders over time, the board can use the Poison Pill to facilitate
competing bids, or in the absence of competing bids, to ward off Acquisition
Proposals that are not, in the opinion of the shareholders, in the shareholders'
best interests.
Mr. Wyser-Pratte is aware of only one instance of a public corporation
with a mechanism like the Shareholder Friendly Bylaw being acquired in a hostile
transaction at a price higher than the initial offer. The Great Northern Nekoosa
poison pill, described above, was similar to the Shareholder Friendly Bylaw
because it required the board within 90 to 120 days after receiving an offer, to
hold a shareholder referendum on whether to accept the offer and redeem the
company's poison pill. There, according to Wall Street Journal reports, Georgia
Pacific made an initial offer of $58 per share for Great Northern Nekoosa and
was ultimately successful in acquiring Great Northern Nekoosa at $65.75 per
share. Except for the Great Northern Nekoosa acquisition, the generalization
that target companies tend to receive subsequent offers higher than the initial
offers is based on companies that did not have in place a mechanism similar to
the Shareholder Friendly Bylaw. Mr. Wyser-Pratte believes, however, that the
enactment of the Shareholder Friendly Bylaw will not eliminate the competitive
process that produces subsequent offers higher than the initial Acquisition
Proposal. Rather, in his opinion, the Shareholder Friendly Bylaw will stimulate
the auction process and encourage potential bidders to come forward with higher
offers after an initial Acquisition Proposal is made because the board will not
have the power to discourage potential bidders by blocking their Acquisition
Proposals indefinitely. Furthermore, he believes that the up to ninety-day
waiting period built into the Shareholder Friendly Bylaw by the timeline
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in the Company's Certificate of Incorporation for directors to set the date of
any special meeting of shareholders will assure that potential bidders have an
adequate period of time in which to evaluate the Company and formulate their
Acquisition Proposals.
Based on his experience as an investor in target company securities,
Mr. Wyser-Pratte believes that ninety days is normally sufficient time for a
target company, seeking a higher offer, to complete the bidding process. For
example, the Great Northern Nekoosa poison pill discussed above provided for a
shareholder referendum--90 to 120 days after an Acquisition Proposal was
received--on whether the Acquisition Proposal should be accepted and the pill
redeemed. Circumstances could arise in which a board of directors seeking a
higher offer was unable to complete the entire process of finding and closing an
alternative transaction before the shareholder vote on the pending proposal.
Similarly, if a board were trying to negotiate the terms of an acquisition with
a prospective purchaser, the inability to block a tender offer to the Company's
shareholders by that purchaser beyond the date of the shareholder meeting could
reduce the board's leverage to negotiate favorable terms for stockholders. Mr.
Wyser-Pratte believes that the Shareholder Friendly Bylaw need not prevent the
Board from obtaining the best possible terms for stockholders in either of these
situations, because the Board would be free to explain to shareholders why more
time was needed and to convince shareholders that the current Acquisition
Proposal was not in their best interests so that the board could continue using
the Poison Pill against an Acquisition Proposal. The adoption of the Shareholder
Friendly Bylaw would not force the acceptance of any Acquisition Proposal. If
shareholders did not believe that an Acquisition Proposal reflected the
Company's intrinsic values, they would be free to vote that the Acquisition
Proposal was not in their best interests, deeming the Acquisition Proposal
"hostile" and providing for the continued use of the Poison Pill against the
Acquisition Proposal. It is possible, however, that under the Shareholder
Friendly Bylaw the Board would lose the power to use the Poison Pill against an
Acquisition Proposal that was not in the best interests of shareholders if the
board failed to convince shareholders of the detriments of the Acquisition
Proposal.
Mr. Wyser-Pratte believes that the provision for a shareholder vote
assures that the Bylaw will not be used to facilitate coercive Acquisition
Proposals. The courts have defined a coercive offer as "an offer which has the
effect of compelling shareholders to tender their shares out of fear of being
treated less favorably in the second stage." Moore Corp. v. Wallace Computer
Servs, Inc., 907 F. Supp. 1545, 1557 n.13 (D. Del. 1995) (interpreting Delaware
law). If a majority of the Company's shareholders consider an Acquisition
Proposal coercive, the shareholders will not vote to deem the Acquisition
Proposal a "friendly" Acquisition Proposal.
LEGAL VALIDITY. Mr. Wyser-Pratte believes that the Shareholder Friendly
Bylaw is valid under Delaware law because Delaware law authorizes shareholders
to adopt bylaws that relate to the powers of the shareholders and the board of
directors. However, he recognizes that the Delaware courts have not specifically
considered the validity of the Shareholder Friendly Bylaw or any similar bylaw
and, therefore, have not resolved the extent to which stockholder-adopted bylaws
may limit the authority of the board of directors to oppose, or to adopt or
employ defensive measures against, takeover bids favored by a majority of the
shareholders. Accordingly, it is uncertain whether the Shareholder Friendly
Bylaw would survive a court challenge.
However, there is support for the validity of the Shareholder Friendly
Bylaw in a recent Oklahoma Federal Court decision involving provisions of the
Oklahoma Corporation Law that are substantially the same as the Delaware
provisions applicable to the Company. International Brotherhood of Teamsters
General Fund v. Fleming Companies, Inc., No. Civ-96-1650-A (W.D. Okla. Jan. 14,
1997). The Fleming court required a corporation to include in its proxy
statement for its 1997 annual shareholders meeting a proposal to adopt a bylaw
requiring the board of directors to redeem the existing poison pill and to
submit any successor poison pill to a shareholder vote. In reaching this
decision the court found that the shareholders had the power to nullify or amend
a poison pill adopted by the board. The court's decision has been appealed to
the Tenth Circuit Court of Appeals, which has requested a ruling on the validity
of the bylaw under Oklahoma law from the Oklahoma Supreme Court.
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Mr. Wyser-Pratte believes that Section 109 of the Delaware General
Corporation Law authorizes the enactment of the Shareholder Friendly Bylaw.
Section 109(a) gives stockholders the power to "adopt, amend or repeal Bylaws."
Section 109(b) states: "The bylaws may contain any provision, not inconsistent
with law or with the certificate of incorporation, relating to the business of
the corporation, the conduct of its affairs, and its rights or powers or the
rights or powers of its stockholders, directors, officers or employees."
(emphasis added). The Shareholder Friendly Bylaw relates to "the rights or
powers of...stockholders, [or] directors" because it allows shareholders to take
away the board's power to use the Poison Pill against an Acquisition Proposal by
voting that such Acquisition Proposal is in the shareholder's best interests.
Section 109 does invalidate bylaws that are "inconsistent with law or
with the certificate of incorporation . . . ." In a review of the Delaware
General Corporation Law, the Company's Certificate of Incorporation and Amended
and Restated Bylaws (the "Bylaws"), Mr. Wyser-Pratte has not discovered any
provisions that bar stockholders from adopting the Shareholder Friendly Bylaw.
He believes that Section 141(a) of the Delaware General Corporation Law does not
bar the adoption of the Shareholder Friendly Bylaw. That section states: "The
business and affairs of every corporation organized under this chapter shall be
managed by or under the direction of a board of directors, except as may be
otherwise provided in this chapter or in its certificate of incorporation"
(emphasis added). Mr. Wyser-Pratte believes that the adoption of the Shareholder
Friendly Bylaw is not inconsistent with Section 141(a) for several reasons.
First, Mr. Wyser-Pratte believes that the enactment of the Shareholder Friendly
Bylaw does not involve management of the "business and affairs of the
corporation" within the meaning of Section 141(a), but rather the creation of a
framework or parameters within which such management takes place. Second, to the
extent that Section 141(a) is read as granting the board of directors authority
over the business and affairs of the corporation, that grant is not by its terms
exclusive and is qualified by the phrase "except as may be otherwise provided in
this chapter or in its certificate of incorporation." Therefore, Mr.
Wyser-Pratte believes, Section 141(a) leaves room for the grant of authority in
Section 109 for stockholders to adopt bylaws which relate to the rights and
powers of stockholders and directors and, in particular, permits the adoption of
bylaws like the Shareholder Friendly Bylaw that permit shareholder referendum on
important corporate governance decisions by the board, such as the decision to
continue using the Poison Pill to block an Acquisition Proposal for the
Company's shares. Finally, Mr. Wyser-Pratte believes that any reading of Section
141(a) that invalidated the Shareholder Friendly Bylaw would make meaningless
Section 109's broad grant of authority for stockholders to adopt bylaws relating
to the rights and powers of stockholders and directors.
While no case other than Fleming has considered the validity of bylaws
similar to the Shareholder Friendly Bylaw, there are cases that have upheld
bylaws allocating corporate governance powers to the shareholders, against
claims that these bylaws illegally invade the board's power to manage the
business and affairs of the corporation. Such cases include Securities and
Exchange Commission v. Transamerica Corp., 163 F. 2d 511 (3rd Cir. 1947), cert.
denied, 332 U.S. 847 (1948) (upholding bylaw allowing the shareholders of a
Delaware corporation to select the company's independent auditors) and Ripley v.
Storer, N.Y. Sup. Ct., 139 N.Y.S. 2d 786, aff'd N.Y. App. Div., 142 N.Y.S. 2d
269 (1955) (involving a New York corporation which adopted a bylaw requiring
shareholder approval of contracts entered into by the board of directors).
More generally, the Delaware Supreme Court has strongly endorsed the
power of shareholders to adopt corporate bylaws. The Delaware Supreme Court has
stated: "The power [of stockholders] to make and amend the bylaws of a
corporation has been recognized as an inherent feature of the corporate
structure. The bylaws of a corporation are presumed to be valid, and the courts
will construe the bylaws in a manner consistent with the law rather than strike
down the bylaws." Frantz Manufacturing Co. v. EAC Industries, Del. Supr., 501
A.2d 401, 407 (1985) (citations omitted). Other courts have recognized that
shareholders, as the owners of a corporation, have the ultimate power over
corporate governance. An example is the opinion of the United States Supreme
Court in Rogers v. Hill, 289 U.S. 582, 589 (1933),
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which quoted the statement in a New Jersey state court opinion that "It would be
preposterous to leave the real owners of the corporate property at the mercy of
their agents, and the law has not done so."
Courts interpreting Delaware law have also recognized that the use of
the Poison Pill against an Acquisition Proposal is a defensive action by the
board. Moran v. Household Int'l, Inc., 500 A.2d 1346, 1354 (Del. 1985) (board
faced with tender offer and request to redeem rights plan will be held to same
fiduciary duties under Unocal as would apply to any decision to adopt defensive
mechanism); Moore Corp. v. Wallace Computer Servs, Inc., 907 F. Supp. 1545, 1556
(D. Del. 1995) ("With respect to the failure to redeem the poison pill, the
Court finds this to be a defensive measure").
Mr. Wyser-Pratte also believes that there is no inconsistency between
the Shareholder Friendly Bylaw and Section 157 of the Delaware General
Corporation Law. While Section 157 states that rights or options to purchase a
company's stock shall be subject to agreements approved by the board of
directors, Section 157 does not require that the board of directors shall
exclusively control the exercise of the company's rights under such agreements,
and Mr. Wyser-Pratte believes that any agreement that purports to bar a company
from allowing shareholders to participate in the control of such rights is an
illegal infringement on the power of shareholders to enact bylaws. The opinion
in the Fleming case, cited above, rejected the company's argument that an
Oklahoma provision identical to Section 157 prevented shareholders from
requiring redemption of the company's Poison Pill. Section 157 differs from the
Georgia statutory provision that was at issue in Invacare Corp. v. Healthdyne
Technologies, Inc., 968 F. Supp. 1578 (N.D. Ga. 1997). There a federal district
court, interpreting the Georgia statute dealing with rights or options to
purchase a company's stock, held that the statute barred shareholders from
requiring the redemption of the Poison Pill. However, the Georgia statute,
unlike Delaware Section 157, states that the board shall have "sole discretion"
over the terms of rights to acquire the company's stock, language which, the
Invacare court determined, was enacted to give the board of a Georgia
corporation sole discretionary control over the terms and conditions of a Poison
Pill. Section 157 has no such language or statutory history and therefore, Mr.
Wyser-Pratte believes, the Invacare case does not apply to the Shareholder
Friendly Bylaw.
Mr. Wyser-Pratte also believes that the Shareholder Friendly Bylaw does
not conflict with Delaware case law dealing with the fiduciary duties of boards
of directors. In certain cases, courts interpreting Delaware law have, on the
basis of particular facts presented, upheld reasonable defensive measures
adopted by directors who, in good faith and upon reasonable investigation,
believed that a hostile offer posed a danger to corporate policy and
effectiveness, even though a majority of the stockholders may have tendered
their shares. Mr. Wyser-Pratte believes, however, that those cases do not
support invalidating the Shareholder Friendly Bylaw because those cases only
dealt with whether the board had properly exercised its powers, and not with
whether those powers can be circumscribed by bylaws previously adopted by the
shareholders pursuant to Section 109. In none of those cases was the board's
discretion limited by a bylaw previously adopted by stockholders pursuant to the
grant of authority in Section 109. Mr. Wyser-Pratte believes it is inherent in
the Delaware scheme of corporate law that while the board is entitled to
exercise its judgment in responding to a tender offer or other takeover bid, the
board must exercise its judgment within the framework of statutes (including
Section 109), charter provisions and bylaws, such as the Shareholder Friendly
Bylaw, which in certain instances limit the actions that directors may take even
when the directors believe that their chosen course of action is in the best
interests of stockholders. Mr. Wyser-Pratte further believes that the
Shareholder Friendly Bylaw is supported by Delaware case law recognizing that at
some point in time the failure to redeem a poison pill can constitute a
fiduciary breach (See Moore, 907 F. Supp. at 1556), and by Delaware case law
recognizing that directors' exercise of their fiduciary duties is limited by the
voting rights of shareholders (See Blasius Industries, Inc. v. Atlas
Corporation, Del. Ch., 564 A.2d 651 (1988) and Stahl v. Apple Bancorp, Del. Ch.,
579 A.2d 1115, 1124 (1990)).
In any event, Mr. Wyser-Pratte believes that if the existing Telxon
board attempts to use the Poison Pill to block a premium Acquisition Proposal,
the board will be subject to stricter judicial review than the courts applied in
the leading Delaware cases upholding the use of a poison pill to block a
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premium offer. In each of those cases, the court explicitly stated that the
board's showing of good faith and reasonable investigation was "materially
enhanced" by the presence of a majority of outside independent directors. See,
Unocal Corp. v. Mesa Petroleum Co., 493 A.2d at 955; Unitrin v. American General
Corp., 651 A.2d 1361, 1375 (1995); Moore Corp. v. Wallace Computer Servs, Inc.,
907 F. Supp. 1545 at 1560. Mr. Wyser-Pratte believes that the Telxon board does
not have a majority of outside independent directors. Therefore, in his opinion,
it is doubtful whether the existing Telxon board, composed primarily of inside
and otherwise interested directors, will be able to carry its Unocal burden in a
situation where it is blocking a premium Acquisition Proposal and has not
offered shareholders a value maximizing alternative.
Mr. Wyser-Pratte believes that even if the Delaware courts did not
uphold the provisions of the Shareholder Friendly Bylaw that require the board
to Withdraw the Poison Pill, there is no question as to the legal validity of
the provisions of the Shareholder Friendly Bylaw giving shareholders the right
to call and hold a special meeting to vote on whether they consider an
Acquisition Proposal to be in their best interests. Article Sixth, Paragraph C
of the Certificate of Incorporation provides that special meetings of
stockholders may be called "for any purpose by the Chairman of the Board of
Directors, by the President or by the Board of Directors of the Corporation or
as otherwise provided in the By-laws of the Corporation (emphasis added).
Section 211(d) of the Delaware General Corporation Law provides that "Special
meetings of the stockholders may be called by the board of directors or by such
person or persons as may be authorized by the certificate of incorporation or by
the bylaws."
IN ORDER TO GIVE SHAREHOLDERS A GREATER VOICE IN THE GOVERNANCE OF THE COMPANY,
MR. WYSER-PRATTE RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND THE BYLAWS
TO ALLOW SHAREHOLDERS TO DETERMINE WHETHER A PROPOSAL TO ACQUIRE THE COMPANY
SHALL BE TREATED AS "FRIENDLY" OR "HOSTILE".
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PROPOSAL TO ADOPT A "SHAREHOLDER INTERESTS PROTECTION BYLAW" THAT WOULD REQUIRE
A UNANIMOUS VOTE OF THE DIRECTORS TO APPROVE "DEFENSIVE ACTIONS" BY THE BOARD
UNLESS SUCH ACTIONS HAVE BEEN APPROVED BY A SHAREHOLDER VOTE
(ITEM 2 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO ADOPT A
"SHAREHOLDER INTERESTS PROTECTION BYLAW" THAT WOULD REQUIRE A UNANIMOUS VOTE OF
THE DIRECTORS TO APPROVE "DEFENSIVE ACTIONS" BY THE BOARD UNLESS SUCH ACTIONS
HAVE BEEN APPROVED BY SHAREHOLDERS:
"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 majority in interest of the shares
represented and entitled to vote at the meeting. `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 July
31, 2006 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.' "
Mr. Wyser-Pratte is proposing the adoption of a bylaw (the "Shareholder
Interests Protection Bylaw") that would require a unanimous board vote to
approve any Defensive Action by the board, unless such action was approved by a
shareholder vote. 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.
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The proposed bylaw defines "Defensive Action" to include 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. Mr. Wyser-Pratte believes it is desirable to include a
general definition of Defensive Action in the bylaw, so that the bylaw covers
any new devices that are created to block takeover bids in the future. He also
believes that such a general definition can be applied by the courts, since the
Delaware courts already apply a similar test in determining whether a board is
engaged in anti-takeover defenses that give rise to "enhanced" duties under
Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985). With limited
exceptions, the definition of Defensive Action specifically excludes any action
taken by the board to facilitate an offer that a majority of the board
determines will maximize the Company's value in a sale for the benefit of
stockholders. Therefore, if after receiving an Acquisition Proposal, the Company
receives a higher offer from a "white knight," the board would not have to act
by a unanimous vote to block the original Acquisition Proposal and facilitate
the offer from the white knight.
In addition to proscribing the use of the Poison Pill to block an
acquisition, the Shareholder Interests Protection Bylaw will require a unanimous
board vote (or shareholder approval) to extend the Pill past its present July
31, 2006 expiration date or to amend the Pill to include a Dead Hand clause. A
"Dead Hand" clause typically prevents a newly elected board from voting to
redeem the Pill by only allowing such action to be taken by "Continuing
Directors" (i.e., directors who were in office before a change in control, or
their designees). Mr. Wyser-Pratte believes that it would be a breach of the
directors' fiduciary duties to add a Dead Hand clause to the Company's Poison
Pill. When the Delaware Supreme Court upheld the adoption of a Poison Pill in
Moran, its decision was premised in part on the assumption that the Poison Pill
would not prevent a bidder from replacing the existing board through a
successful proxy contest and then redeeming the Poison Pill. A Dead Hand clause
would prevent a bidder from redeeming the Poison Pill by this means.
Nevertheless, Mr. Wyser-Pratte has included a specific reference to the Dead
Hand Clause in the Shareholder Interests Protection Bylaw, to reduce the risk
that the board would adopt such a provision and that it would be upheld.
While it is possible that the Shareholder Interests Protection Bylaw
could delay board actions that might be beneficial to shareholders, Mr.
Wyser-Pratte believes, given the history of the Telxon board's response to the
Symbol Acquisition Proposal, that the present Telxon board cannot be relied upon
to act in the best interests of shareholders when responding to Acquisition
Proposals, and that there is a greater risk that without the Shareholder
Interests Protection Bylaw the board will take action that denies shareholders
an opportunity to receive or accept an advantageous Acquisition Proposal.
While there are no Delaware cases considering the validity of a
Shareholder Interests Protection Bylaw, Mr. Wyser-Pratte believes this bylaw is
legally valid.
The essential feature of the Shareholder Interests Protection Bylaw is
a requirement for the Board to act unanimously to authorize Defensive Actions.
The Bylaw also permits the Board to authorize Defensive Actions by a lesser vote
if the shareholders ratify the board's action; but the board does not need
shareholder approval as long as the board acts unanimously.
A unanimous vote requirement for action by the board is authorized by
Section 141(b) of the Delaware General Corporation Law which states in relevant
part: "The vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the board of directors unless the
certificate of incorporation or the bylaws shall require a vote of a greater
number." (emphasis added). In Frantz Mfg. Co. v. EAC Indus., 501 A.2d 401, 407
(Del. 1985) (citations omitted) the Delaware Supreme Court ruled that a majority
shareholder may adopt a bylaw requiring a unanimous vote for action by the board
in order "to limit the Frantz board's anti-takeover maneuvering after EAC had
gained control of the corporation."
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The Shareholder Interests Protection Bylaw would enable individual
directors (including Professor Macey if he is elected to the board) to block a
Defensive Action approved by a majority of the board unless such actions were
ratified by a shareholder vote. While the Shareholder Interests Protection Bylaw
would have this effect, whether or not such Defensive Action was in the best
interests of shareholders, Mr. Wyser-Pratte believes that the failure of such
Defensive Action to obtain approval by a unanimous board vote or majority
shareholder vote would be evidence that the Defensive Action was not
advantageous for shareholders and, therefore, he believes the adoption of the
Shareholder Interests Protection Bylaw is in the shareholders' best interests.
The definition of Defensive Actions also includes the expenditure of
Company funds on a proxy contest against a shareholder (including expenditures
on litigation) unless the board agrees to reimburse the shareholder's expenses
if at least 10% of the Company's shares are voted in favor of any of the
shareholder's proposals. Mr. Wyser-Pratte included this provision in the
definition of Defensive Action to help create a level playing field in future
proxy contests. Today management is able to utilize Company funds in a proxy
contest with shareholders, while the shareholders (who may be seeking to
vindicate the interests of all shareholders) must fund their own expenses.
Typically, the shareholder's expenses do not get reimbursed by a company unless
a court orders these expenses to be reimbursed or there is a change in control
of the company and the new board votes to reimburse the expenses. The provision
for reimbursement of proxy statement expenses would apply to any shareholder
proposal on any subject. The definition of Defensive Actions also includes any
amendment or repeal of the Shareholder Interests Protection Bylaw. Mr.
Wyser-Pratte has included this element in the definition of Defensive Actions in
order to prevent less than all the Company's directors from repealing the Bylaw
without shareholder approval.
IN ORDER TO GIVE SHAREHOLDERS A GREATER VOICE IN THE GOVERNANCE OF THE COMPANY,
MR. WYSER-PRATTE RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND THE BYLAWS
TO REQUIRE A UNANIMOUS VOTE OF THE DIRECTORS TO APPROVE "DEFENSIVE ACTIONS" BY
THE BOARD UNLESS SUCH ACTIONS HAVE BEEN APPROVED BY A SHAREHOLDER VOTE
PROPOSAL TO AMEND THE BYLAWS TO ALLOW THE HOLDERS OF 25% OF THE SHARES TO CALL
A SPECIAL MEETING OF SHAREHOLDERS
(ITEM 3 ON PROXY CARD)
"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.' "
Mr. Wyser-Pratte believes that a 25% requirement for calling a special
meeting is reasonable and beneficial to shareholders because if a significant
number of shareholders want to bring an issue before the Company's other
shareholders, they should be able to do so. Under the Company's existing Bylaws,
49% of the Company's shareholders do not have the power to call a special
meeting.
Such an amendment of the Bylaws is authorized by the Company's
Certificate of Incorporation and by the Delaware General Corporation Law.
Article Sixth, Paragraph C of the Certificate of Incorporation provides that
special meetings of stockholders may be called "for any purpose by the Chairman
of the Board of Directors, by the President or by the Board of Directors of the
Corporation or as
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otherwise provided in the By-laws of the Corporation (emphasis added). Section
211(d) of the Delaware General Corporation Law provides that "Special meetings
of the stockholders may be called by the board of directors or by such person or
persons as may be authorized by the certificate of incorporation or by the
bylaws."
IN ORDER TO GIVE SHAREHOLDERS A GREATER VOICE IN THE GOVERNANCE OF THE COMPANY,
MR. WYSER-PRATTE RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND THE BYLAWS
TO ALLOW THE HOLDERS OF 25% OF THE SHARES TO CALL A SPECIAL MEETING OF
SHAREHOLDERS.
PROPOSAL TO AMEND THE BYLAWS TO ELECT NOT TO BE GOVERNED BY THE
BUSINESS COMBINATION STATUTE
(ITEM 4 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO AMEND
THE BYLAWS TO ELECT NOT TO BE GOVERNED BY THE BUSINESS COMBINATION STATUTE:
"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:
`The corporation shall not be governed by Section 203 of the Delaware
General Corporation Law.' "
Mr. Wyser-Pratte is proposing that stockholders adopt an amendment to
the Bylaws electing not to be governed by Section 203 of the Delaware General
Corporation Law (the "Business Combination Statute").
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 Interested
Shareholder may not engage in a business combination with the Company for three
years thereafter, subject to certain exceptions. Among the exceptions are (i)
the Board's prior approval of such acquisition; (ii) 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 (iii) the approval
of such business combination by 66 2/3% of the outstanding stock not owned by
the Interested Shareholder. The Company's shareholders may, by a vote of a
majority of the outstanding shares, adopt an amendment to the Bylaws or
Certificate of Incorporation electing not to be governed by the Business
Combination Statute. Such amendment would become effective twelve months after
adoption and would not be subject to amendment by the Board and would not apply
to a business combination with a person who became an Interested Shareholder
prior to the adoption of such amendment.
THE FOREGOING IS A SUMMARY OF THE RELEVANT MATERIAL PROVISIONS OF THE BUSINESS
COMBINATION STATUTE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE THERETO. THE
TEXT OF THE BUSINESS COMBINATION STATUTE IS ATTACHED HERETO AS EXHIBIT B.
While the proposed Bylaw could facilitate a business combination with a
15% or greater shareholder, whether or not the transaction was advantageous for
shareholders, Mr. Wyser-Pratte believes that the adoption of this Bylaw is in
the best interests of shareholders because the Business Combination Statute
discourages Acquisition Proposals to acquire the Company's shares; and Mr.
Wyser-Pratte believes that the Delaware "entire fairness" doctrine provides more
than adequate protection of the interests of the other shareholders in a
business combination with a controlling shareholder. If the
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shareholders adopt the proposed Bylaw, prospective bidders may be encouraged to
make offers to acquire control of the Company, thereby benefiting shareholders
such as Mr. Wyser-Pratte who wish to have the opportunity to consider offers to
acquire a controlling interest in the Company.
The Business Combination Statute discourages offers to acquire the
Company's shares, in Mr. Wyser-Pratte's opinion, by creating obstacles to
second-stage mergers in which successful offerors acquire the remainder of the
Company's shares. The Business Combination Statute has this effect because it
requires the offeror to win the votes of a two-thirds super-majority of the
minority shareholders to approve a second-stage merger unless the offeror
acquired at least 85% of the Company's shares (subject to certain exclusions) in
the transaction in which the offeror became an Interested Shareholder or unless
such transaction was approved by the Board of Directors.
Mr. Wyser-Pratte believes that the Company's minority stockholders are
protected in a second-stage merger because under Delaware law a second-stage
merger with a controlling shareholder would have to satisfy the entire fairness
test. This test requires the courts to conduct a comprehensive review of the
fairness of such a transaction. Its scope has been described by the Delaware
Supreme Court in Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983): "The
concept of fairness has two basic aspects: fair dealing and fair price. The
former embraces questions of when the transaction was timed, how it was
initiated, structured, negotiated, disclosed to the directors, and how the
approvals of the directors and shareholders were obtained. The latter aspect of
fairness relates to the economic and financial considerations of the proposed
merger, including all relevant factors: assets, market value, earnings, future
prospects, and any other elements that affect the intrinsic or inherent value of
a company's stock."
IN ORDER TO ENCOURAGE OFFERS FOR THE COMPANY'S SHARES, MR. WYSER-PRATTE
RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND THE BYLAWS TO ELECT NOT TO BE
GOVERNED BY THE BUSINESS COMBINATION STATUTE.
PROPOSAL TO REPEAL ANY BYLAWS ADOPTED BY THE BOARD OF DIRECTORS SINCE JUNE 11,
1998
(ITEM 5 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO REPEAL
ANY BYLAWS ADOPTED BY THE BOARD OF DIRECTORS SINCE JUNE 11, 1998:
"RESOLVED, that any Bylaws adopted by the board of directors since June
11, 1998 be, and they hereby are, repealed."
The purpose of this proposal is to prevent the board from interfering
with the implementation of the proposals being voted upon by the shareholders at
this Annual Meeting. Mr. Wyser-Pratte and other similarly situated shareholders
will benefit from the adoption of this proposal to the extent of the benefits,
described above, that they will derive from the adoption of the other proposals
being voted upon at this Annual Meeting.
IN ORDER TO PREVENT THE BOARD FROM INTERFERING WITH THE IMPLEMENTATION OF THE
PROPOSALS BEING VOTED UPON BY THE SHAREHOLDERS AT THIS ANNUAL MEETING, MR.
WYSER-PRATTE RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO REPEAL ANY BYLAWS
ADOPTED BY THE BOARD OF DIRECTORS SINCE JUNE 11, 1998.
PROPOSAL TO ADOPT A RESOLUTION RECOMMENDING TO THE BOARD THAT THE
COMPANY REIMBURSE MR. WYSER-PRATTE'S EXPENSES IN CONNECTION WITH THIS PROXY
SOLICITATION
(ITEM 6 ON PROXY CARD)
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SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO ADOPT
A RESOLUTION RECOMMENDING TO THE BOARD THAT THE COMPANY REIMBURSE MR.
WYSER-PRATTE'S EXPENSES IN CONNECTION WITH THIS PROXY SOLICITATION:
"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."
The purpose of the proposals being made by Mr. Wyser-Pratte at this
Annual Meeting is to advance shareholder interests. Therefore, he believes that
his expenses in connection with the proxy solicitation (including any litigation
expenses) should be reimbursed. Mr. Wyser-Pratte estimates that his expenses
incurred through September __, 1998 are $______ and that his total expenses will
be $_____.
One of the bylaws being proposed by Mr. Wyser-Pratte would require a
unanimous board vote or shareholder approval for the board to spend any funds on
a proxy contest with a shareholder unless the board agreed to reimburse the
shareholder's expenses if any of the shareholder's proposals were approved by
the holders of 10% of the shares. However, this proposal will not assist Mr.
Wyser-Pratte in getting his expenses in the current proxy contest reimbursed,
because this proposal will only operate prospectively.
The proposed resolution is precatory and will not bind the board of
directors. If the shareholders adopted this proposal, and the Board followed the
shareholders' recommendation, Mr. Wyser-Pratte would benefit by having his
expenses for this proxy contest reimbursed.
If the board does not reimburse Mr. Wyser-Pratte's expenses, he intends
to seek a court order requiring the board to reimburse these expenses, because
of the benefits conferred on the Company's shareholders.
MR. WYSER-PRATTE RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO ADOPT A RESOLUTION
RECOMMENDING TO THE BOARD THAT THE COMPANY REIMBURSE MR. WYSER-PRATTE'S EXPENSES
IN CONNECTION WITH THIS PROXY SOLICITATION
PROPOSAL TO ELECT JONATHAN R. MACEY TO THE BOARD OF DIRECTORS
(ITEM 7 ON PROXY CARD)
Two directors are to be elected at the 1998 Annual Meeting to a
three-year term ending at the 2001 Annual Meeting (or until their respective
successors are duly elected and qualified). The directors will be elected by a
plurality of the votes cast.
Jonathan R. Macey has been nominated as a director and Mr. Wyser-Pratte
is soliciting proxies to vote for his election. Mr. Wyser-Pratte is seeking
proxies with cumulative voting instructions to cast two votes per share for
Professor Macey. If Professor Macey received two votes per share from all
shareholders voting for him, he would need the votes of shareholders holding 33%
of the shares voted, plus one share, in order to be assured of being elected.
Professor Macey, age 42, is the J. DuPratt White Professor of Law and
the Director of the John M. Olin Program in Law and Economics at Cornell Law
School, specializing in corporation law, comparative corporate governance,
banking and corporate finance. Professor Macey's employment with the Cornell Law
School is his principal occupation. His business address is Cornell Law School,
306 Myron Taylor Hall, Ithaca, New York 14853. His residence address is 28
Renwick Heights Road, Ithaca NY 14853. From late 1993 through mid-1994,
Professor Macey was a Research Fellow in Turin, Italy.
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Prior to that, he was a visiting law professor at the Stockholm School of
Economics. From 1990 to 1991, Professor Macey was a Professor of Law at the
University of Chicago, and from 1987 to 1990 he was a Professor of Law at
Cornell University.
Professor Macey believes that the board of directors, subject to their
fiduciary duties, should seek to maximize shareholder value through a sale of
the Company. He also believes that the board's response to the Symbol
Acquisition Proposal shows that the present board is not committed to that goal.
Professor Macey believes that his election to the board would improve the
chances that the Company would enter into a value-maximizing transaction,
although at least initially there would not be a majority of directors who share
Professor Macey's views. If he were elected, and the shareholders adopted the
bylaw requiring a unanimous vote for Defensive Actions, Professor Macey would,
subject to his fiduciary duties, cast his vote to prevent the board from taking
Defensive Actions unless they were part of a strategy that he believed would
maximize shareholder value. If the bylaw were not adopted, Professor Macey
believes that he could still be effective as a director by pressing the board to
negotiate and give serious consideration to premium Acquisition Proposals.
Professor Macey has entered into an agreement with Mr. Wyser-Pratte
whereby WPC has agreed to pay Professor Macey a fee of between $10,000 and
$15,000 (the specific amount to be in the sole discretion of WPC) in the event
that he does not become a director of the Company. Additionally, WPC has agreed
to (i) reimburse Professor Macey for any reasonable out-of-pocket expenses
incurred in the performance of his service as a nominee and (ii) indemnify
Professor Macey with respect to any liabilities relating to or arising out of
such service.
REQUIRED VOTE
Under Article IX of the Bylaws, the affirmative vote of a majority in
interest of the shares represented and entitled to vote at any meeting of
stockholders at which a quorum is present is required to adopt Proposals 1
through 3 and 5, the amendments to the Bylaws and repeal of certain Bylaws being
proposed by Mr. Wyser-Pratte. Under Article I, Section 5 of the Bylaws, adoption
of Proposal 6 requires the affirmative vote of a majority of the shares present
in person or represented by proxy and entitled to vote at a meeting at which a
quorum is present. A majority of the outstanding shares, present in person or
represented by proxy, constitute a quorum. The affirmative vote of a majority in
interest of the issued and outstanding shares is required to adopt Proposal No.
4 under Section 203 of the Delaware General Corporation Law. With respect to
abstentions and broker non-votes, the shares represent issued and outstanding
shares and will be considered present and entitled to vote generally at the
Annual Meeting, but since they are not affirmative votes for the amendments or
the repeal, they will have the same effect as votes against Proposals 1 through
6. Under the Company's cumulative voting system, Professor Macey will need 33%
of the votes cast, plus one vote, to be assured of being elected to the
Company's board. Abstentions and broker non-votes will have no effect on the
election of directors except to reduce the number of votes cast.
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BACKGROUND AND RECENT EVENTS
On April 8, 1998, Symbol sent a letter to the Company expressing
serious interest in acquiring all of the Company's outstanding shares for $38
per share in cash. Symbol also indicted, on April 8, its willingness to provide
a portion of the consideration for the Company's shares in Symbol stock, if the
Company preferred. The Company's shares closed at 24 1/2 on April 7, the day
before Symbol's initial proposal, which represented a 55% premium over the April
7 closing stock price.
On April 21, 1998, Frank Brick, the Company's president and chief
executive officer, acknowledged receipt of Symbol's April 8 letter stated the
letter was "currently being reviewed by [the Company's] financial and legal
advisors and [would] be considered by Telxon's board of directors in due
course."
Also on April 21, Symbol stated that it was prepared to negotiate all
aspects of a potential transaction and that, to the extent the form of
consideration consists of cash, Symbol did not envision a negotiated transaction
would be subject to a financing out. Symbol also stated on April 21 that it has
been advised by its legal counsel that a combination of the two companies would
not present any significant regulatory issues. Symbol continued that its
interest remained subject to confirmatory diligence which could be completed
promptly to accommodate any reasonable schedule Telxon would require.
On May 1, 1998, prior to any public announcement regarding Telxon's
response to Symbol's initial proposal, Jerome Schwartz, Symbol's Chairman and
Chief Executive Officer sent a letter containing the following text to Frank
Brick:
"I was disappointed to learn of your response to our letter dated April
8, 1998, proposing to acquire Telxon at $38 per share in cash. Your
advisor, Goldman, Sachs, has advised our advisor, Bear Stearns, that
you are not even interested in discussing our proposal and that you
believe the $38 price level is inadequate. We expressed to you our
flexibility to more fully discuss this proposal, and we sincerely hope
that we will be able to negotiate a transaction between our two
companies. Furthermore, your advisors expressed reservations as to our
ability to finance the transaction, and they indicated that you would
be interested in receiving additional information concerning both our
financing plan and the various accounting and synergy assumptions made
in connection with the formulation of our proposal.
We believe that $38 is a very full and fair price. We note that $38
represents a premium of over 50% from the closing price of Telxon's
shares on the day prior to our April 8 letter. In addition, $38 per
share is well above the highest price Telxon's shares have ever traded
and is higher than any price Telxon could reasonably be expected to
reach on its own in the foreseeable future. We also note that virtually
all of the analysts and Telxon stockholders who have contacted us
and/or have published research comments regarding our proposal are
enthusiastic about it. We would be interested in understanding the
valuation methodology that you have used to justify a conclusion that
the $38 offer price is inadequate.
We can only assume that Telxon has not formed a special committee of
independent directors to fully consider whether Symbol's $38 proposal
is in the best interests of your shareholders since Telxon has made no
public announcement. As your legal advisors have undoubtedly informed
you, your Board of Directors is only entitled to a legal presumption of
having acted in good faith and in fulfillment of its duty of loyalty
with respect to its consideration of our offer if a majority of your
existing six person Board is disinterested.
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Symbol has the financial resources to quickly consummate a transaction
with Telxon. We have met with three money center banks, each of which
expressed a willingness to finance the entire transaction. We would be
prepared to provide you and your board with copies of documentation of
such committed financing at the appropriate time.
As I publicly stated, the proposed transaction is significantly and
immediately accretive to Symbol's earnings per share (after one time
charges). Our analysis was based on assumptions regarding potential
cost savings that Symbol, Bear Stearns and the banks consider
conservative and reasonable. We have prepared a detailed plan regarding
such potential savings that could be expected from a combination of our
two companies. We would also be prepared to share that information with
you at the proper time.
Based on the positive reaction of your shareholders, I am still hopeful
that you will reconsider and discuss a friendly merger with us. We are
determined to complete this transaction and I therefore look forward to
a prompt response from you."
On May 8, 1998, Telxon publicly rejected Symbol's acquisition proposal,
stating that "Symbol's $38 price is inadequate. Moreover, we believe a
Symbol/Telxon combination raises troubling questions that have not been
addressed by Symbol." Mr. Brick did indicate which aspects of the proposed
combination Telxon found "troubling."
Also on May 8, 1998, Symbol released the text of the May 1 letter,
above.
On June 1, 1998, Symbol delivered a revised written proposal to Telxon,
increasing its offer to $40 cash per share or up to $42 per share in cash and
Symbol stock. On June 2, 1998, Symbol announced that Telxon had rejected its
sweetened offer and challenged Telxon to explain why it was not in the
shareholders' best interests to negotiate a merger between the two companies.
Symbol's revised offer represented an approximately 71.4% premium over the
closing price of Telxon's shares on April 7, 1998, the day before Symbol's
initial proposal.
On June 5, 1998 Frank Brick announced that the board had rejected
Symbol's $40 per share all cash offer and that Symbol's $42 per share hybrid
cash and stock offer did not contain enough information to even be considered by
the Company's board.
Brick also announced that Telxon's board had authorized management to
meet with Symbol following Telxon's rejection of Symbol's initial proposal.
Symbol stated that the board had determined, following the discussions, that
Symbol was unwilling to offer Telxon's shareholders a proposal that gives them
fair value for their shares.
On June 8, 1998, Symbol withdrew its bid to acquire the Company.
Telxon's shares dropped more than 10% to close at 32 1/16, an almost 31% deficit
from Symbol's $42 dollar per share offer.
On June 11, 1998, Mr. Wyser-Pratte issued a press release announcing
that he had sent notice to the Company's board of directors of his intention to
introduce proposals for shareholder action and to nominate Professor Macey for
election to the Company's board at the Company's Annual Meeting.
Also on June 11, 1998, Symbol issued a press release stating, "We are
encouraged that Telxon shareholders are taking independent action and we remain
very interested in a negotiated acquisition subject to due diligence."
On June 19, 1998, Mr. Wyser-Pratte filed his preliminary proxy
materials with the Securities and Exchange Commission.
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CERTAIN INFORMATION CONCERNING
MR. WYSER-PRATTE
AND OTHER PARTICIPANTS
IN THE SOLICITATION
Mr. Wyser-Pratte is President and Chief Executive Officer of
Wyser-Pratte Management Company and WPC, which are principally engaged in money
management and event arbitrage. The principal executive offices of WPC are
located at 63 Wall Street, New York, New York 10005. Mr. Wyser-Pratte owns
beneficially 730,000 shares of the Common Stock, representing approximately 4.9%
of the of the 15,902,312 shares of Common Stock outstanding as of January 31,
1998, as reported in the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997. This includes shares owned directly by Mr. Wyser-Pratte
and shares owned by investment partnerships and other managed accounts and other
discretionary for which affiliates of WPC are the general partner or investment
manager. Certain information about the directors and executive officers of WPC
is set forth in Schedule I attached hereto. Other than Mr. Wyser-Pratte, no
other officer of WPC owns any shares of Common Stock.
Except as set forth in this Proxy Statement or in the Appendices
hereto, to the best knowledge of Mr. Wyser-Pratte, none of Mr. Wyser-Pratte, any
of the persons participating in this solicitation on behalf of Mr. Wyser-Pratte,
Professor Macey and any associate of any of the foregoing persons (i) owns
beneficially, directly or indirectly, or has the right to acquire, any
securities of the Company or any parent or subsidiary of the Company, (ii) owns
any securities of the Company of record but not beneficially, (iii) has
purchased or sold any securities of the Company within the past two years, (iv)
has incurred indebtedness for the purpose of acquiring or holding securities of
the Company, (v) is or has been a party to any contract, arrangement or
understanding with respect to any securities of the Company within the past
year, (vi) has been indebted to the Company or any of its subsidiaries since the
beginning of the Company's last fiscal year or (vii) has any arrangement or
understanding with respect to future employment by the Company or with respect
to any future transactions to which the Company or any of its affiliates will or
may be a party. In addition, except as set forth in this Proxy Statement or in
the Appendices hereto, to the best knowledge of Mr. Wyser-Pratte, none of Mr.
Wyser-Pratte, Professor Macey, any of the persons participating in this
solicitation on behalf of Mr. Wyser-Pratte, and any associate or immediate
family member of any of the foregoing persons has had or is to have a direct or
indirect material interest in any transaction with the Company since the
beginning of the Company's last fiscal year, or any proposed transaction, to
which the Company or any of its affiliates was or is a party.
VOTING RIGHTS
According to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1997, 15,902,312 shares of Common Stock were
outstanding as of at January 31, 1998. Only holders of record as of the close of
business on _______ __, 1998 will be entitled to vote at the Annual Meeting. Mr.
Wyser-Pratte intends to vote all shares of Common Stock beneficially owned by
him in favor of the proposals set forth herein.
GENERAL INFORMATION
This Proxy Statement and the accompanying [COLOR] Proxy Card are first
being made available to shareholders on or about ________ __, 1998. Executed
Proxies will be solicited by mail advertisement, telephone, telecopier and in
person. Solicitation will be made by Mr. Wyser-Pratte, Professor Macey and Eric
Longmire, Senior Managing Director of WPC none of whom will receive additional
compensation for such solicitation. Proxies will be solicited from individuals,
brokers, banks, bank nominees and other institutional holders. Mr. Wyser-Pratte
has requested banks, brokerage houses and other custodians, nominees and
fiduciaries to forward all solicitation materials to the beneficial owners of
the shares they hold of record. Mr. Wyser-Pratte will reimburse these record
holders for their reasonable out-of-pocket expenses.
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In addition, Mr. Wyser-Pratte has retained the Proxy Solicitor to
solicit proxies in connection with the Annual Meeting for which the Proxy
Solicitor will be paid a fee of approximately $______ and will be reimbursed for
its reasonable expenses. The Proxy Solicitor will employ approximately __ people
in its efforts. Costs incidental to this solicitation include expenditures for
printing, postage, legal and related expenses and are expected to be
approximately ______. The total costs incurred to date in connection with this
solicitation are not in excess of $______.
If the Shareholder Friendly Bylaw is adopted, or the Board adopts a
change in policy or takes other action in response to this solicitation that
increases shareholder value, Mr. Wyser-Pratte will ask the Board to have the
Company reimburse him for costs and expenses incurred in connection with this
proxy solicitation. Mr. Wyser-Pratte does not intend to request that its
reimbursement request be submitted to a vote of stockholders.
OTHER MATTERS TO BE CONSIDERED
AT THE ANNUAL MEETING
Mr. Wyser-Pratte is not aware of other matters to be considered at the
Annual Meeting. However, if any other matters properly come before the Annual
Meeting, Mr. Wyser-Pratte will vote his Common Stock and all proxies held by him
in accordance with his best judgment with respect to such matters.
CERTAIN OTHER INFORMATION REGARDING THE COMPANY
Shareholders are referred to the Company's Proxy Statement with respect
to other information related to beneficial ownership of the Company's
securities, including dissenters' rights of appraisal, procedures for submitting
stockholder proposals intended to be presented at the Company's 1999 Annual
Meeting, information regarding the beneficial ownership of the Shares, any
arrangements regarding the Shares, the operation of which may result in a change
of control of the Company, and any change of control of the Company that may
have occurred since the beginning of the Company's last fiscal year and
information regarding the Company's stock option and other incentive
compensation plans.
VOTING OF PROXY CARDS
Shares of Common Stock represented by properly executed [COLOR] Proxy
Cards will be voted at the Annual Meeting as marked, and in the discretion of
the persons named as proxies on all other matters as may properly come before
the Annual Meeting, including all motions for an adjournment or postponement of
Annual Meeting, unless otherwise indicated in the Proxy Statement.
IF YOU WISH TO VOTE FOR THE PROPOSAL AND IN THE DISCRETION OF THE
PERSONS NAMED AS PROXIES ON ALL MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE
PROVIDED POSTAGE-PAID ENVELOPE.
REVOCABILITY OF SIGNED PROXIES
A proxy executed by a holder of the Company's Common Stock may be
revoked at any time before its exercise by sending a written revocation of such
proxy, by submitting another proxy with a later date marked on it or by
appearing in person at the Annual Meeting and voting. A written revocation must
clearly state that the proxy to which it relates is no longer effective and must
be executed and delivered prior to the time that the action authorized by the
executed proxy is taken. The written revocation may be delivered either to Mr.
Wyser-Pratte or the Secretary of the Company. Although a written revocation or
later dated proxy delivered only to Telxon will be effective, Mr. Wyser-Pratte
requests that a written revocation or subsequent proxy also be delivered to Mr.
Wyser-Pratte so that he will be aware of such written revocation.
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THE RETURN OF A SIGNED AND DATED [COLOR] PROXY CARD WILL FULLY REVOKE
ANY PREVIOUSLY DATED PROXY YOU MAY HAVE RETURNED. THE LATEST DATED PROXY IS THE
ONE THAT COUNTS.
YOUR VOTE IS IMPORTANT. IT WILL HELP DECIDE WHETHER THE SHAREHOLDERS
WILL HAVE AN ADEQUATE VOICE IN THE AFFAIRS OF THE COMPANY. PLEASE MARK, SIGN AND
DATE THE ENCLOSED [COLOR] PROXY CARD AND RETURN IT PROMPTLY IN THE PROVIDED
POSTAGE-PAID ENVELOPE.
GUY P. WYSER-PRATTE
IF YOUR SHARES OF TELXON COMMON STOCK ARE HELD IN THE NAME OF A
BROKERAGE FIRM, BANK NOMINEE OR OTHER INSTITUTION, ONLY IT CAN SIGN A PROXY WITH
RESPECT TO YOUR COMMON STOCK. ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE
FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR A PROXY CARD TO BE SIGNED
REPRESENTING YOUR SHARES OF COMMON STOCK
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EXHIBIT A
ITEM 5. OTHER EVENTS.
On August 5, 1996, Telxon Corporation ("Telxon" or the
"Company") and KeyBank National Association, as Rights Agent, entered into
Telxon's Amended and Restated Rights Agreement (the "Rights Plan"), effective as
of July 31, 1996, restating and amending the Company's Rights Plan originally
adopted by its Board of Directors (the "Directors") in 1987, at which time the
Directors declared a dividend of one Common Stock Purchase Right (a "Right") on
each outstanding share of Common Stock pursuant to the Rights Plan. The Rights
Plan, as amended, provides that each Right, when exercisable, entitles the
registered holder to purchase one share of Common Stock at a price of One
Hundred Dollars ($100.00) per share (the "Purchase Price"), subject to
adjustment. Unless they become exercisable upon the occurrence of certain events
as described below or unless earlier redeemed by the Company, the Rights will
expire on July 31, 2006.
If the Company is party to a merger or other business
combination transaction (not approved by the Directors) in which the Company is
not the surviving corporation, or where the Common Stock is changed or
exchanged, or 50% or more of the Company's assets or earning power are sold,
each holder of a Right will have the right to receive shares of publicly traded
common stock of the acquiring company having a market value of two times the
Purchase Price of the Right or, in specified circumstances, cash in an amount
determined under the Rights Plan.
If the Company is the surviving corporation in a merger and
the Common Stock is not changed or exchanged, or if any acquiring person engages
in certain self-dealing transactions specified in the Rights Plan, or becomes
the beneficial owner of 15% or more of the outstanding Common Stock, each holder
of a Right (other than the acquiring person) will have the right to receive
Common Stock having a market value of two times the then current Purchase Price
of the Right.
The Rights Plan discourages hostile takeovers by effectively
allowing the Company's stockholders to purchase additional shares of Common
Stock at a discount following a hostile acquisition of a large block of the
Company's outstanding Common Stock and by increasing the value of consideration
to be received by stockholders in certain transactions following such an
acquisition.
The Rights may be redeemed pursuant to the Rights Plan. The
terms of the Rights may be amended by the Directors without the consent of the
holders of the Rights.
The foregoing summary description of the Rights Plan and the
Rights thereunder (i) replaces and should be read in lieu of the discussion of
the Rights Plan contained (A) in Item 1 of the Form 8-A originally filed by the
Company on December 19, 1983, with respect to its Common Stock, par value $.01
per share ("Common Stock"), as amended by Amendment No. 1 thereto filed under
cover of a Form 8 dated May 1, 1992, and (B) on pages 37 and 38 of the
Prospectus, included as part of the Registration Statement on Form S-3 filed by
the Company with respect to its 5-3/4% Convertible Subordinated Notes due 2003,
which became effective February 23, 1996, and (ii) does not purport to be
complete and is qualified in its entirety by reference to the copy of the Rights
Plan filed as Exhibit 4 to this Current Report on Form 8-K.
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EXHIBIT B
203 BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS.
(a) Notwithstanding any other provisions of this chapter, a corporation shall
not engage in any business combination with any interested stockholder for a
period of 3 years following the time that such stockholder became an interested
stockholder, unless:
(1) prior to such time the board of directors of the corporation
approved either the business combination or the transaction which resulted
in the stockholder becoming an interested stockholder, or
(2) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at
the time the transaction commenced, excluding for purposes of determining
the number of shares outstanding those shares owned (i) by persons who are
directors and also officers and (ii) employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer, or
(3) At or subsequent to such time the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not
owned by the interested stockholder.
(b) The restrictions contained in this section shall not apply if:
(1) the corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by this
section;
(2) the corporation, by action of its board of directors, adopts
an amendment to its bylaws within 90 days of the effective date of this
section, expressly electing not to be governed by this section, which
amendment shall not be further amended by the board of directors.
(3) the corporation, by action of its stockholders, adopts an
amendment to its certificate of incorporation or bylaws expressly electing
not to be governed by this section, provided that, in addition to any
other vote required by law, such amendment to the certificate of
incorporation or bylaws must be approved by the affirmative vote of a
majority of the shares entitled to vote. An amendment adopted pursuant to
this paragraph shall be effective immediately in the case of a corporation
that both (i) has never had a class of voting stock that falls within any
of the three categories set out in subsection (b)(4) hereof, and (ii) has
not elected by a provision in its original certificate of incorporation or
any amendment thereto to be governed by this section. In all other cases,
an amendment adopted pursuant to this paragraph shall not be effective
until 12 months after the adoption of such amendment and shall not apply
to any business combination between such corporation and any person who
became an interested stockholder of such corporation on or prior to such
adoption. A bylaw amendment adopted pursuant to this paragraph shall not
be further amended by the board of directors;
(4) the corporation does not have a class of voting stock that is
(i) listed on a national securities exchange, (ii) authorized for
quotation on The NASDAQ Stock Market or (iii) held of record by more than
2,000 stockholders, unless any of the foregoing results from action taken,
directly or indirectly, by an interested stockholder or from a transaction
in which a person becomes an interested stockholder;
(5) a stockholder becomes an interested stockholder inadvertently
and (i) as soon as practicable divests itself of ownership of sufficient
shares so that the stockholder ceases to be an interested stockholder and
(ii) would not, at any time within the 3 year period immediately prior
to a
<PAGE>
<PAGE>
business combination between the corporation and such stockholder, have
been an interested stockholder but for the inadvertent acquisition of
ownership;
(6) the business combination is proposed prior to the
consummation or abandonment of and subsequent to the earlier of the public
announcement or the notice required hereunder of a proposed transaction
which (i) constitutes one of the transactions described in the second
sentence of this paragraph; (ii) is with or by a person who either was not
an interested stockholder during the previous 3 years or who became an
interested stockholder with the approval of the corporation's board of
directors or during the period described in paragraph (7) of this
subsection (b); and (iii) is approved or not opposed by a majority of the
members of the board of directors then in office (but not less than 1) who
were directors prior to any person becoming an interested stockholder
during the previous 3 years or were recommended for election or elected to
succeed such directors by a majority of such directors. The proposed
transactions referred to in the preceding sentence are limited to (x) a
merger or consolidation of the corporation (except for a merger in respect
of which, pursuant to section 251(f) of the chapter, no vote of the
stockholders of the corporation is required); (y) a sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one transaction or a
series of transactions), whether as part of a dissolution or otherwise, of
assets of the corporation or of any direct or indirect majority-owned
subsidiary of the corporation (other than to any direct or indirect
wholly-owned subsidiary or to the corporation) having an aggregate market
value equal to 50% or more of either that aggregate market value of all of
the assets of the corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of the corporation; or
(z) a proposed tender or exchange offer for 50% or more of the outstanding
voting stock of the corporation. The corporation shall give not less than
20 days notice to all interested stockholders prior to the consummation of
any of the transactions described in clauses (x) or (y) of the second
sentence of this paragraph; or
(7) The business combination is with an interested stockholder
who became an interested stockholder at a time when the restrictions
contained in this section did not apply by reason of any paragraphs (1)
through (4) of this subsection (b), provided, however, that this paragraph
(7) shall not apply if, at the time such interested stockholder became an
interested stockholder, the corporation's certificate of incorporation
contained a provision authorized by the last sentence of this subsection
(b).
Notwithstanding paragraphs (1), (2), (3) and (4) of this subsection, a
corporation may elect by a provision of its original certificate of
incorporation or any amendment thereto to be governed by this section; provided
that any such amendment to the certificate of incorporation shall not apply to
restrict a business combination between the corporation and an interested
stockholder of the corporation if the interested stockholder became such prior
to the effective date of the amendment.
(c) As used in this section only, the term:
(1) 'affiliate' means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, another person.
(2) 'associate,' when used to indicate a relationship with any
person, means (i) any corporation, partnership, unincorporated association
or other entity of which such person is a director, officer or partner or
is, directly or indirectly, the owner of 20% or more of any class of
voting stock, (ii) any trust or other estate in which such person has at
least a 20% beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, and (iii) any relative or
spouse of such person, or any relative of such spouse, who has the same
residence as such person.
(3) 'business combination,' when used in reference to any
corporation and any interested stockholder of such corporation, means:
(i) any merger or consolidation of the corporation or any
direct or indirect majority-owned subsidiary of the corporation with
(A) the interested stockholder, or (B) with any other corporation,
partnership, unincorporated association or other entity if the merger
or
<PAGE>
<PAGE>
consolidation is caused by the interested stockholder and as a result
of such merger or consolidation subsection (a) of this section is not
applicable to the surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of transactions),
except proportionately as a stockholder of such corporation, to or with
the interested stockholder, whether as part of a dissolution or
otherwise, of assets of the corporation or of any direct or indirect
majority-owned subsidiary of the corporation which assets have an
aggregate market value equal to 10% or more of either the aggregate
market value of all the assets of the corporation determined on a
consolidated basis or the aggregate market value of all the outstanding
stock of the corporation;
(iii) any transaction which results in the issuance or
transfer by the corporation or by any direct or indirect majority-owned
subsidiary of the corporation of any stock of the corporation or of any
stock of the corporation or of such subsidiary to the interested
stockholder, except (A) pursuant to the exercise, exchange or
conversion of securities exercisable for, exchangeable for or
convertible into stock of such corporation or any such subsidiary which
securities were outstanding prior to the time that the interested
stockholder became such, (B) pursuant to a merger under Section 251(g)
of this title; (C) pursuant to a dividend or distribution paid or made,
or the exercise, exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of such corporation or any
such subsidiary which security is distributed, pro rata to all holders
of a class or series of stock of such corporation subsequent to the
time the interested stockholder became such, (D) pursuant to an
exchange offer by the corporation to purchase stock made on the same
terms to all holders of said stock, or (E) any issuance or transfer of
stock by the corporation, provided however, that in no case under
(C)-(E) above shall there be an increase in the interested
stockholder's proportionate share of the stock of any class or series
of the corporation or of the voting stock of the corporation;
(iv) any transaction involving the corporation or any direct
or indirect majority-owned subsidiary of the corporation which has the
effect, directly or indirectly, of increasing the proportionate share
of the stock of any class or series, or securities convertible into the
stock of any class or series, of the corporation or of any such
subsidiary which is owned by the interested stockholder, except as a
result of immaterial changes due to fractional share adjustments or as
a result of any purchase or redemption of any shares of stock not
caused, directly or indirectly, by the interested stockholder; or
(v) any receipt by the interested stockholder of the
benefit, directly or indirectly (except proportionately as a
stockholder of such corporation) of any loans, advances, guarantees,
pledges, or other financial benefits (other than those expressly
permitted in subparagraphs (i)-(iv) above) provided by or through the
corporation or any direct or indirect majority owned subsidiary.
(4) 'control,' including the term 'controlling,' 'controlled by'
and 'under common control with,' means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting stock, by contract, or otherwise. A person who is the owner of 20%
or more of the outstanding voting stock of any corporation, partnership,
unincorporated association or other entity shall be presumed to have
control of such entity, in the absence of proof by a preponderance of the
evidence to the contrary. Notwithstanding the foregoing, a presumption of
control shall not apply where such person holds voting stock, in good
faith and not for the purpose of circumventing this section, as an agent,
bank, broker, nominee, custodian or trustee for one or more owners who do
not individually or as a group have control of such entity.
(5) 'interested stockholder' means any person (other than the
corporation and any direct or indirect majority-owned subsidiary of the
corporation) that (i) is the owner of 15% or more of the outstanding
voting stock of the corporation, or (ii) is an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the 3-year period immediately
prior to the date on which it is sought to be determined whether such
<PAGE>
<PAGE>
person is an interested stockholder; and the affiliates and associates of
such person; provided, however, that the term 'interested stockholder'
shall not include (x) any person who (A) owned shares in excess of the 15%
limitation set forth herein as of, or acquired such shares pursuant to a
tender offer commenced prior to, December 23, 1987, or pursuant to an
exchange offer announced prior to the aforesaid date and commenced within
90 days thereafter and either (I) continued to own shares in excess of
such 15% limitation or would have but for action by the corporation or
(II) is an affiliate or associate of the corporation and so continued (or
so would have continued but for action by the corporation) to be the owner
of 15% or more of the outstanding voting stock of the corporation at any
time within the 3-year period immediately prior to the date on which it is
sought to be determined whether such a person is an interested stockholder
or (B) acquired said shares from a person described in (A) above by gift,
inheritance or in a transaction in which no consideration was exchanged;
or (y) any person whose ownership of shares in excess of the 15%
limitation set forth herein in the result of action taken solely by the
corporation provided that such person shall be an interested stockholder
if thereafter such person acquires additional shares of voting stock of
the corporation, except as a result of further corporate action not
caused, directly or indirectly, by such person. For the purpose of
determining whether a person is an interested stockholder, the voting
stock of the corporation deemed to be outstanding shall include stock
deemed to be owned by the person through application of paragraph (8) of
this subsection but shall not include any other unissued stock of such
corporation which may be issuable pursuant to any agreement, arrangement
or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(6) 'person' means any individual, corporation, partnership,
unincorporated association or other entity.
(7) 'Stock' means, with respect to any corporation, capital stock
and, with respect to any other entity, any equity interest.
(8) 'Voting stock' means, with respect to any corporation, stock
of any class or series entitled to vote generally in the election of
directors and, with respect to any entity that is not a corporation, any
equity interest entitled to vote generally in the election of the
governing body of such entity.
(9) 'owner' including the terms 'own' and 'owned' when used with
respect to any stock means a person that individually or with or through
any of its affiliates or associates:
(i) beneficially owns such stock, directly or indirectly;
or
(ii) has (A) the right to acquire such stock (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise; provided, however, that a person shall not be deemed the
owner of stock tendered pursuant to a tender or exchange offer made by
such person or any of such person's affiliates or associates until such
tendered stock is accepted for purchase or exchange; or (B) the right
to vote such stock pursuant to any agreement, arrangement or
understanding; provided, however, that a person shall not be deemed the
owner of any stock because of such person's right to vote such stock if
the agreement, arrangement or understanding to vote such stock arises
solely from a revocable proxy or consent given in response to a proxy
or consent solicitation made to 10 or more persons; or
(iii) has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting (except voting pursuant to a
revocable proxy or consent as described in item (B) of clause (ii) of
this paragraph), or disposing of such stock with any other person that
beneficially owns, or whose affiliates or associates beneficially own,
directly or indirectly, such stock.
(d) No provision of a certificate of incorporation or bylaw shall require, for
any vote of stockholders required by this section a greater vote of stockholders
than that specified in this section.
<PAGE>
<PAGE>
(e) The Court of Chancery is hereby vested with exclusive jurisdiction to hear
and determine all matters with respect to this section.
<PAGE>
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF WPC AND
THEIR ADVISORS THAT MAY PARTICIPATE
IN THE SOLICITATION OF PROXIES
The name, business address, and present principal occupation or
employment of each of the directors and executive officers of WPC and its
advisors and certain other employees and representatives of WPC that may
participate in the solicitation of proxies are set forth below. Unless otherwise
indicated, the principal business address of each director or executive officer
of Wyser-Pratte & Co. is, 63 Wall Street, New York, NY 10005.
PARTICIPANT DIRECTORS AND EXECUTIVE OFFICERS OF WPC.
<TABLE>
<CAPTION>
Present Office or Other
Name Principal Occupation or Employment
- ---- ----------------------------------
<S> <C>
Guy P. Wyser-Pratte President
Eric Longmire Senior Managing Director
</TABLE>
<PAGE>
<PAGE>
SCHEDULE II
The following sets forth the name, business address and the number of
shares of Common Stock of the Company owned beneficially by the participants in
this solicitation of proxies, or their associates. No shares are held of record
but not beneficially by the participants or their associates.
<TABLE>
<CAPTION>
Number of Shares of Common
Name & Stock Beneficially
Business Address Owned Percent of Common Stock
---------------- (June 19, 1998) -----------------------
---------------
<S> <C> <C>
Guy P. Wyser-Pratte
Wyser-Pratte & Co., Inc.
63 Wall Street
New York, New York 10005 730,000 ~4/9%
</TABLE>
<PAGE>
<PAGE>
SCHEDULE III
The following tables set forth information with respect to all purchases
and sales of Common Stock of the Company by Mr. Wyser-Pratte and his affiliates
during the past two years.(1) Except as set forth below, no participant in this
solicitation has purchased or sold securities of the Company within the past two
years.
<TABLE>
<CAPTION>
TRADE DATE QUANTITY PURCHASE OR (SOLD)
---------- ---------------------------
<S> <C>
06-02-98 100
06-08-98 1,500
06-08-98 34,500
06-08-98 2,000
06-08-98 8,800
06-08-98 12,300
06-08-98 1,900
06-08-98 1,900
06-08-98 2,200
06-09-98 12,400
06-09-98 285,700
06-09-98 16,500
06-09-98 72,800
06-09-98 101,700
06-09-98 15,700
06-09-98 15,700
06-09-98 18,200
06-10-98 1,900
06-10-98 7,000
06-10-98 43,000
06-10-98 10,000
06-10-98 2,500
06-10-98 11,000
06-10-98 4,900
06-10-98 15,300
06-10-98 2,400
06-10-98 10,000
06-10-98 5,000
06-10-98 2,400
06-10-98 2,700
06-11-98 200
06-11-98 4,400
06-11-98 200
06-11-98 1,000
06-11-98 1,500
06-11-98 200
06-11-98 200
06-11-98 300
Total 730,000
</TABLE>
- --------
(1) All securities beneficially owned by Mr. Wyser-Pratte's securities are
contained in a margin account in the regular course of business of a
broker, including in connection with the purchases listed in the table. As
of June 16, 1998, $178,868,000 of this indebtedness was outstanding.
<PAGE>
<PAGE>
[COLOR] PROXY APPENDIX 1
TELXON CORPORATION
ANNUAL MEETING OF SHAREHOLDERS -______ __, 1998
THIS PROXY IS SOLICITED BY GUY P. WYSER-PRATTE
IN OPPOSITION TO THE TELXON BOARD OF DIRECTORS
The undersigned shareholder of Telxon Corporation ("Telxon") hereby
appoints Guy P. Wyser-Pratte, Eric Longmire and Daniel H. Burch each of them
with full power of substitution, to vote all shares of Common Stock, par value
$0.01 per share, of Telxon that the undersigned is entitled to vote if
personally present at the 1998 Annual Meeting of Shareholders of Telxon to be
held on ______ __, 1998, and at any adjournments or postponements thereof as
indicated below and in the discretion of the proxies, to vote cumulatively for
the election of Professor Macey as director (other than if authority to vote for
Professor Macey is withheld below) and upon such other business as may properly
come before the meeting, and any adjournment or postponement thereof. The
undersigned hereby revokes any previous proxies with respect to matters covered
by this Proxy.
MR. WYSER-PRATTE RECOMMENDS A VOTE FOR PROPOSALS 1 THROUGH 7.
1. To amend the bylaws to determine whether a proposal to acquire the Company
shall be treated as "friendly" or "hostile".
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To amend the bylaws to require a unanimous vote of the directors to approve
"defensive actions" by the board unless shareholders approve such actions.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To amend the bylaws to allow the holders of 25% of the shares to call a
special meeting of shareholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To amend the bylaws to elect not to be governed by the Business Combination
Statute.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To repeal any bylaws adopted by the board of directors since June 11, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. To adopt a resolution recommending to the board that the Company reimburse
Mr. Wyser-Pratte's expenses in connection with this proxy solicitation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. To elect Jonathan R. Macey to the board of directors.
[ ] FOR nominee [ ] WITHHOLD AUTHORITY for nominee
<PAGE>
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER MARKED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO MARKING IS MADE, THIS PROXY WILL BE DEEMED TO
BE A DIRECTION TO VOTE FOR PROPOSALS 1 THROUGH 7 AND IN THE DISCRETION OF THE
PROXIES, TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING, AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
____________________________________
(Date)
____________________________________
(Signature)
____________________________________
(Title)
____________________________________
(Signature, if held jointly)
When shares are held by joint tenants,
both should sign. When signing an
attorney, executor, administrator,
trustee, guardian, corporate officer or
partner, please give full title as such.
If a corporation, please sign in
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person. This Proxy votes all
shares held in all capacities.
PLEASE MARK, SIGN, DATE AND MAIL PROMPTLY
<PAGE>
<PAGE>
IMPORTANT
Your proxy is important. No matter how many shares you own,
please give Mr. Wyser-Pratte your proxy FOR approval of the his Proposals by:
MARKING the enclosed [COLOR] Annual Meeting proxy card,
SIGNING the enclosed [COLOR] Annual Meeting proxy card,
DATING the enclosed [COLOR] Annual Meeting proxy card and
MAILING the enclosed [COLOR] Annual Meeting proxy card TODAY
in the envelope provided (no postage is required if mailed in
the United States).
If you have already submitted a proxy to Telxon for the Annual
Meeting, you may change your vote to a vote FOR Mr. Wyser-Pratte's Proposals by
marking, signing, dating and returning the enclosed [COLOR] proxy card for the
Annual Meeting, which must be dated after any proxy you may have submitted to
Telxon. Only your latest dated proxy for the Annual Meeting will count at such
meeting.
If you have any question or require any addition information concerning this
Proxy Statement or the proposals by Mr. Wyser-Pratte, please contact the Proxy
Solicitor at the address and telephone number set forth below.
IF ANY OF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK, BANK
NOMINEE OR OTHER INSTITUTION, ONLY IT CAN VOTE SUCH SHARES AND ONLY UPON RECEIPT
OF YOUR SPECIFIC INSTRUCTIONS. ACCORDINGLY, PLEASE CONTACT THE PERSON
RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE THE [COLOR]
ANNUAL MEETING PROXY CARD.
