SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TELEPAD CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed Maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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TELEPAD CORPORATION
380 Herndon Parkway, Suite 1900
Herndon, Virginia 22070
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders
(the "Meeting") of TelePad Corporation (the "Company") will be held at the
Company's executive offices at 380 Herndon Parkway, Suite 1900, Herndon,
Virginia on Monday, May 4, 1998, at 11:00 A.M., Eastern Daylight Savings Time,
to consider and act upon the following matters:
1. The election of a director of the Company to serve as the Class II
director of the Company's Board of Directors for a term expiring at
the third succeeding annual meeting after election, and until his
successor is duly elected and qualified;
2. A proposal to amend the Company's Second Restated Certificate of
Incorporation (the "Certificate of Incorporation") in order to
effectuate a 1 for 10 reverse stock split;
3. A proposal to ratify the action of the Board of Directors in
appointing Ernst & Young LLP as the Company's independent public
accountants for the year ending December 31, 1998; and
4. The transaction of such other business as may properly come before
the Meeting or any adjournment or postponement thereof.
Information regarding the matters to be acted upon at the Meeting is
contained in the accompanying Proxy Statement.
The close of business on March 25, 1998 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Meeting and any adjournment or postponement thereof. A list of such
stockholders will be open for examination by any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the Meeting at the offices of the Company, 380 Herndon Parkway,
Suite 1900, Herndon, Virginia.
By Order of the Board of Directors,
ROBERT D. RUSSELL
Secretary
Herndon, Virginia
April 3, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. EACH STOCKHOLDER
IS URGED TO SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY WHICH IS BEING
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. AN ENVELOPE ADDRESSED TO THE
COMPANY'S TRANSFER AGENT IS ENCLOSED FOR THAT PURPOSE AND NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES.
<PAGE>
TELEPAD CORPORATION
380 Herndon Parkway, Suite 1900
Herndon, Virginia 22070
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
May 4, 1998
This Proxy Statement is furnished to the holders of common stock,
par value $.01 per share ("Common Stock"), of TelePad Corporation (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company ("Proxy" or "Proxies") for use at the Annual Meeting of
Stockholders (the "Meeting") to be held on Monday, May 4, 1998, at 11:00 A.M.,
Eastern Daylight Savings time, at the Company's executive offices at 380 Herndon
Parkway, Suite 1900, Herndon, Virginia, and at any adjournment or postponement
thereof, for the purposes set forth in the accompanying Notice of Annual
Meeting. The approximate mailing date of this Proxy Statement is April 4, 1998.
The close of business on March 25, 1998 has been fixed by the Board
of Directors as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Meeting and any
adjournment thereof. As of the Record Date, there were 12,065,624 shares of
Class A Common Stock outstanding, which are the only voting securities of the
Company, issued and outstanding. There were no shares of Class B Common Stock
outstanding as of the Record Date. Each share of Class A Common Stock
outstanding on the Record Date will be entitled to one vote on all matters to
come before the Meeting. Cumulative voting is not permitted. A majority of the
shares entitled to vote, represented in person or by proxy, is required to
constitute a quorum for the transaction of business. Proxies submitted which
contain abstentions or broker nonvotes will be deemed present at the Meeting in
determining the presence of a quorum.
Directors are elected by a plurality of the votes cast at the
Meeting (Proposal 1). The affirmative vote of a majority of the shares of Class
A Common Stock outstanding will be required to amend the Company's Certificate
of Incorporation to effect the proposed reverse stock split (Proposal 2). The
affirmative vote of a majority of the shares present, in person or by proxy, and
entitled to vote at the Meeting will be required to ratify the appointment of
Ernst & Young LLP as the Company's independent public accountants for the
Company's fiscal year ending December 31, 1998 (Proposal 3). Abstentions are
considered as shares entitled to vote and, therefore, are effectively negative
votes for Proposals 2 and 3. Broker nonvotes with respect to any matter are not
considered as shares entitled to vote. However, because an affirmative vote of a
majority of the outstanding Class A Common Stock is required to amend the
Company's Certificate of Incorporation, broker nonvotes will have the same
effect as a vote "against" the amendment. Broker nonvotes will have no effect on
the outcome of the vote on Proposals 1 or 3.
A Proxy may be revoked at any time before its exercise by filing
with the Secretary of the Company an instrument of revocation or a duly executed
proxy bearing a later date, or by attendance at the Meeting and electing to vote
in person. Attendance at the Meeting will not in and of itself constitute
revocation of a Proxy.
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PROPOSAL 1
ELECTION OF DIRECTORS
A Class II director will be elected to the Company's Board of
Directors at the Meeting. The director nominated for Class II will serve for a
term expiring at the third succeeding Annual Meeting of Stockholders. The
nominee for Class II directorship is currently a Class II director of the
Company whose term as director expires at the Meeting.
The Board of Directors has no reason to expect that the nominee will
be unable to stand for election at the date of the Meeting. In the event that a
vacancy occurs with respect to the original nominee prior to the Meeting, the
proxies will be voted for a substitute nominee, if named by the Board of
Directors.
INFORMATION ABOUT NOMINEE
The following table sets forth information regarding the nominee:
NAME AGE CLASS POSITIONS WITH THE COMPANY
- ------------------ --- ----- --------------------------
Alan B. Salisbury 61 II Director
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ALAN B. SALISBURY has been a Director of the Company since July
1996. Mr. Salisbury has been a director and the president of Learning Tree
International Inc. since April 1993 and has been a director of Sybase, Inc. and
Template Software. Mr. Salisbury served as Executive Vice President and Chief
Operating Officer of Microelectronics & Computer Technology Corporation from May
1991 to April 1993.
EXECUTIVE OFFICERS
DONALD W. BARRETT became Chief Executive Officer of the Company and
Chairman of its Board of Directors on April 16, 1996. From July 1991 through
March 1996, Mr. Barrett was President and Chief Executive Officer of Ideas, Inc.
which owned and operated a family of telecommunications and information systems
companies. Mr. Barrett was president of the Government Systems Group of Contel
Federal Systems, Inc., a network integrator, from 1987 through 1991 and
President of the Custom Products Group of Burroughs Corporation, a computer
manufacturer, from 1984 through 1987. Prior to that time, Mr. Barrett held
various marketing and technical positions with GTE and General Dynamics. Mr.
Barrett is a director of Objective Communications, Inc.
RONALD C. OKLEWICZ has been President and a Director of the Company
since August 1992, but is not standing for re-election at the Meeting and has
been Chief Operating Officer since November 1995. Mr. Oklewicz was Chief
Executive Officer from August 1992 until April 1996. From November 1991 until
August 1992, Mr. Oklewicz served as a consultant to the Company. Mr. Oklewicz
served in an executive capacity at Wollongong Group, a software communications
firm, from 1990 through 1991. Mr. Oklewicz served in various positions at Apple
Computer from 1986 through 1990, including serving as general manager of the
Federal System Division. Mr. Oklewicz also spent 13 years with Xerox Corporation
in various sales and marketing positions.
ROBERT D. RUSSELL has been Vice President, Treasurer and Chief
Financial Officer of the Company since May 1995 and Secretary of the Company
since September 1996. Prior to joining the Company, Mr. Russell was
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<PAGE>
Vice President, Finance and Administration, Secretary and Treasurer of Falcon
Microsystems, Inc. from 1986 until 1994 and an independent consultant from
August 1994 until May 1995.
BOARD MEETINGS AND COMMITTEES
The Board of Directors is responsible for the management of the
Company. During the year ended December 31, 1997, the Board of Directors held
five meetings. Each incumbent director attended at least 75% of all meetings of
the Board and committees on which the person served which were held during the
year.
The Audit Committee, which currently consists of Messrs. Toups and
Diesel, has authority with respect to the financial audit and reporting
functions of the Company, including the review of internal accounting procedures
and the review and oversight of the Company's independent accountants. The Audit
Committee held one meeting during 1997.
The Compensation Committee, which currently consists of Messrs.
Shapiro and Dankman, has power and authority with respect to all matters
pertaining to compensation payable by the Company and the administration of
employee benefits, deferred compensation and the stock option plans of the
Company. The Compensation Committee held two meetings during 1997.
The Nominating Committee, which currently consists of Messrs. Diesel
and Shapiro, is responsible for the nomination of individuals for election to
the Company's Board of Directors. The Nominating Committee held no independent
meetings during 1997.
The Executive Committee, which currently consists of Messrs.
Barrett, Diesel, Shapiro and Toups, is charged with the review and oversight of
the management of the Company and monitoring its corporate activities. The
Executive Committee held no independent meetings during 1997.
PROPOSAL 2
AMENDMENT TO CERTIFICATE
OF INCORPORATION
TO EFFECT
REVERSE STOCK SPLIT
PROPOSAL TO AUTHORIZE REVERSE STOCK SPLIT
GENERAL
The Board of Directors of the Company has unanimously adopted
resolutions proposing, declaring advisable and recommending that stockholders
authorize an Amendment to the Company's Certificate of Incorporation (the
"Amendment") to (i) effect a 1 for 10 reverse stock split of the Company's
issued shares of Common Stock (the "Reverse Split") and (ii) provide for the
payment of cash in lieu of fractional shares otherwise issuable in connection
therewith. There will be no change in the number of the Company's authorized
shares of Common Stock and no change in the par value of the Class A Common
Stock. The complete text of the Amendment is set forth in Exhibit A to this
Proxy Statement.
The Reverse Split will not change the proportionate equity interests
of the Company's stock, nor will the respective voting rights and other rights
of stockholders be altered, except for possible immaterial changes due to the
Company's purchase of fractional shares. The Common Stock issued pursuant to the
Reverse Split will remain fully paid and nonassessable.
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Upon effectiveness of the Reverse Split, the Company's outstanding
shares will be reduced from 12,065,624 shares of Class A Common Stock (assuming
no further shares are issued until the effective date of the Amendment) to
approximately 1,206,562 shares of Class A Common Stock. Each certificate
representing shares of Class A Common Stock outstanding immediately prior to the
Reverse Split (the "Old Shares") will automatically represent new shares (the
"New Shares") equal to 10% of the number of shares of Common Stock represented
by the Old Shares. After the Reverse Split becomes effective, holders of Old
Shares will be asked to surrender certificates representing Old Shares in
exchange for certificates representing New Shares in accordance with the
procedures set forth in a letter of transmittal to be sent by the Company. No
fractional New Shares will be issued as a result of the Reverse Split. Rather,
the Company will pay cash in lieu of any fraction of a New Share that any holder
of record of Old Shares would otherwise receive. See "Procedure for Effecting
Reverse Split and Exchange of Stock Certificates."
PURPOSE OF THE REVERSE SPLIT
The principal purpose of the Reverse Split is to reduce the number
of shares of Class A Common Stock while increasing the market value thereof. On
February 27, 1998, the Company was notified by Nasdaq that it had recently
amended the maintenance requirements to require, among other things, that any
stock listed on the Nasdaq SmallCap Market have a minimum closing bid price of
$1.00. The letter further stated that unless the Company's minimum closing bid
price rises above $1.00 by May 28, 1998 and stays above $1.00 for at least 10
consecutive trading days, the Company will be subject to delisting from the
Nasdaq SmallCap Market. The Board of Directors recommends that stockholders
approve the Amendment in order that the minimum closing bid price of the Class A
Common Stock will be at least $1.00 to maintain its listing on the Nasdaq
SmallCap Market. As of March 31, 1998, the closing bid price of the Class A
Common Stock was 1-1/16 and, notwithstanding the fact that the Common Stock had
closed at more than $1.00 on the two prior trading days, its closing bid price
had not previously exceeded $1.00 since October 1997.
The Board of Directors believes that the closing bid price should
increase 10 times following the consummation of the Reverse Split thereby giving
the Company a large buffer over the minimum requirement.
In the event that the Company's stock is delisted there can be no
assurance that trading in the Common Stock will continue (through the OTC
Bulletin Board or otherwise). Any delisting of the Common Stock may adversely
affect a holder's ability to dispose of, or to obtain accurate quotations as to
the market value of, the Class A Common Stock. In addition, any delisting may
cause the Class A Common Stock to be subject to "penny stock" regulations
promulgated by the Securities and Exchange Commission. Under such regulations,
broker- dealers are required to, among other things, comply with disclosure and
special suitability determinations prior to the sale of the Class A Common
Stock. If the Class A Common Stock becomes subject to these regulations, the
market price of the Class A Common Stock and the liquidity thereof could be
adversely affected.
Stockholders should recognize that if the Reverse Split is
effectuated they will own 10% of the number of shares they presently own and
that there can be no assurance that the market price of the Company's Class A
Common Stock will, in fact, correspondingly increase by 10 times following
consummation of the Reverse Split or, even if such price increases by 10 times,
such post Reverse Split market price will be sustained. The Reverse Split will
increase the number of stockholders of the Company who own odd-lots (less than
100 shares). Stockholders who hold odd-lots typically will experience an
increase in the cost of selling their shares, as well as greater difficulty in
effecting such sales. Also, the possibility does exist that liquidity could be
adversely affected by the reduced number of shares that would be outstanding
after the Reverse Split. Consequently, there can be no assurance that the
Reverse Split will achieve the desired results that have been outlined above.
PROCEDURE FOR EFFECTING REVERSE SPLIT AND EXCHANGE OF STOCK CERTIFICATES
The Reverse Split will be effected by means of filing the Amendment
with the Secretary of State of the State of Delaware (the "Secretary of State").
Assuming approval of the Reverse Split by the requisite vote of
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<PAGE>
stockholders at the Meeting, it is expected that the Amendment will be filed in
time for the Reverse Split to become effective with the opening of trading on
the Nasdaq Stock Market on or about May 6, 1998. However, the Board of Directors
may abandon or delay the Reverse Split at any time before or after the Meeting
and prior to the effective date for the Reverse Split if for any reason the
Board of Directors deems it advisable to do so. In addition, the Board of
Directors may make any and all changes to the form of Amendment that it deems
necessary in order to file the Amendment with the Secretary of State and give
effect to the Reverse Split.
The Common Stock is listed for trading on the Nasdaq SmallCap Market
under the symbol "TPADA". Following implementation of the Reverse Split, trading
the Common Stock will continue on the Nasdaq SmallCap Market on the post Reverse
Split basis.
As soon as practicable after the effective date of the Reverse
Split, the Company will send a letter of transmittal to each holder of record of
Old Shares outstanding on the effective date of the Reverse Split. The letter of
transmittal will contain instructions for the surrender of certificate(s)
representing Old Shares to American Stock Transfer and Trust Company, the
Company's transfer agent (the "Transfer Agent"). Upon proper completion and
execution of the letter of transmittal and return thereof to the Transfer Agent,
together with the certificate(s) representing Old Shares, a stockholder will be
entitled to receive a certificate representing the number of New Shares of
Common Stock into which the Old Shares submitted have been reclassified and
changed as a result of the Reverse Split, together with a check for the cash
payment made in lieu of fractional New Shares, if any.
No scrip or fractional New Shares will be issued as a result of the
Reverse Split. Rather, the Company will pay cash (rounded to the nearest cent)
in lieu of any fraction of a share that any stockholder of record would
otherwise receive. The price for such fractional New Shares will equal such
fraction multiplied by the closing price of the Company's Common Stock on the
Nasdaq SmallCap Market on the day prior to the effective date of the Amendment,
adjusted for the Reverse Split, which is equal to 10 times the prereverse split
closing bid price.
No new certificates will be issued to a stockholder until such
stockholder has surrendered his or her outstanding certificate(s) together with
the properly completed and executed letter of transmittal to the Transfer Agent.
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY
CERTIFICATES UNTIL REQUESTED TO DO SO.
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PROPOSAL 3
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
The firm of Ernst & Young LLP has audited the financial statements
of the Company. The Board of Directors has, subject to ratification by
stockholders, appointed that firm to act as its independent public accountants
for the year ending December 31, 1998. Accordingly, management will present to
the Meeting a resolution ratifying the appointment of Ernst & Young LLP as the
Company's independent public accountants for the fiscal year ending December 31,
1998.
A representative of Ernst & Young LLP is expected to be present at
the Meeting with the opportunity to make a statement if the representative
desires to do so and is expected to be available to respond to appropriate
questions addressed by stockholders.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following sets forth the compensation paid by the Company during
the three fiscal years ended December 31, 1997 to the Officers of the Company
listed below (the "Named Officers"). No other executive officer of the Company
received compensation in excess of $100,000 for the fiscal year ended December
31, 1997.
SUMMARY COMPENSATION TABLE
Name and Principal Position Annual Compensation Long-term
Compensation
Awards
----------------------------------------------
Year Salary Other Annual Options
($) Compensation (#)
($)
- -------------------------------- ---- ---------- ------------ ------------
Donald W. Barrett(1) 1997 $250,000 $ 0 125,000(3)
Chief Executive Officer 1996 $177,083 $ 0 400,000(4)
Ronald C. Oklewicz(2) 1997 $150,000 $ 0 60,000(5)
President and Chief Operating 1996 $150,000 $35,000
1995 $123,885 $ 0 200,000(6)
Officer
(1) Mr. Barrett became the Company's Chief Executive Officer on April 16,
1996.
(2) Mr. Oklewicz was the Company's Chief Executive Officer from August 5, 1992
until April 16, 1996.
(3) Represents options to purchase shares of Class A Common Stock at an
exercise price of $0.376 per share (the average of the closing highest and
lowest sales prices of the Common Stock on the date of grant), with such
options becoming exercisable on December 2, 2003.
(4) Represents options to purchase shares of Class A Common Stock at an
exercise price of $3.8125 per share (the average of the closing bid and
asked prices of the Common Stock on the date of grant), with 200,000 of
such options being currently exercisable and 200,000 options becoming
exercisable on December 31, 1998.
(5) Represents options to purchase shares of Class A Common Stock at an
exercise price of $0.376 per share (the average of the closing highest and
lowest sales prices of the Common Stock on the date of grant), with such
options becoming exercisable on December 2, 2003.
(6) Represents options to purchase shares of Class A Common Stock at an
exercise price of $1.75 per share (the average of the closing bid and
asked prices of the Common Stock on the date of grant).
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Option Grants in Fiscal 1997
Shown below is information concerning stock option grants of Class A
Common Stock awarded to the Named Officers during the Company's 1997 fiscal
year.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Name Number of Shares % of Total Options Exercise or Expiration
Underlying Options Granted to Employees Base Price Date
Granted (1) in Fiscal 1996 ($/sh) (2)
- ------------------ ------------------ -------------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Donald W. Barrett 125,000 33.0% $0.376 12/02/07
Ronald C. 60,000 16.3% $0.376 12/02/07
Oklewicz
</TABLE>
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(1) The options are incentive stock options.
(2) The exercise price is equal to the fair market value of the shares of
Class A Common Stock on the date of grant of the option.
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Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End
Option Values
The following table sets forth, for the Named Officers of the
Company, information regarding aggregate exercises of options in 1997 and the
number and value of unexercised options at December 31, 1997:
<TABLE>
<CAPTION>
Name Number of Value Number of Shares Value of
Shares Realized Underlying Unexercised Unexercised
Acquired on Options at End of In-the-Money
Exercise Fiscal Year Options at End of
Exercisable/ Fiscal 1997
Unexercisable Exercisable/
Unexercisable(1)
- ------------------ ----------- -------- ---------------------- ----------------
<S> <C> <C> <C> <C> <C>
Donald W. Barrett 0 0 200,000/325,000 $0/$7,750
Ronald C. Oklewicz 0 0 380,000/60,000 $9,720/$3,720
</TABLE>
- ------------------
(1) Based upon the difference between the exercise prices of the options and
the closing price of the Class A Common Stock, as reported on the Nasdaq
SmallCap Market on December 31, 1997, of $0.438 per share.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Donald W.
Barrett, dated as of April 10, 1996. The employment is "at-will" and may be
terminated by either party at any time, subject only to the terms of the
employment agreement and the By-Laws of the Company. Pursuant to the agreement,
Mr. Barrett serves as Chairman of the Board and Chief Executive Officer of the
Company at a salary of $250,000 per annum. Mr. Barrett's salary has been reduced
by $22,500 commencing January 1, 1998 in consideration for an award of 45,000
shares of Class A Common Stock. The agreement provides that Mr. Barrett is
entitled to receive specified bonuses in the aggregate amount of $220,000 upon
the occurrence of specified events and achievement of specified sales and
financial milestones by the Company, as well as other supplemental benefits at
the discretion of the Board of Directors. In addition, options to purchase
396,500 shares of Class A Common Stock pursuant to Company's Amended and
Restated 1993 Stock Option Plan as amended (the "SOP"), and options to purchase
3,500 shares of Class A Common Stock under the 1996 Stock Incentive Plan, all at
an exercise price of $3.8125 per share, were granted to Mr. Barrett pursuant to
such agreement. 200,000 of such options are immediately exercisable and 200,000
of such options shall become exercisable on December 31, 1998, subject to
certain acceleration provisions, including the occurrence of a change in control
of the Company or the termination of Mr. Barrett other than for cause or
disability (as such terms are defined in Mr. Barrett's employment agreement).
The agreement also provides that if Mr. Barrett is terminated other than for
cause or disability, the Company will pay to Mr. Barrett his compensation for 12
months following such termination. During the term of employment and for a
period of one year after such employment has terminated, the agreement provides
that Mr. Barrett will not solicit the Company's employees.
The Company has entered into an employment agreement with Ronald C.
Oklewicz, dated as of January 1, 1998, for a term ending December 31, 1998.
Pursuant to the agreement, Mr. Oklewicz serves as President and Chief Operating
Officer of the Company at a salary of $130,000 per annum. The agreement provides
that Mr. Oklewicz is entitled to receive 40,000 shares of Class A Common Stock
in 1998 and a bonus upon the occurrence of specified events and achievement of
specified sales and financial milestones by the Company, as well as other
supplemental benefits at the discretion of the Board of Directors. In addition,
the exercise period of options to purchase 200,000 shares of the Company's Class
A Common Stock pursuant to the SOP, (with an exercise price of $1.75 per share
which are currently exercisable), was extended pursuant to the terms of such
agreement. The agreement also provides that if Mr. Oklewicz is terminated other
than for cause (as defined therein) or dies, the Company will pay to Mr.
Oklewicz (or his spouse or estate if he dies) his compensation until the
expiration of the term of the agreement. The agreement contains a
confidentiality provision and provides that during the term of employment and
for a period of one year after such employment has terminated, Mr. Oklewicz will
not interfere with the Company's customers or solicit the Company's employees.
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COMPENSATION OF DIRECTORS
Directors of the Company are reimbursed for their expenses in
attending board meetings. Each non-employee director is entitled to an option to
purchase 90,000 shares of Common Stock of the Company upon becoming a director
of the Company, which options vest over a two-year period.
In April 1996, the Board of Directors of the Company authorized that
each non-employee Director will receive an annual retainer of $18,000 plus a
payment of $1,000 for each regular or special meeting of the Board plus a
payment of $500 for any committee meeting held in conjunction with a Board
meeting plus $1,000 for any committee meeting held separately from a Board
meeting. Each non-employee Director received 45,000 shares of Class A Common
Stock in January 1998 in lieu of the foregoing regular or special meeting
payments.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, certain
information as to the beneficial ownership of Class A Common Stock of each of
the Company's directors, all executive officers and directors as a group, and
all persons known by the Company to be the beneficial owner of more than five
percent of the Company's Class A Common Stock:
AMOUNT AND PERCENT OF
NATURE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL SHARES OWNED
BENEFICIAL STOCKHOLDER OWNERSHIP (1)(2) (2)
- --------------------------------------- -------------------- -------------
Donald W. Barrett 245,000(3) 2.1%
380 Herndon Parkway Herndon, VA 20170
Sydney H. Dankman 225,148(4) 1.9%
380 Herndon Parkway Herndon, VA 20170
Ronald C. Oklewicz 451,219(5) 3.8%
380 Herndon Parkway Herndon, VA 20170
John M. Toups 129,445(6) 1.1%
380 Herndon Parkway Herndon, VA 20170
John P. Diesel 262,862(7) 2.2%
380 Herndon Parkway Herndon, VA 20170
E. Donald Shapiro 105,000(8) *
57 Worth Street
New York, NY 10013
Alan B. Salisbury 105,000(9) *
380 Herndon Parkway Herndon, VA 20170
All current officers and directors 1,542,007(10) 11.5%
as a group (8 persons)
- -----------------------
* Less than 1%.
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(1) Except as otherwise indicated, each of the parties listed has sole voting
and investment power with respect to all shares of Common Stock indicated.
Beneficial ownership is calculated in accordance with Rule 13d-3(d) under
the Exchange Act.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from March 25, 1998 upon the
exercise of options or warrants. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from March 25, 1998 have been exercised. Unless
otherwise noted, the Company believes that all persons named in the table
have sole voting and investment power with respect to all shares of Common
Stock beneficially owned by them.
(3) Includes 200,000 shares of Class A Common Stock underlying immediately
exercisable options. Does not reflect 200,000 options which shall vest and
become exercisable on December 31, 1998; provided, however, that in the
event of a change in control (as defined in Mr. Barrett's employment
agreement) of the Company, the non-vested portion of the options which
shall automatically accelerate to the date of such change in control.
(4) Includes 94,862 shares of Class A Common Stock underlying immediately
exercisable stock options and Class C Warrants.
(5) Includes 380,000 shares of Class A Common Stock underlying immediately
exercisable stock options. Also includes 3,438 shares of Class A Common
Stock underlying immediately exercisable Class C warrants and 17,781
shares of Class A Common Stock jointly owned by Mr. Oklewicz and his
spouse.
(6) Includes 84,445 shares of Class A Common Stock underlying immediately
exercisable options.
(7) Includes 64,445 shares of Class A Common Stock underlying immediately
exercisable stock options. Also includes 150,917 shares of Class A Common
Stock underlying immediately exercisable Class A, Class B and Class C
warrants jointly owned by Mr. Diesel and his spouse.
(8) Includes 60,000 shares of Class A Common Stock underlying immediately
exercisable stock options.
(9) Includes 60,000 shares of Class A Common Stock underlying immediately
exercisable stock options.
(10) Includes 1,116,440 shares of Class A Common Stock underlying immediately
exercisable stock options and Class A, Class B and Class C warrants.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
(the "Exchange Act") requires the Company's executive officers and directors,
and persons who beneficially own more than 10% of the Company's Common Stock, to
file initial reports of ownership and reports of changes of ownership with the
Securities and Exchange Commission and furnish copies of those reports to the
Company. Based solely on a review of the copies of the reports furnished to the
Company to date, or written representations that no reports were required, the
Company believes that all reports required to be filed by such persons with
respect to the Company's fiscal year ending December 31, 1997 were timely made,
except for certain reports filed by Messrs. Dankman, Shapiro and Toups.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company not later than December
4, 1998 for inclusion in the Company's proxy statement and form of proxy for
that meeting.
-11-
<PAGE>
SOLICITATION OF PROXIES
The cost of preparing, assembling and mailing the Notice of Annual
Meeting, this Proxy Statement and Proxies is to be borne by the Company. The
Company will also reimburse brokers who are holders of record of Common Stock
for their expenses in forwarding Proxies and Proxy soliciting material to the
beneficial owners of such shares. In addition to the use of the mails, Proxies
may be solicited without extra compensation by directors, officers and employees
of the Company by telephone, telecopy, telegraph or personal interview.
OTHER MATTERS
Management does not intend to bring before the Meeting for action
any matters other than those specifically referred to above and is not aware of
any other matters which are proposed to be presented by others. If any other
matters or motions should properly come before the Meeting, the persons named in
the Proxy intend to vote thereon in accordance with their judgment on such
matters or motions, including any matters or motions dealing with the conduct of
the Meeting.
PROXIES
All stockholders are urged to fill in their choices with respect to
the matters to be voted upon, sign and promptly return the enclosed form of
Proxy.
By Order of the Board of Directors,
ROBERT D. RUSSELL
Secretary
Herndon, Virginia
April 3, 1998
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<PAGE>
PROXY PROXY
- ----- -----
TELEPAD CORPORATION
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned holder of Common Stock of TELEPAD CORPORATION,
revoking all proxies heretofore given, hereby constitutes and appoints Donald W.
Barrett and Robert D. Russell and each of them, Proxies, with full power of
substitution, for the undersigned and in the name, place and stead of the
undersigned, to vote all of the undersigned's shares of said stock, according to
the number of votes and with all the powers the undersigned would possess if
personally present, at the Annual Meeting of Stockholders of TELEPAD
CORPORATION, to be held at the Company's executive offices at 380 Herndon
Parkway, Suite 1900, Herndon, Virginia on Monday, May 4, 1998, at 11:00 A.M.,
Eastern Daylight Savings Time, and at any adjournments or postponements thereof.
The undersigned hereby acknowledges receipt of the Notice of Meeting
and Proxy Statement relating to the meeting and hereby revokes any proxy or
proxies heretofore given.
Each properly executed Proxy will be voted in accordance with the
specifications made on the reverse side of this Proxy and in the discretion of
the Proxies on any other matter that may properly come before the meeting. Where
no choice is specified, this Proxy will be voted FOR the listed nominee to serve
as director and FOR Proposals 2 and 3.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE
<PAGE>
________________ ________ PLEASE MARK YOUR
ACCOUNT NUMBER COMMON CHOICE LIKE THIS IN BLUE
OR BLACK INK: [X]
Will attend the meeting
[_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
LISTED NOMINEE AND FOR PROPOSALS 2 AND 3.
(1) Election of one Class II Director
FOR the nominee listed WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for the listed nominee below
[_] [_]
Class II
--------
Nominee: Alan B. Salisbury
(Instruction: To withhold authority to vote for any individual nominee,
circle that nominee's name in the list provided above.)
(2) Amendment of the Certificate of Incorporation to effectuate a reverse
stock split.
FOR AGAINST ABSTAIN
|_| |_| |_|
(3) Ratify the appointment of Ernst & Young LLP as the Company' independent
public accountants
FOR AGAINST ABSTAIN
|_| |_| |_|
(4) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
Dated _______________________________, 1998
____________________________________________
____________________________________________
Signature(s)
(Signatures should conform to names as
registered. For jointly owned shares, each
owner should sign. When signing as attorney,
executor, administrator, trustee, guardian
or officer of a corporation, please give
full title.)
PLEASE MARK AND SIGN ABOVE AND RETURN PROMPTLY
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF AMENDMENT
TO THE
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
TELEPAD CORPORATION.
TELEPAD CORPORATION, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, (the
"Corporation")
DOES HEREBY CERTIFY:
FIRST: That the Second Restated Certificate of Incorporation of the
Corporation was filed in the office of the Secretary of State of Delaware on
August 19, 1992 (the "Certificate of Incorporation").
SECOND: That at a meeting of the Board of Directors of the
Corporation a resolution was duly adopted setting forth a proposed amendment of
the Certificate of Incorporation, as amended, of the Corporation and declaring
said amendment to be advisable. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Corporation amend Article FIFTH of its
Certificate of Incorporation in order to effect a reverse stock
split of its shares on a 1 for 10 ratio (the "Reverse Split") by
changing Article FIFTH thereof so that as amended, said Article
shall be and read as follows:
"FIFTH: STOCK. The aggregate number of shares which the
Corporation shall have the authority to issue is 100,000,000 shares,
divided into three classes: (i) 5,000,000 shares of preferred stock,
$.01 par value per share (the "Preferred Stock"), (ii) 593,063
shares of Class B Common Stock, $.01 par value per share (the "Class
B Common Stock"), and (iii) 94,406,937 shares of Class A Common
Stock, $.01 par value per share (the "Class A Common Stock") (the
Class A Common Stock and Class B Common Stock, collectively, the
"Common Stock").
Upon the filing of this amendment with the office of the
Secretary of State of the State of Delaware (the "Effective Date"),
each ten (10) shares of Class A Common Stock, which are the only
voting securities of
<PAGE>
the Corporation issued and outstanding, then issued shall be
automatically reclassified into one (1) share of Class A Common
Stock of the Corporation. In lieu of any fractional share to which
the holder would otherwise be entitled, the Corporation shall pay
cash in an amount equal to such fraction multiplied by the closing
price of the Corporation's Common Stock on the Nasdaq SmallCap
Market on the day prior to the Effective Date, adjusted for the
Reverse Split, which is equal to 10 times the prereverse split
closing price."
THIRD: That thereafter, pursuant to the Corporation's Bylaws and
pursuant to resolution of its Board of Directors, the Annual Meeting was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which Annual Meeting the holders of
stock representing a majority of the votes entitled to be cast with respect
thereto voted in favor of the aforesaid amendment.
FOURTH: That the aforesaid amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, said TELEPAD CORPORATION has caused this
Certificate of Amendment to be signed by Ronald C. Oklewicz, its President, and
Robert D. Russell, its Secretary, this ____ day of May, 1998.
TELEPAD CORPORATION
By: /s/ Ronald C. Oklewicz
-------------------------
Ronald C. Oklewicz
President
Attest: /s/ Robert D. Russell
-------------------------
Robert D. Russell
Secretary
