<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
(AMENDMENT NO. 3)
<TABLE>
<S> <C> <C>
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
TO
</TABLE>
COMMISSION FILE NUMBER 0-11402
TELXON CORPORATION
---------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 74-1666060
------------------------------------ ----------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
<TABLE>
<S> <C>
1000 SUMMIT DRIVE, CINCINNATI, OHIO 45150
----------------------------------- ------------
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (330) 664-1000
<TABLE>
<CAPTION>
SECURITIES REGISTERED PURSUANT NAME OF EACH EXCHANGE
TO SECTION 12(B) OF THE ACT: ON WHICH REGISTERED:
------------------------------ ---------------------
<S> <C>
None None
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $.01 Par Value
---------------------------------
(TITLE OF CLASS)
7 1/2% Convertible Subordinated Debentures Due 2012
---------------------------------------------------------
(TITLE OF CLASS)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]. No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
The aggregate market value of registrant's Common Stock held by non-affiliates
as of May 31, 2000, based on the last reported sales price of the Common Stock
as reported on the Nasdaq National Market for such date, was $259,377,871.
At May 31, 2000, there were 17,511,472 outstanding shares of the registrant's
Common Stock.
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<PAGE> 2
This Amendment No. 3 on Form 10-K/A amends and restates in full the
disclosures made by the registrant under Item 11 of Part III of the registrant's
Form 10-K with respect to its fiscal year ended March 31, 2000 ("Fiscal 2000"),
as previously amended, to correct understatements occurring at two places in the
previously filed disclosure under that Item regarding the number of employee
stock options granted to William J. Murphy during Fiscal 2000 and to add a
clarifying disclosure to the footnote associated with his option grant
information in the Summary Compensation Table. Specifically:
The number of stock options shown for Mr. Murphy in the seventh
column of the Summary Compensation table has been correctly
restated as 71,500 shares, and the associated footnote has been
expanded to reflect that the additional stock options included
in the corrected total were granted outside the Company's 1990
Stock Option Plan for employees, consistent with the disclosure
in footnote (4) of the table of Option Grants in Fiscal 2000
included in the registrant's Item 11 disclosures as originally
filed; and
The number of shares shown for Mr. Murphy in the second column of
the second row of information for him in the table of Option Grants
in Fiscal 2000 has been correctly restated as 25,000 shares (all
other information in that row was correctly stated in the disclosure
originally filed notwithstanding the understatement of the number of
shares in the second column).
Except as specifically discussed above, no changes have been made to the
previously filed Item 11 disclosures as set forth herein. This Amendment No. 3
is intended only to amend the previously filed Item 11 disclosures so that the
Item 11 information is correctly stated as of the original filing thereof on
July 31, 2000 in Amendment No. 2 to the subject Form 10-K and not to update any
of the Item 11 information to reflect any changes in that information, or any
other developments relating to the subject matters covered by Item 11, which may
have occurred since that date.
PART III
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows all annual, long-term and other compensation for
services rendered to the Company in all capacities paid or awarded during each
of its three most recently completed fiscal years to the Company's chief
executive officer during any portion of Fiscal 2000, to the Company's four
other executive officers serving at fiscal year end who received the highest
combined salary and bonus compensation during Fiscal 2000 and to a former
executive officer of the Company who, but for the fact that he was not serving
as such at fiscal year end, would have been included among the four Company
executive officers other than the chief executive officer who received the
highest combined salary and bonus compensation during Fiscal 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------- ----------------------
OTHER RESTRICTED ALL
ANNUAL STOCK STOCK OTHER
NAME AND COMPEN- AWARDS OPTIONS COMPEN-
PRINCIPAL POSITION(1) YEAR SALARY BONUS SATION ($) (SHARES) SATION(2)
--------------------- ---- ------- ------- ------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
John W. Paxton, Sr........................ 2000 803,077 150,000 0 0 0 0
Chairman of the Board and 1999 27,692(3) 0 0 0 700,000!(4) 0
Chief Executive Officer
William J. Murphy......................... 2000 375,057 150,000 0 0 71,500! 5,494
Executive Vice President, Americas
David H. Biggs............................ 2000 301,875(5) 18,000 11,195(6) 301,875(5) 0 0
Vice President,
Chief Technical Officer
Kenneth A. Cassady........................ 2000 277,308 50,750 59,705(6) 0 350,000! 0
President and Chief Operating Officer
</TABLE>
96
<PAGE> 3
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------- ----------------------
OTHER RESTRICTED ALL
ANNUAL STOCK STOCK OTHER
NAME AND COMPEN- AWARDS OPTIONS COMPEN-
PRINCIPAL POSITION(1) YEAR SALARY BONUS SATION ($) (SHARES) SATION(2)
--------------------- ---- ------- ------- ------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
James G. Cleveland........................ 2000 269,471 0 0 0 0 383,800(7)
Executive Vice President, Americas 1999 333,655 0 0 0 40,000* 5,000
from March 1999 to January 2000 1998 275,000 200,000 0 0 0 3,173
Peter Lomax............................... 1999 234,148 30,090 11,470(7) 0 15,000! 17,639(8)
Executive Vice President,
Europe/Middle East/Africa
</TABLE>
---------------
! Option for the purchase of the indicated number of shares of Telxon Common
Stock granted to the named executive officer pursuant to the Telxon
Corporation 1990 Stock Option Plan for employees (the "Employee Option
Plan"), except that 400,000 of the stock options to Mr. Paxton were granted
outside the Employee Option Plan as part of an inducement essential to his
entering into an employment agreement to join the Company as its new
President, Chairman of the Board and Chief Executive Officer and 25,000 of
the stock options to Mr. Murphy were granted outside the Employee Option
Plan as part of the terms of his agreement to become the Company's
Executive Vice President, Americas.
.
* Option for the purchase of the indicated number of shares of common stock of
Aironet Wireless Communications, Inc. ("Aironet", a majority-owned
subsidiary of the Company until the initial public offering of Aironet
common stock on July 30, 1999; Aironet was subsequently acquired by Cisco
Systems, Inc. in March 2000 at an exercise price of $3.50 per share under
the Aironet 1996 Stock Option Plan for employees, directors and advisors (as
amended through March 31, 1998, the "Aironet Option Plan"), granted by
Aironet to the named executive officer as an advisor to Aironet.
(1) Except as otherwise indicated by limiting dates, each of the named
executive officers presently holds the position(s) indicated.
(2) Except as otherwise footnoted, the amounts shown are matching contributions
made by the Company under its Retirement and Uniform Matching Profit
Sharing (401(k)) Plan ("401(k) Matching Contribution").
(3) The amount shown is the portion of his annual salary which accrued during
the portion of Fiscal 1999 after he joined the Company on March 22, 1999.
(4) In addition to these stock options granted to Mr. Paxton, the Company
agreed to sell to Mr. Paxton, as part of an inducement essential to his
entering into an employment agreement to join the Company, and Mr. Paxton
agreed to purchase, 300,000 shares of Company Common Stock at a price of
$8.719 per share (equal to the closing sale price for the Common Stock as
reported on The Nasdaq Stock Market's National Market (the "Nasdaq NNM")
for the last trading day prior to his entering into the Company's employ);
Mr. Paxton completed that stock purchase on February 2, 2000.
97
<PAGE> 4
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(5) Mr. Biggs' compensation as the Company's Chief Technical Officer under
his employment agreement consists of an award of 35,000 shares of
restricted stock that was approved by the Company's Board of Directors
on August 30, 1999. The amount shown represents the value of the shares
at the closing price per share for the Company's common stock as
reported on the Nasdaq NNM on the date of award. At March 31, 2000,
10,000 of those restricted shares remained unvested, subject to his
continued performance of his services under the employment agreeement;
based on the closing price for the Company's common stock as reported
on the Nasdaq NNM on March 30, 2000, the value of the unvested shares
on that date was $175,630.
(6) Reimbursement of relocation and/or temporary living expenses.
(7) In addition to a $4,297 401(k) Matching Contribution, includes a
$14,274 payment for accrued but unused vacation and payments of and
accruals for severance benefits aggregating $356,534 in respect of
salary continuation plus $8,147 in respect of medical insurance.
(8) Company contribution to personal retirement plan.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Mr. Paxton serves as Chairman of the Board of Directors and Chief
Executive Officer of the Company through March 31, 2002 at a base salary of
$800,000 per year. Mr. Paxton's employment agreement further provides for
annual bonus compensation of up to $600,000 per year if he meets or exceeds the
annual goals to be agreed upon between him and the Company's Board of Directors,
components of which shall include operating earnings, backlog, revenue,
inventory, quality control and cash flow. The employment agreement also
obligated the Company to pay his transitional living expenses (housing, ground
and air transportation), "grossed-up" for taxes, through March 31, 2000. The
Company also pays the premium (currently $7,835 per year) under a $1 million
term life insurance policy obtained by Mr. Paxton in April 2000, the benefits
of which are payable to such beneficiary(ies) as he may designate.
98
<PAGE> 5
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
If Mr. Paxton's employment is terminated by the Company for other than
"cause" (defined in his employment agreement as behavior of Employee which is
adverse to the Company's interests, including dishonesty, grossly negligent
misconduct, willful misconduct, disloyalty, acts of bad faith, neglect of duty
or material breach of the employment agreement or of any other Company agreement
with him or Company policy applicable to its employees generally), his
employment agreement obligates the Company to pay a severance benefit to him at
a rate equal to his base salary for the greater of 24 months or the remaining
term of the agreement, as well as his basic medical insurance premiums for 18
months. A resignation by Mr. Paxton following the Company's assignment of him to
serve in any capacity other than his current offices or to perform tasks
inconsistent with such positions will be deemed a termination by the Company
without "cause" entitling him to the foregoing severance and insurance. Mr.
Paxton is also entitled to the severance benefit if his employment agreement
expires without renewal or extension. If any of the foregoing employment
terminations occurs after a "change in control" of the Company of a nature which
the Company would be required to report in its filings with the SEC (including,
without limitation, (a) the acquisition by any person, entity or group of
beneficial ownership of 15% or more of the combined voting power of the
Company's securities in the election of directors, (b) liquidation of all or
substantially all of the Company's assets or a merger, consolidation or
reorganization in which neither the Company nor any entity in which the
Company's stockholders own at least 50% of the voting power is the surviving
entity, and (c) the current directors of the Company, or persons approved by
them to succeed them (such current and successor directors constituting
"Continuing Directors"), ceasing to constitute at least a majority of the
Board), the severance benefit payable to Mr. Paxton is increased to an amount
equal to 2.99 times his base salary and, to the extent that such payment and/or
any other payments which he has the right to receive from the Company would
constitute, alone or in the aggregate, an "excess parachute payment" under
Section 280G of the Internal Revenue Code, payment by the Company of any excise
tax imposed on such payments and any taxes due as the result of the Company's
payment of such excise tax and other taxes, as well as the acceleration of the
vesting of all then outstanding stock option grants and the ability to exercise
all of his stock options for their full original terms. In the event of a Change
in Control, Mr. Paxton has the right to elect to terminate his employment within
30 days of such event without regard to his reason therefor or within two years
of the Change in Control if he has "Good Reason" (defined to include a reduction
in his salary or benefits from pre-change in control levels or a requirement
that he relocate from, or be based anywhere other than, the metropolitan area
where his office is located prior to the change in control) to resign; upon any
such election, Mr. Paxton is entitled to receive the increased severance and
insurance benefits. If his employment is terminated by the Company within two
years after a Change in Control, Mr. Paxton is entitled, until replacement
benefits may be provided by a successor employer, to up to two years of
continued employee welfare benefits.
Mr. Murphy has an employment agreement with the Company for a term ending
March 31, 2003, at a base salary of $325,000 per year. His employment agreement
further provides for bonus compensation for each fiscal year during the term as
determined by the Board of Directors in its discretion based upon the
recommendation of the Chief Executive Officer or such other supervising officer
as the Chief Executive Officer shall designate (the "Supervising Officer"). The
agreement provides for a bonus potential for fiscal 2001 of up to $200,000. His
employment also provides for his receipt of a $450,000 promotion bonus, the
first $150,000 installment of which has been paid and the remaining two $150,000
installments are payable March 31, 2001 and March 31, 2002. Mr. Murphy or his
estate is entitled under the employment agreement to the same disability and
death benefits as are extended by the Company to its executive employees
generally, and he is also entitled to severance benefits of twelve months base
salary and, until replacement benefits may be provided by a successor employer,
up to twelve months of continued employee welfare benefits in the event that his
employment is terminated by the Company for other than "cause".
By letter agreement, Mr. Biggs' employment has been continued at a salary
of $250,000 per year, beginning August 7, 2000, with an annual bonus potential
of 35% of his salary. His current employment agreement, which expires on August
6, 2000, provides for his receipt of 35,000 shares of restricted stock in full
payment for his services thereunder. The restricted stock vests, subject to his
continued employment, in installments over the term of the original agreement.
Of the restricted shares, 10,000 shares remain unvested and subject to
forfeiture until he completes his original term of service, at which time the
shares will vest. His employment agreement also provides for the vesting of the
shares in the event (a) Mr. Biggs' employment is terminated other than (i) by
reason of his death or permanent disability or (ii) for cause, or (b) any of the
following events (each a "Change in Control Event") occurs: (i) Mr Paxton ceases
for any reason to be the Company's chief executive officer, (ii) the
consummation of a transaction requiring stockholder approval and involving the
sale of all or substantially all of the Company's assets or the merger or
consolidation of the Company with or into another corporation, or (iii) any
person, entity or group becoming the beneficial owner of Company securities
representing 50% or more of the combined voting power of the Company's then
outstanding securities. Vesting is also accelerated on a pro rata basis in the
event of Mr. Biggs' death or permanent disability. Under the letter agreement,
he is entitled to a one-year severance benefit in the event of a Change in
Control Event, a six months' severance if he leaves Telxon after August 7, 2001,
provided that he assists the Company is finding and training a qualified
replacement for him. The letter agreement also provides for the continuation of
the living expense allowance for housing, airfare and automobile expenses
provided for under his original employment agreement. Mr. Biggs or his estate is
entitled to the same disability and death benefits as are extended by the
Company to its executive employees generally.
Mr. Cassady has an employment agreement with the Company for a term
ending June 6, 2002, at a base salary of $350,000 per year. His employment
agreement further provides for bonus compensation for each fiscal year during
the term as determined by the Board of Directors in its discretion based upon
the recommendation of the Supervising Officer. Mr. Cassady or his estate is
entitled under the employment agreement to the same disability and death
benefits as are extended by the Company to its executive employees generally,
and he is also entitled to severance benefits of twelve months base salary and,
until replacement benefits may be provided by a successor employer, up to twelve
months of continued employee welfare benefits in the event that his employment
is terminated by the Company for other than "cause".
99
<PAGE> 6
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
The Company has also entered into letter agreements with Messrs. Cassady
and Murphy providing for certain severance benefits in the event such officer's
employment with the Company is terminated under certain circumstances within two
years after a "change in control" of the Company. If the officer's employment is
terminated by the Company or its successor other than for "cause", disability or
at retirement age or by the officer for "good reason", the officer is entitled
to a lump sum payment equal to two times his annual salary as in effect prior to
the change in control, continued benefits under all insured and self-insured
welfare benefit plans in effect prior to the employment termination date for a
period of two years or until such earlier date as the officer receives
equivalent benefits from a new employer or reaches retirement age (in which case
the terms of any retirement plan shall apply), and to the extent that such
payment and/or any other payments which he has the right to receive from the
Company would constitute, alone or in the aggregate, an "excess parachute
payment" under Section 280G of the Internal Revenue Code, payment by the Company
of any excise tax imposed on such payments and any taxes due as the result of
the Company's payment of such excise tax and other taxes. "Good reason" will
exist for an officer to terminate his own employment without losing his
entitlement to such benefits if, without the officer's prior written consent,
his job status, positions or responsibilities are reduced or otherwise
inconsistent with those prior to the change in control, his salary or benefits
are reduced from pre-change in control levels or he is required to relocate
from, or be based anywhere other than, the metropolitan area where his office is
located prior to the change in control. The events constituting a "change in
control" following which the letter agreement's severance provisions apply are
events of a nature which the Company would be required to report in its filings
with the SEC, including, without limitation, (a) the acquisition by any person,
entity or group of beneficial ownership of 15% or more of the combined voting
power of the Company's securities in the election of directors, (b) liquidation
of all or substantially all of the Company's assets or a merger, consolidation
or reorganization in which neither the Company nor any entity in which the
Company's stockholders own at least 50% of the voting power is the surviving
entity, and (c) the current directors of the Company, or persons approved by
them to succeed them, ceasing to constitute at least a majority of the Board;
provided that any of the foregoing events shall not constitute a "change in
control" if the officer or a group of which he is a part acquires, directly or
indirectly, 15% or more of the combined voting power of the Company's
securities.
Each of the Employee Option Plan and Restricted Stock Plan under which one
or more of the Company's executive officers have received grants or awards
provide for the cancellation or forfeiture of then unvested stock options or
restricted stock, and a limited, 30-day post-termination period for exercising
his then vested stock options (generally extended to three months in the case of
retirement, six months in the case of death and one year in the case of
disability), in the event the recipient ceases to be employed by or an advisor
to the granting or awarding entity, subject to the acceleration of vesting
and/or the extension of the post-termination exercise period by the
administering authority in its discretion. In the event of a "change in control"
of the issuing entity, each of the Plans provides that, except as otherwise
determined at the time by the board of directors of the issuing entity, all
grants and awards then outstanding thereunder shall become fully vested, and the
Employee Option Plan further provides that, except as otherwise determined at
the time by the applicable board of directors, a cash payment shall be made to
the holders of outstanding options equal to the amount by which (i) the highest
price paid or offered in any transaction related to the "change in control", or
at which the underlying stock has traded on any securities market, within the
preceding 60 days, as determined by the board, exceeds (ii) the exercise price.
The Employee Option Plan and the Restricted Stock Plan
100
<PAGE> 7
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
define "change in control" to mean (1) the acquisition by any person, entity or
group of beneficial ownership of 50% or more of the combined voting power of the
issuing entity's then outstanding securities, or (2) the consummation of a
transaction requiring stockholder approval and involving the sale of all or
substantially all of the assets, or a merger or consolidation, of the issuing
entity.
EMPLOYEE STOCK OPTIONS
The following tables provide information with respect to options granted
to, and exercises by, the persons indicated during Fiscal 2000 and the value of
unexercised options held by such persons at the end of Fiscal 2000.
OPTION GRANTS IN FISCAL 2000
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------
PERCENT OF
TOTAL
OPTIONS
GRANTED
TO
EMPLOYEES GRANT
OPTIONS IN EXERCISE DATE
GRANTED FISCAL PRICE EXPIRATION PRESENT
NAME (SHARES)(1) 2000 (PER SHARE)(2) DATE VALUE
---- ---------- ---------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
John W. Paxton, Sr........... - - - - -
William J. Murphy............ 46,500 3% $22.156 03/03/08 $ 865,365(3)
25,000(4) 2% $15.063 03/07/05 $ 432,250(5)
David H. Biggs............... - - - - -
Kenneth A. Cassady........... 350,000 26% $ 9.821 06/07/07 $2,009,000(6)
James G. Cleveland........... - - - - -
Peter Lomax.................. 15,000 2% $ 7.97 09/22/07 $ 70,650(7)
</TABLE>
---------------
101
<PAGE> 8
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(1) Except as otherwise footnoted, granted under the Employee Option Plan and
becoming exercisable as to one-third of the underlying shares on a
cumulative basis on each of the first three anniversaries of the grant date.
(2) In the case of options granted under the Employee Option Plan, the exercise
price shown is equal to the closing sale price for the Common Stock as
reported on the Nasdaq NNM for the last trading day prior to the grant date.
(3) Present value of the option as of the date of grant, calculated using the
Black-Scholes option valuation model under the following assumptions: (a)
based upon the Company's review of historical data concerning the exercise
by employees of options for Shares granted under the Company's stock option
plans and survey data concerning the experience of other companies, an
executive may typically be expected to hold an option with a stated term of
eight years for five years prior to exercise; (b) a stock price volatility
of 72.92% (based on the changes in the market price for Shares over the five
fiscal year period ended March 31, 2000, the length of which period
corresponds to the expected holding period assumed in (a) above); (c) a
risk-free interest rate of 6.66% (based on risk free rate is the rate on
U.S. zero coupon bonds with a life equal to that of the options.)
(4) Granted outside the Employee Option Plan at an exercise price per share
negotiated as part of the terms of Mr. Murphy's agreement to become the
Company's Executive Vice President, Americas, based on the market price for
the Company's common stock as of the time he assumed those duties. Fully
exercisable as of the date of grant.
(5) Present value of the option as of the date of grant, calculated using the
Black-Scholes option valuation model under the following assumptions: (a)
based upon the Company's review of historical data concerning the exercise
by employees of options for Shares granted under the Company's stock option
plans and survey data concerning the experience of other companies, an
executive may typically be expected to hold an option with a stated term of
five years for three years prior to exercise; (b) a stock price volatility
of 81.15% (based on the changes in the market price for Shares over the
three fiscal year period ended March 31, 2000, the length of which period
corresponds to the expected holding period assumed in (a) above); (c) a
risk-free interest rate of 6.64% (based on risk free rate is the rate on
U.S. zero coupon bonds with a life equal to that of the options.)
(6) Present value of the option as of the date of grant, calculated using the
Black-Scholes option valuation model under the following assumptions: (a)
based upon the Company's review of historical data concerning the exercise
by employees of options for Shares granted under the Company's stock option
plans and survey data concerning the experience of other companies, an
executive may typically be expected to hold an option with a stated term of
eight years for five years prior to exercise; (b) a stock price volatility
of 69.77% (based on the changes in the market price for Shares over the five
fiscal year period ended March 31, 2000, the length of which period
corresponds to the expected holding period assumed in (a) above); (c) a
risk-free interest rate of 5.86% (based on risk free rate is the rate on
U.S. zero coupon bonds with a life equal to that of the options.)
(7) Present value of the option as of the date of grant, calculated using the
Black-Scholes option valuation model under the following assumptions: (a)
based upon the Company's review of historical data concerning the exercise
by employees of options for Shares granted under the Company's stock option
plans and survey data concerning the experience of other companies, an
executive may typically be expected to hold an option with a stated term of
eight years for five years prior to exercise; (b) a stock price volatility
of 70.75% (based on the changes in the market price for Shares over the five
fiscal year period ended March 31, 2000, the length of which period
corresponds to the expected holding period assumed in (a) above); (c) a
risk-free interest rate of 5.93% (based on risk free rate is the rate on
U.S. zero coupon bonds with a life equal to that of the options.)
102
<PAGE> 9
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
AGGREGATED OPTION EXERCISES IN FISCAL 2000
AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
EXERCISES DURING
FISCAL 2000 FISCAL YEAR-END
-------------------- ------------------------------------------------------------
SHARES NUMBER OF VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS(1)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John W. Paxton, Sr..... -- -- 400,000! 300,000! $3,537,400 $2,653,050
William J. Murphy...... 70,000 $298,672 245,000! 46,500! $ 377,488 --
David H. Biggs......... -- -- -- -- -- --
Kenneth A. Cassady..... -- -- -- 350,000 -- $2,898,525
James G. Cleveland..... 129,998! $545,363 -- -- -- --
40,000* $2,695,000 -- -- -- --
Peter Lomax............ -- -- 14,999! 35,001! -- $ 143,888
</TABLE>
103
<PAGE> 10
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
---------------
! Options for the purchase of the indicated number of shares of Telxon Common
Stock granted to the named executive officer pursuant to the Employee Option
Plan except as otherwise explained in footnote (4) to the table of Fiscal
2000 Option Grants above with respect to 25,000 of the option shares
granted to Mr. Murphy.
* Option for the purchase of the indicated number of shares of common stock of
the Company's former Aironet subsidiary granted to the named executive
officer as an advisor to Aironet pursuant to Aironet's stock option plan.
(1) Aggregate fair market value, based, in the case of options for the purchase
of Telxon Common Stock, on the amount by which the closing sale price for
Telxon Common Stock as reported on the Nasdaq NNM for March 31, 2000
exceeded the exercise price of all unexercised "in-the-money" (fair market
value per share in excess of exercise price) Telxon stock options then held.
COMPENSATION OF DIRECTORS
CASH COMPENSATION
The Company's non-employee directors each receive an annual fee of $25,000
per year. The non-employee directors also receive $2,500 plus travel expenses
for each day of attendance at directors' meetings ($1,250 for a telephonic
meeting), and $2,500 for each Audit Committee or Compensation Committee meeting
attended (either as a member thereof or at the request of the Committee), unless
the committee and the full Board meet on the same day, in which event
compensation in the amount of $1,250 is paid for attendance at such committee
meeting.
Mr. Paxton, by reason of also being an employee of the Company, does not
receive any compensation from the Company for his services as a director (see
"COMPENSATION OF EXECUTIVE OFFICERS" above for the compensation payable to him
in his capacity as an executive officer of the Company).
STOCK OPTIONS
Directors who are not employees of the Company or a subsidiary are eligible
to receive options to purchase Shares under the Company's 1990 Stock Option Plan
for Non-Employee Directors (as amended the "Director Option Plan"). However, all
shares of Company Common Stock authorized for issuance under the Director Option
Plan have been fully utilized for the granting of options thereunder. The
Director Option Plan provides for each non-employee director to be automatically
granted an option to purchase 25,000 Shares upon first being elected to the
Board (an "Initial Grant") and to be automatically granted annually thereafter a
10,000 Share option (each a "Continuing Grant") on each anniversary of his last
election to the Board during his continued
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ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
service on the Board. An Initial Grant becomes exercisable in equal thirds on
each of the first three anniversaries of the grant date, whereas each Continuing
Grant becomes exercisable in full on the third anniversary of its grant date.
The Director Option Plan also permits the Board to make discretionary option
grants under the Director Option Plan to any one or more of the Company's
non-employee directors from time to time in addition to the foregoing automatic
grants. Each option granted under the Director Option Plan has a seven-year
term, which may be extended up to ten (10) years, and an option price per Share
equal to the closing sales price of the Common Stock as reported on the Nasdaq
for the trading day immediately preceding the date of grant. The options
terminate three months following the optionee no longer being a director of the
Company, six months following death and one year following disability. Options
granted under the Director Option Plan are subject to the same "change in
control" provisions as apply under the Employee Option Plan described under
"EXECUTIVE COMPENSATION -- Employment Agreements and Termination of Employment
Arrangements" above.
OTHER ARRANGEMENTS
Prior to his election to the Company's Board of Directors, the Company
engaged R. Dave Garwood to provide employee training and consulting services to
the Company valued at $154,000 relating to the adoption and implementation of
its MRP-II material resource planning process. Mr. Garwood agreed to accept
20,197 shares of Company common stock as payment for his services. The shares
vested in two approximately equal installments at the midpoint of the
engagement and upon its completion in June 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As part of its five-year plan, "Telxon 2000," announced in August 1995,
the Company established a program providing key Telxon employees with a
long-term incentive opportunity to purchase stock in its technology
subsidiaries, thereby encouraging them to support the development of the
subsidiaries and their businesses with the same effort and dedication as in
their service to Telxon so as to more closely align their objectives with the
long-term goals of the Company as a whole. During the fiscal year ended March
31, 1996 ("Fiscal 1996"), the Company sold shares of common stock in its
Metanetics Corporation subsidiary ("Metanetics") under the program at a price
per share equal to that paid in a contemporaneous sale negotiated at arm's
length with a third party investor. John H. Cribb, then an officer of the
Company and now a member of its Board of Directors and its Compensation
Committee, purchased 30,000 Metanetics Shares. In February 2000, the Company
repurchased all of the outstanding minority stockholdings in Metanetics,
including Mr. Cribb's shares, at a price of $6.73 per share. As a result, Mr.
Cribb received a cash payment of $201,900 from the Company for his Metanetics
shares, representing an approximately 0.6% interest in Metanetics at the time
of the repurchase.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 3 on Form 10-K/A to be signed on
its behalf by the undersigned, thereunto duly authorized.
TELXON CORPORATION
Date: October 31, 2000 By: /s/ WOODY M. MCGEE
-------------------------------
Woody M. McGee, Vice President
and Chief Financial Officer
