TELULAR CORP
PRE 14A, 1997-11-26
TELEPHONE & TELEGRAPH APPARATUS
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<PAGE>   1
                              TELULAR CORPORATION
                           647 NORTH LAKEVIEW PARKWAY
                             VERNON HILLS, IL 60061

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                          TO BE HELD JANUARY 27, 1998


TO THE SHAREHOLDERS OF TELULAR CORPORATION:

         NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of the
Telular Corporation, a Delaware corporation (the "Company"), will be held on
Tuesday, January 27, 1998, at 9:00 a.m. local time, at the Sheraton North Shore
Hotel, the Northfield Room, located at 933 Skokie Boulevard, Northbrook,
Illinois 60062 for the purpose of considering and acting upon the following
matters:

         1.      To elect eight directors to serve until the next Annual
                 Meeting of Shareholders and until their successors are duly
                 elected.

         2.      To approve the issuance by the Company of certain shares of
                 Common Stock on conversion of the Company's Series A
                 Convertible Preferred Stock.

         3.      To ratify and approve the selection of Ernst & Young, LLP as
                 independent auditors for the fiscal year ending September 30,
                 1998.

         4.      Such other or further business as may properly come before the
                 meeting.

         These items of business are more fully described in the Proxy
Statement accompanying this notice.

         The Board of Directors has fixed the close of business on November 21,
1997 as the record date for the determination of shareholders entitled to
notice of and to vote at such meeting or any adjournment thereof.



                                        By Order of the Board of Directors




                                        Kenneth E. Millard
                                        Chief Executive Officer and President

Vernon Hills, Illinois
December 15, 1997

IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>   2

                              TELULAR CORPORATION

                            PROXY STATEMENT FOR 1998
                         ANNUAL MEETING OF SHAREHOLDERS

                 INFORMATION CONCERNING SOLICITATION AND VOTING

GENERAL

         The enclosed Proxy is solicited by the Board of Directors of the
Telular Corporation, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Shareholders to be held on Tuesday, January 27, 1998, at 9:00
a.m. local time, or at any adjournment thereof, for the purposes set forth in
this Proxy Statement and the accompanying Notice of Annual Meeting of
Shareholders.  The Annual Meeting will be held at the Sheraton North Shore
Hotel, the Northfield Room, located at 933 Skokie Boulevard, Northbrook,
Illinois 60062.  The Company's principal executive offices are located at 647
North Lakeview Parkway, Vernon Hills, Illinois 60061.  The Company's telephone
number at that address is (847) 247-9400.

         These proxy solicitation materials were mailed on or about December
15, 1997, to all stockholders entitled to vote at the meeting.

REVOCABILITY OF PROXIES

         Any shareholder who has executed and returned a proxy pursuant to this
solicitation may revoke it any time before it is voted.  It may be revoked by
filing with the Secretary of the Company at the Company's principal executive
office, a written notice of revocation or a duly executed proxy bearing a later
date, or it may be revoked by attending the meeting and voting in person.
Attendance at the meeting will not, by itself, revoke a proxy.

OUTSTANDING SHARES AND VOTING

         Only shareholders of record at the close of business on November 21,
1997 are entitled to notice of the meeting and to vote at the meeting.  Each
shareholder is entitled to one vote for each share held.  At the record date,
32,613,543 shares of the Company's Common Stock were issued and outstanding.

         All votes will be tabulated by the inspector of election, appointed
for the Annual Meeting.  Under Delaware law, properly executed proxies that are
marked "abstain" or are held in "street name" by brokers that are not voted on
one or more particular proposals (if otherwise voted on at least one proposal)
will be counted for purposes of determining whether a quorum has been achieved
at the Annual Meeting.  Abstentions will have the same effect as a vote against
the proposal to which such abstention applies.  Broker non-votes will be
treated as neither a vote for nor a vote against any of the proposals to which
such broker non-votes apply.  Proxy cards which are timely signed and returned
with no other marking will be voted in accordance with the recommendation of
the Board of Directors.

SOLICITATION

         The Company will bear the entire cost of solicitation of proxies
including preparation, assembly, printing and mailing of the proxy statement,
the proxy and any additional information furnished to shareholders.  In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners.  Original solicitation of
proxies by mail may be supplemented by telephone, telegraph or personal
solicitations by directors, officers or employees of the Company.  No
additional compensation will be paid for any such services.



                                      2
<PAGE>   3
                                   PROPOSAL 1

                             ELECTION OF DIRECTORS

         The Board of Directors will consist of eight directors to be elected
at the annual meeting of shareholders to hold office until the next annual
meeting or until their successors are elected and qualified.  A Board of
Directors resolution in October 1997 increased the number of directors from six
to nine.  Eight directors are being slated for election at this time; a
Nominating Committee has been selected and a search is underway for a ninth
director.  The proxies solicited by and on behalf of the Board of Directors
will be voted FOR the election of the eight nominees listed below, unless
authority to do so is withheld as provided in the proxy.  Except for Mr.
Warner, all nominees are currently members of the Company's Board of Directors.
If for any reason one or more of the nominees should be unable to serve or
refuse to serve as a director (an event which is not anticipated), the persons
named as proxies will vote for another candidate or candidates nominated by the
Board of Directors, and discretionary authority to cast such votes is included
in the proxy.  The nominees receiving the highest number of votes of shares of
Common Stock, up to the number of directors to be elected, shall be elected.

         Pursuant to the Shareholders' Agreement, see "Certain Transactions",
among certain shareholders of the Company, the holders of approximately 49.5%
of the Company Stock are required to vote in favor of the one nominee
designated by Motorola.  Director Haning has been so designated by Motorola.

         The nominees, and certain information about them as of December 1,
1997, are set forth below.

         William L. De Nicolo, age 51, is the founder of the Company and has
served as Chairman of the Board (including service to DNIC Brokerage Co. (DNIC)
prior to formation of The Telular Group L.P.) since its formation in 1986.  Mr.
De Nicolo served as Chief Executive Officer (CEO) of the Company from 1986
until November 1993 and from November 1995 until April 1996.  Mr. De Nicolo
continues to serve as President and Chairman of the Board of Directors of DNIC,
a principal stockholder of the Company.   Mr. De Nicolo is also a Director of
Wells-Garner Electronics Corporation (AMEX/WGA) and Explore Technologies, Inc.
(ASE/XPL).

         Kenneth E. Millard, 50, has served as a director, President and Chief
Executive Officer of the Company since April 1996.  Mr. Millard served as
President and Chief Operating Officer of Oncor Communications, based in
Bethesda, Maryland.  He worked for Ameritech from 1982 to 1992 where he served
as President and Chief Executive Officer of Michigan Bell Telephone Company
from 1989 to 1992.  Prior to 1989, he held the positions of Senior
Vice-President of Corporate Strategy for three years and Senior Vice-President
and General Counsel of Ameritech for four years.  From 1972 to 1982, Mr.
Millard worked for AT&T and Wisconsin Bell as an attorney.


         Mr. John E. Berndt, 57, has served as a director of the Company since
December 1996.  Mr. Berndt was President of New Business Development/Multimedia
Ventures & Technologies for Lucent Technologies, Inc. before he retired.  He
held the same position with AT&T prior to the Lucent spinoff.  Mr. Berndt was
employed by AT&T since 1963 and was President of its Business Services Business
Unit from 1991 until 1993 and President of the International Communications
Services Business Unit from 1987 until 1991.  Mr. Berndt is a member of the
Council of Foreign Relations and served on the U.S. Trade Representative's
Services Policy Advisory Commission from 1987 until 1993.  Mr. Berndt is a
member of the Board of Trustees for the American Graduate School of
International Management and the Board of Directors for the University of
Wisconsin Foundation.

         Larry J. Ford, age 56, has served as a director of the Company since
March 1994.  Mr. Ford has been the President and Chief Executive Officer of
Information Advantage since April 1995.  Mr. Ford was previously employed by
Systems Software Associates, Inc.  as a Vice Chairman from November 1994 -
March 1995, and the Chairman, Chief Executive Officer and President from August
1991 - October 1994.  Previously, Mr. Ford spent 28 years with IBM, his most
recent position being Vice President of Information and Telecommunications
Systems.

         Richard D. Haning, age 45, has served as a director of the Company
since April 1995.  Mr. Haning has been a Corporate Vice-President with Motorola
since 1994, and has been a Vice-President and Director of Finance since 1990.
Mr. Haning has been with Motorola for the past 19 years. Mr. Haning is the
designee of Motorola for election to the Board pursuant to a Shareholders'
Agreement, see "Certain Transactions -- Shareholders' Agreement".





                                       3
<PAGE>   4
         Robert C. Montgomery, age 56, has served as a director of the Company
since October 28, 1997.  He has been the Company's Executive Vice President and
Chief Operating Officer since 1996.  Mr. Montgomery has been a senior manager
for the Company since 1994.  Prior to that, Mr. Montgomery was President of
Adcor Electronics International, Inc.  Previously, Mr. Montgomery was a partner
at McKinsey & Company.

         Dan Giacopelli, age 39, has served as director and Executive Vice
President -- Chief Technology Officer of the Company since October 28, 1997.
Mr. Giacopelli founded and was President and Chief Executive Officer of
Wireless Domain, Incorporated from September 1995 to November 1997.  Prior to
that time, Mr. Giacopelli was Director of Engineering of the Wireless Group of
Telephonics Corporation from 1987 to 1995.  Prior to 1987, Mr. Giacopelli was
President and CEO of Valinor Electronics, Inc.

         Mark R. Warner, age 43, is not currently a director or officer of the
Company.  Mr. Warner served as director for the Company and its predecessor in
1993 and 1992.  Mr. Warner is a Managing Director of Columbia Capital
Corporation, for which he has served as an officer since its formation in 1989.
Mr. Warner was a co-founder of Nextel, Inc., f\k\a Fleetcall, Inc.

         David P. Mixer, a current director, did not stand as a nominee for
re-election to the Board of Directors.

         There are no family relationships among any officers and directors of
the Company.

BOARD COMMITTEES AND MEETINGS

         During the fiscal year ended September 30, 1997, the Board of
Directors held seven meetings.  The Board has an Audit Committee and a
Compensation Committee.  Each incumbent Board member attended at least 75% of
the aggregate of (i) the total number of meetings of the Board held during the
period during which he was a director, and (ii) the total number of meetings
held by all committees of the Board on which he served during the period that
he was a committee member.

         The Audit Committee is responsible for reviewing the Company's
financial management practices, internal controls, internal audit function and
meetings with the Company's independent accountants to discuss the scope and
results of the annual audit.  The Audit Committee, which is required to have at
least two "Independent Directors", in fiscal 1997 consisted of Mr. Berndt and
Mr.  Ford, and met four times during fiscal 1997.

         The Compensation Committee is responsible for developing and making a
compensation policy for Executive Officers of the Company, which includes
approving employment agreements, reviewing and approving compensation plans,
establishing performance targets and assessing their performance, and making
grants of salary, annual incentive compensation and long-term incentive
compensation.  The Compensation Committee, which as of the end of fiscal 1997
consisted of Mr. Ford and Mr. Mixer, met three times during the fiscal year.
If elected, Mr. Warner will take the place of Mr. Mixer on the Compensation
Committee.

         The Nominating Committee is responsible for recommending candidates to
fill board positions that become vacant or are added.  The Nominating
Committee, which as of the end of fiscal 1997 consisted of Mr. Ford and Mr.
Mixer, met one time during the fiscal year.  Mr. Warner will take the place of
Mr. Mixer on the Nominating Committee.  The Nominating Committee is currently
searching for the ninth director.  The ninth director will not be slated for
the January 27, 1998 election.

COMPENSATION OF DIRECTORS

         Directors of the Company who are either employees of the Company or
affiliated with a significant beneficial owner of the Company, receive no
compensation for serving on the Board of Directors.  Mr. Millard, Mr.
Montgomery and Mr. Giacopelli are employees of the Company.  Mr. De Nicolo, Mr.
Mixer and Mr. Haning are affiliated with a significant beneficial owner.

         During fiscal 1997, Mr. Berndt and Mr. Ford were the Independent
Directors.  Each Independent Director was compensated for attending meetings of
the Board or committee meetings of the Board with a grant of stock options.  A
grant of 20,000 stock options was issued to each Independent Director.  The
options vest on February 28, 1998, the





                                       4
<PAGE>   5
exercise price is $3.0625, which was reset on October 28, 1997 from $5.5625.
Mr. Berndt received 5,000 stock options for joining Telular's board of
directors.  The options vested on the grant date, December 6, 1996, the
exercise price is $3.0625, which was reset on October 28, 1997 from $5.5625.
All options, if not exercised or cancelled, shall terminate on the sixth
anniversary of the date of grant.

         All directors are reimbursed for all reasonable expenses of attendance
at each meeting.





                                      5
<PAGE>   6
                                   PROPOSAL 2

                   APPROVAL OF THE ISSUANCE BY THE COMPANY OF
                CERTAIN SHARES OF COMMON STOCK ON CONVERSION OF
     THE COMPANY'S SERIES A CONVERTIBLE PREFERRED STOCK ("PREFERRED STOCK")

CREATION AND ISSUANCE OF SERIES A CONVERTIBLE PREFERRED STOCK

         The board of Directors of Telular Corporation (the "Company") on April
15, 1997 created a new series of 21,000 shares of Series A Convertible
Preferred Stock (the "Preferred Stock").  The Company issued 20,000 shares of
the Preferred Stock.  On April 16, 1997, the Company issued 5,000 shares of
Preferred Stock to each of Nelson Partners ("Nelson") and Olympus Securities,
Ltd.  ("Olympus") (collectively, 10,000 shares) in a private placement.  On
June 6, 1997, the Company issued 5,000 shares of Preferred Stock to each of
Stark International and Shepherd International Investments, Ltd.  ("Shepherd
International") (collectively 10,000 shares) in a private placement.  Nelson,
Olympus, Stark International and Shepherd International are collectively
referred to hereafter as the "Investors".  The Company received 10 Million
Dollars ($10,000,000) from the sales of the Preferred Stock, and paid a
placement fee of One Million Four Hundred Forty Six Thousand Dollars
($1,446,000) in connection with such sales.  Senior management anticipates that
the funds will be used for the development of new products for the worldwide
fixed wireless terminal business.

TERMS OF CONVERSION

         Each share of Preferred Stock has a face value of $1,000 per share.
The Preferred Stock issued by the Company is convertible into Common Stock at a
conversion price equal to the low of (i) $6.4856, which represents the 110% of
the 30-day average trading price immediately prior to April 16, 1997, when the
first shares of Preferred Stock were issued, and (ii) 85% (prior to October 15,
1999) or 100% (on or after October 15, 1999) or the 30-day average trading
price prior to conversion, but in no event lower than a minimum price.  The
minimum price is $3.00 per share until April 15, 1998, and $2.00 per share
thereafter, in each case subject to certain adjustments.  In addition, at
conversion the holder of the Preferred Stock is entitled to an effective 5%
annual dividend on the Preferred Shares, paid in Common Stock with the
conversion price based on the average market price for the 30 trading days
preceding conversion.

         If the Holders elect not to convert their shares of Preferred Stock,
then the Preferred Stock automatically converts to shares of the Company's
Common Stock on April 16, 1999, or October 16, 1999, depending upon the
conversion price.  The Company also has the right to redeem the Preferred Stock
for cash at defined terms.

         The Common Stock into which the Preferred Stock is convertible has
been registered with the Securities and Exchange Commission for resale.

DILUTION

         Upon conversion of the Company's Preferred Stock, Common Stock may be
issued at a discount relative to the market price of Common Stock at that time.
Issuance at a discount could result in a dilution in the net tangible book
value of the Company per share and in the stockholders' equity per share.  The
magnitude of any dilution will depend on the conversion price, the size of the
discount and the number of shares to be issued.  These variables will depend on
a variety of factors, including the timing of conversion and the market price
at time or conversion.  Consequently, the amount of dilution cannot be
calculated at this time.

REDEMPTION OF PREFERRED STOCK

         A right of redemption on the part of the holders of the Preferred
Stock may be triggered by a number of events including the merger,
consolidation or sale of substantially all of the assets of the Company, the
purchase of more than 50% of the outstanding shares of Common Stock of the
Company, the failure by the Company to convert Preferred Stock when required to
do so, the delisting of the Company's Common Stock from a national securities
exchange, or the failure by the Company to register timely and keep in effect
the registration of the Common Stock to be issued upon conversion of the
Preferred Stock.





                                       6
<PAGE>   7
NASDAQ RULE 4460 (i) AND CERTAIN REQUIRED REDEMPTIONS

         NASDAQ Rule 4460 (i) (the "Rule") provides (with certain exceptions
not relevant here) that without shareholder approval, a company listed on the
National Market System may not in any transaction issue a number of shares
equal to more than 20% of the number of shares of Common Stock then
outstanding.  As of November 21, 1997, there were outstanding 32,204,043 shares
of Common Stock of the Company (exclusive of 409,500 shares that have already
been issued upon conversion of the Preferred Stock), so that the Company on
that date could issue 6,440,808 shares under the Rule.

         The Company might be barred under the Rule from issuing to the holders
of the Preferred Stock the number of shares of Common Stock required by a
conversion of the Preferred Stock.  Pursuant to the terms of the Certificate of
Designation, the Company may be required, at the option of the holders of the
Preferred Stock, to redeem the shares or Preferred Stock, if it cannot issue a
sufficient number of shares of Common Stock to satisfy its obligations to the
holders of Preferred Stock.  Accordingly, unless the Company obtains the
approval of its Shareholders to issue more than the [6,279,617] shares
presently permitted under the Rule, the Company may be required to redeem any
shares of Preferred Stock whose conversion would otherwise cause the Company to
issue a total number of shares in excess of the number permitted by the Rule.
Any such redemptions would require the expenditure of cash which could
otherwise be applied for corporate purposes.

         The redemption price for each such required conversion is a cash
amount equal to the greater of (i) $1,250 and (ii) the product of (A) the
conversion rate at such time and (B) the Closing Bid Price calculated as of the
day prior to the date (the "Notice Date") that the holder is given notice of
the Company's inability to convert the shares of Preferred Stock held by the
holder.  Alternatively, a holder may elect to have the redemption price
calculated on the basis of the average market price of the Stock during the
five-day period proceeding the Notice Date.  The Company cannot at this time
determine the number of shares of Preferred Stock which it may be required to
redeem, because the number of shares of Common Stock issuable on conversion of
the Preferred Stock depends in part of the market price of the Common Stock at
the time of conversion.

         The Company's Board has elected to seek shareholder approval for the
issuance of the number of shares of Common Stock that may be issuable on
conversion of the Preferred Stock.  Such approval will ensure that the Company
will not be required to make the redemptions referred to in the proceeding
paragraph, which redemptions would require the expenditure of cash which could
otherwise be applied by the Company for corporate purposes.  Proxies for such
approval are being solicited hereby.

         The Company proposes that the Shareholders approve the issuance of all
shares of Common Stock which are issuable on conversion of the Preferred Stock
in order that the Company not be required to make such redemptions.

         The affirmative vote of a majority of the votes cast at the Annual
Meeting is required to approve the issuance, on conversion of the Preferred
Stock, of such shares of Common Stock for which approval is required under
NASDAQ Rule 4460 (i).

                 THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
                           A VOTE FOR THIS PROPOSAL.





                                       7
<PAGE>   8
                                   PROPOSAL 3

                          RATIFICATION OF SELECTION OF
                              INDEPENDENT AUDITORS

         The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending September 30, 1998 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting.  Ernst & Young LLP
has audited the Company's financial statements since December 1992.
Representatives of Ernst & Young LLP are expected to be present at the 1998
Annual Meeting of Shareholders, will have an opportunity to make a statement if
they so desire, and are expected to be available to respond to appropriate
questions.





                                       8
<PAGE>   9
                             SECURITY OWNERSHIP OF
                    CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information known to the
Company with respect to beneficial ownership of the Company's Common Stock as
of November 21, 1997, (i) by each person who is known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) by
each director of the company, (iii) by each Named Executive Officer, and (iv)
by all directors and executive officers of the Company as a group:

<TABLE>
<CAPTION>
           NAME  OF                                                NUMBER OF
        BENEFICIAL OWNER                                            SHARES            PERCENT
  ------------------------                                          ------            -------
  <S>                                                             <C>                  <C>
  Motorola   . . . . . . . . . . . . . . . . . . . . . . .         4,752,989           14.6%
      1303 E. Algonquin Rd.
      Schaumburg, IL 60601

  DNIC Brokerage (1)   . . . . . . . . . . . . . . . . . .         4,479,841           13.7%
      3 Canterbury Court
      Wilmette, IL 60091

  Mark R. Warner (2)(3)  . . . . . . . . . . . . . . . . .         2,460,470            7.5%
      201 North Union St., Suite 300                                                    
      Alexandria, VA 22314

  Robert B. Blow (2)   . . . . . . . . . . . . . . . . . .         2,390,745            7.3%
      6410 Poplar Avenue, Suite 395
      Memphis, TN 38119

  Columbia Capital Corporation (2)   . . . . . . . . . . .            41,543            *
  William L. De Nicolo (1)(3)(7)   . . . . . . . . . . . .         4,538,081           13.9%
  Kenneth E. Millard (3)(5)(9)   . . . . . . . . . . . . .           182,324            *
  John E. Berndt (3)(9)  . . . . . . . . . . . . . . . . .             5,000            *
  Larry J. Ford (3)(9)   . . . . . . . . . . . . . . . . .            45,000            *
  David P. Mixer (2)(3)(4)   . . . . . . . . . . . . . . .           769,876            2.4%
  Richard D. Haning (3)(8)   . . . . . . . . . . . . . . .         4,752,989           14.6%
  Robert C. Montgomery (3)(5)(9)   . . . . . . . . . . . .           129,139            *
  George Claudio, Jr.  (5)(6)(9)   . . . . . . . . . . . .           133,515            *
  S.W.R. (Sandy) Moore (5)(9)  . . . . . . . . . . . . . .            19,906            *
  John F. Mitchell (5)(9)  . . . . . . . . . . . . . . . .             3,333            *
  Daniel D. Giacopelli (3)(9)  . . . . . . . . . . . . . .           704,833            2.2%
  Frank J.M. ten Brink (6)(11)   . . . . . . . . . . . . .                 0            *
  Fred R. Radke (6)(11)  . . . . . . . . . . . . . . . . .                 0            *

  All Directors and Officers as a group (13 Persons) (10)         11,283,996           34.6%
</TABLE>

- ----------   
 * Less than one percent.

 (1)  Through his ownership of stock of DNIC Brokerage ("DNIC"), Mr. De
      Nicolo has an indirect beneficial interest in 71.2% of the shares of
      the Company held by DNIC. As a director and principal stockholder of
      DNIC, he may be deemed to have voting and investment power with
      respect to all shares of the Company held by DNIC.

 (2)  Through their ownership of stock of Columbia Capital Corporation, Mr.
      Warner, Mr. Blow and Mr. Mixer have indirect beneficial interest in
      41,543 shares of the Company held by or attributed to Columbia Capital
      Corporation.  As directors of Columbia Capital Corporation, they may
      be deemed to share voting and investment power with respect to all
      shares of the Company held by or attributed to Columbia Capital
      Corporation.





                                       9
<PAGE>   10
 (3)   The named individual is, or has been nominated to serve as, a director
       of the Company.

 (4)   The named individual is a director of the Company that did not stand
       as a nominee for re-election or retired from the Board of Directors.

 (5)   The named individual is a Named Executive Officer of the Company as of
       September 30, 1997.

 (6)   The Named Executive Officer's employment with the Company terminates
       on December 31, 1997.

 (7)   Includes 4,479,841 shares held by DNIC.  Mr. De Nicolo, as a director
       and principal stockholder of DNIC, may be deemed to share voting and
       investment power with respect to the shares held by DNIC.

 (8)   Includes 4,752,989 shares held by Motorola.  As an executive officer
       of Motorola, the director may be deemed to share voting and investment
       power with respect to the shares held by Motorola. The Director
       disclaims beneficial ownership of these shares.

 (9)   The number of shares shown as beneficially owned includes options that
       are exercisable within 60 days of November 21, 1997.

 (10)  Includes 538,276 shares that Officers of the Company may acquire
       pursuant to options exercisable within 60 days of November 21, 1997.

 (11)  The named Executive Officer's employment with the Company terminated
       during the fiscal year 1997.





                                       10
<PAGE>   11
                             EXECUTIVE COMPENSATION

         The following table sets forth the aggregate compensation earned by
the Chief Executive Officers, the four most highly compensated executive
officers whose salary and bonus combined exceeded $100,000 in fiscal 1997 and
two named executive officers whose employment terminated with the Company
during the fiscal year, for whom, but for that fact, disclosure would have been
required.  During that period, no Named Executive Officer received any
restricted stock award, stock appreciation right or payment under any long term
incentive plan.

<TABLE>
<CAPTION>
                                                         ANNUAL COMPENSATION
                                                         -------------------
                                                                                     LONG-TERM
                                                                                    COMPENSATION                
                                                                       OTHER           AWARDS               ALL 
                                                                       ANNUAL       ------------           OTHER
       NAME                         YEAR   SALARY($)    BONUS($)   COMPENSATION($)  OPTIONS(#)(1)     COMPENSATION($)
       ----                         ----   ---------    --------  ----------------  -------------     ---------------
<S>                                <C>                 <C>           <C>                <C>             <C>             
Kenneth E. Millard  . . . . .      1997   $ 250,000    $  150,000    $         0        150,000         $    2,487(2)  
    Chief Executive Officer        1996     114,423        50,000              0        500,000             22,973(2)  
      President and Director                                                                                           
                                                                                                                       
Robert C. Montgomery  . . . .      1997     189,323        75,000              0         75,000             46,799(3)  
    Chief Operating Officer        1996     177,184        54,788              0        246,000                  0       
     Executive Vice-President      1995     161,250        15,000              0         36,000                  0       
      Director                                                                                                         
                                                                                                                       
George Claudio, Jr.(4). . . .      1997      89,385        10,500              0              0                  0     
    Senior Vice-President          1996     131,223        16,000              0         48,209                  0     
     Development Technology        1995     116,666        19,000              0         48,209                  0     
                                                                                                                       
S.W.R. (Sandy) Moore  . . . .      1997     133,077         2,280(5)           0         50,000                  0     
    Senior Vice-President                                                                                              
    Strategic Alliances & OEM                                                                                          
                                                                                                                       
John F. Mitchell  . . . . . .      1997      78,654        37,331              0         20,000                  0     
    Senior Vice-President                                                                                              
    Marketing                                                                                                          
                                                                                                                       
Frank J.M. ten Brink(6) . . .      1997     103,327        37,500         47,216(7)           0                  0     
    Chief Financial Officer        1996      90,433        28,125              0        100,000                       
    Senior Vice-President                                                                                              
                                                                                                                       
Fred R. Radke(6)  . . . . . .      1997      87,981        18,119              0              0                  0     
    Senior Vice-President
    Engineering
</TABLE>

(1) Represents the number of options granted during fiscal year 1997.  In the
    first fiscal quarter of fiscal 1998, the Company decided to reprice all
    outstanding options then held by active employees and directors.

(2) The 1997 amount represents medical expenses in accordance with an
    employment agreement.  The 1996 amount represents approximately $10,000 in
    moving expenses and $13,000 in consulting fees paid to Mr. Millard, which
    were incurred prior to being employed by the Company.

(3) Represents relocation expenses ($26,565), personal auto expenses ($10,605)
    and medical expenses ($9,629) in accordance with an employment agreement.

(4) The named executive officer's employment with the Company terminates
    December 31, 1997.

(5) Represents sales commissions.





                                       11
<PAGE>   12
(6) The named executive officer's employment with the Company terminated during
    fiscal year 1997.

(7) Represents the dollar value of the difference between the price paid and
    the fair market value of the Company's common stock from options exercised
    during fiscal 1997.

EMPLOYMENT CONTRACTS

         On April 18, 1996, the Company entered into a two-year employment
agreement with Kenneth E. Millard, pursuant to which Mr.  Millard agreed to
serve as Chief Executive Officer and President of the Company. Employment is on
an "at-will" basis and shall continue in effect until terminated by either the
Company or Mr. Millard with at least 60 days prior to notice.  Under the
agreement, Mr. Millard is to receive an annual salary of $250,000 and an
incentive bonus of $200,000 based on performance targets established by the
Board of Directors.  For any fiscal year for which Mr. Millard achieves 100% of
the performance targets, he will receive the incentive bonus, of which $100,000
shall be paid in cash and $100,000 shall be paid in the form of Common Stock of
the Company at fair market value.  Mr. Millard was granted 500,000 options as
part of his employment agreement with the Company. Options to acquire 50,000
shares of the Company's Common Stock at $5.00 per share vested on April 18,
1996. Options to acquire 150,000 shares of the Company's Common Stock at $4.50
per share vest in 36 monthly installments from June 1996 through May 1998.
Options to acquire 300,000 shares of the Company's Common Stock at $4.50 per
share shall vest on April 30, 2003 or earlier if certain "cliff " vesting
targets are met.  Under cliff vesting, for each $2.00 increase over a base
price of $5.00 in the closing bid price on NASDAQ for the Company Shares which
remains in effect for 30 consecutive trading days, options for 25,000 Company
Shares will vest on the first business day after such 30-day period.  There may
be coterminous periods for which the closing bid price of the Company Shares
have increased over the applicable base price by more than $4.00.  Under cliff
vesting, during the first, second and third years of Mr. Millard's employment,
of the 300,000 options subject to cliff vesting no more than 40%, 30% and 30%,
respectively, of the options may vest.  All options granted to Mr. Millard
terminate on May 1, 2006 or 180 days after Mr. Millard is no longer employed
with the Company.

         On September 22, 1992, in connection with the Company's acquisition of
Adcor Electronics International, Inc., Robert C.  Montgomery entered into an
employment agreement with the Company's wholly-owned subsidiary, Telular-Adcor
Security Products, Inc.  for a term extending through December 31, 1997. The
amended agreement provided for an annual salary of $181,500, payment of all
operating expenses for automobiles operated by immediate family members as well
as a monthly automobile allowance, fees related to the preparation of personal
income tax returns, participation in the Company's Employee Stock Incentive
Plan, participation in the Company's bonus plan for executives and a minimum
severance payment equivalent to six months of salary if terminated without
cause before the term of the contract.  On April 22, 1997, a new employment
agreement was executed to replace the previous one in its entirety.  The new
agreement provides for an annual salary of $205,000; an annual target bonus of
$100,000 payable quarterly, one-half in stock one-half in cash, under the
guidelines of the Company's Senior Management Bonus Plan; an option to acquire
75,000 shares of Company's stock at $4.78 per share, with 100% vesting on April
22, 1997; and up to one year's salary in severance if terminated for other than
cause.

         Both employment agreements are terminable for cause.





                                       12
<PAGE>   13
OPTION/SAR GRANTS

         The following table sets forth information concerning stock option/SAR
grants made to each of the Named Executive Officers for the twelve months ended
September 30, 1997.

<TABLE>
<CAPTION>
                                      INDIVIDUAL GRANTS(1)
                                      --------------------
                                           % OF TOTAL 
                                          OPTIONS/SARS
                                           GRANTED TO 
                                          EMPLOYEES IN                             POTENTIAL REALIZABLE VALUE AT
                                           IN TWELVE                                   ASSUMED ANNUAL RATES OF
                                             MONTHS                                   STOCK PRICE APPRECIATION
                           OPTIONS/SARS      ENDED     EXERCISE                        FOR OPTION/SAR TERM (2)  
                              GRANTED       SEPT. 30    PRICE      EXPIRATION   ------------------------------------
            NAME                (#)           1997      ($/SH)        DATE         0%($)        5%($)        10%($)            
            ----                ---           ----      ------        ----         -----        -----        ------            
<S>                          <C>              <C>        <C>         <C>           <C>          <C>         <C>             
Kenneth E. Millard  . . .    150,000 (3)      31.4%      4.78        1/28/03      $239,250     $840,630    $1,763,266       
                                                                                                                            
Robert C. Montgomery  . .     75,000 (3)      15.7%      4.78        4/22/03        $2,475     $229,490      $577,776       
                                                                                                                            
S.W.R. (Sandy) Moore  . .     50,000          10.5%      5.56        12/9/06            $0     $134,314      $378,541       
                                                                                                                            
John F. Mitchell. . . . .     10,000           2.1%      5.56        10/1/02            $0      $27,881       $77,329       
                              10,000           2.1%      5.56        3/10/03        $8,780      $49,268      $111,385       
                                                                                                                            
Frank J.M. ten Brink  . .          0             0%       N/A            N/A           N/A        N/A            N/A        
                                                                                                                            
Fred R. Radke . . . . . .          0             0%       N/A            N/A           N/A        N/A            N/A        
</TABLE>



(1) Shares granted and canceled during the year were not included in the table.

(2) The dollar amounts under these columns are the result of calculations at
    the 5% and 10% assumed annual growth rates mandated by the Securities and
    Exchange Commission and, therefore, are not intended to forecast possible
    future appreciation, if any, in the Company's stock price. The calculations
    were based on the market price of the option/SAR from the date of the grant
    to the end of the option/SAR term. No gain to the options/SARS is possible
    without an increase in stock price, which will benefit all shareholders
    proportionately.  The 0% column represents the grant-date market price of
    options with an exercise price below market at the date of grant.

(3) Options for 150,000 and 75,000 shares to Mr. Millard and Mr. Montgomery,
    respectively, were granted to acquire the Company's Common Stock at $4.78
    per share and shall vest 100% on January 28, 1999 and April 22, 1999,
    respectively.





                                       13
<PAGE>   14
OPTION/SAR EXERCISES AND HOLDINGS

         The following table sets forth information concerning the value of
exercisable and unexercisable options/SARS held by each of the Named Executive
Officers as of September 30, 1997.

<TABLE>
<CAPTION>
                                                                   NUMBER OF UNEXERCISED          VALUE OF UNEXERCISED IN THE
                                                                 OPTIONS/SARS AT FY-END(#)          MONEY OPTIONS/SARS($)(1)
                                                                 ---------------------------     ---------------------------
                            SHARES ACQUIRED        VALUE
        NAME                UPON EXERCISE(#)    REALIZED($)    EXERCISABLE     UNEXERCISABLE     EXERCISABLE    UNEXERCISABLE
        ----               -----------------    -----------    -----------     -------------     -----------    -------------
<S>                                <C>              <C>           <C>                <C>            <C>                  <C>
Kenneth E. Millard                 0                     0        152,000            498,000              0              0
Robert C. Montgomery               0                     0         65,486            255,514              0              0
George Claudio Jr.                 0                     0        133,515             11,070        211,545              0
S.W.R. (Sandy) Moore               0                     0         18,054             31,946              0              0
John F. Mitchell                   0                     0              0             20,000              0              0
Frank J.M. ten Brink               0                29,858         47,216                  0              0              0
Fred R. Radke                      0                     0              0                  0              0              0
</TABLE>
- ----------
(1) Represents the fair market value per share of the underlying shares on the
    last day of the fiscal year less the option/SAR exercise price multiplied
    by the number of shares. The fair market value per share was $3.125 based
    upon the closing price of the Common Stock on the NASDAQ National Market
    System on the last trading day of the fiscal year.  In the first fiscal
    quarter of fiscal 1998, the Company decided to reprice all outstanding
    options then held by active employees and directors.


                                      14
<PAGE>   15
                              CERTAIN TRANSACTIONS

SHAREHOLDERS AGREEMENT

         Certain shareholders of the Company are parties to a Shareholders'
Agreement that contains certain provisions as to voting and transfer of Common
Stock held by those stockholders. Pursuant to the Shareholders' Agreement, each
of Telular Canada and Motorola has the right to nominate for election a number
of directors proportionate to its respective holdings of outstanding shares,
rounded to the nearest whole number in the case of Telular Canada and rounded
up to the nearest whole number in the case of Motorola (provided, in the case
of Telular Canada, that as long as it holds at least 10% of the outstanding
shares of Common Stock it may nominate at least one director and, in the case
of Motorola, that as long as it holds at least 10% of the outstanding shares of
Common Stock it may nominate at least one director, and that as long as it
holds at least 20% of the outstanding shares of Common Stock it may nominate at
least two directors), and the principal shareholders of the Company have agreed
to vote in favor of each such nominee.  For the eight person Board to be
elected at the Meeting, this arrangement entitles Motorola to one nominee but
does not entitle Telular Canada to a nominee.  As required by the Shareholders'
Agreement, the Certificate of Incorporation provides that the following actions
may not be taken without the affirmative vote of stockholders holding at least
two-thirds of the outstanding voting shares:

         (i)   merger, consolidation, reorganization, amalgamation or similar
               transaction (other than certain permitted transactions);

         (ii)  disposition of all or substantially all of the assets of the
               Company;

         (iii) amendment or supplement to the Certificate of Incorporation or
               Bylaws of the Company; or

         (iv)  discontinuance, dissolution or liquidation of the Company or the
               Company's business.

         If at any time the Company or the stockholders party to the
Shareholders' Agreement receive an unsolicited offer to acquire a majority of
the stock of the Company or all or substantially all of its assets, they must
notify Motorola.  If the Company or its stockholders intend to consider the
offer, Motorola will have the right to submit a bid as well.  The Company and
such stockholders may not approve a transaction with a third party which is at
a valuation lower than that offered by Motorola.  The rights of Motorola will
terminate upon any sale by Motorola of shares of Common Stock after which
Motorola owns less than 20% of the outstanding shares of Common Stock on a
fully-diluted basis.

         Under the Shareholders' Agreement, each of DNIC and Columbia has
agreed not to compete with the Company for so long as it is a stockholder and
for a period of three years thereafter.


TRANSACTIONS WITH DNIC AND ITS AFFILIATES

         Pursuant to the partnership agreement of The Telular Group L.P., DNIC
retained and did not contribute to the Company the right to receive the first
$250,000 per year in royalty payments under licensing agreements.  A total of
$250,000 was received by DNIC pursuant to the agreement during the fiscal year
ended September 30, 1997.

TRANSACTIONS WITH MOTOROLA

         Pursuant to a Patent Cross License Agreement entered into on March 23,
1990, and amended November 2, 1993, the Company licenses to Motorola the right
to manufacture and sell cellular interfaces in a variety of products. In
addition, the agreement allows the Company to couple its interface to Motorola
transceivers, and grants the Company the right to purchase Motorola
transceivers. This Patent Cross License Agreement is royalty-bearing to the
Company. During fiscal year 1997 the Company received approximately $496,000 in
royalties from Motorola and purchased transceivers and other equipment from
Motorola for approximately $9,557,000.





                                       15
<PAGE>   16
         On November 2, 1993, Motorola purchased from the Company 3,824,240
shares of Common Stock of the Company in consideration for $11.0 million in
cash (including $1.0 million to be used as a market development fund for fixed
cellular products incorporating Motorola transceivers) and certain other
undertakings by Motorola. These undertakings include: reduction of the pricing
on AMPS transceivers currently being purchased by the Company from Motorola; an
elimination of the royalties payable by the Company to Motorola under the
Patent Cross License Agreement; increase of the Company's credit line for
purchases; the opportunity to purchase transceivers based on any transmission
technology or standard which Motorola's Cellular Subscriber Group offers to any
of its customers if, as and when available to the public; and, on a
fee-for-services basis, subject to availability, access to Motorola's Cellular
Subscriber Group's worldwide service and maintenance organization, engineering
support, and purchasing system. These undertakings terminate on the later of
September 20, 1998, and the date on which Motorola ceases to own any Common
Stock. The Company granted to Motorola a limited right of first refusal with
respect to transceiver purchases by the Company.

         In October 1995, the Company announced it was awarded a contract to
supply its PHONECELL product to Motorola's Cellular Infrastructure Group for
deployment in existing and future wireless local loop ("WLL") projects in
Hungary.  Under the above agreement, the Company was awarded a contract to
supply a specifically customized version of its PHONECELL SX(R) product to
Motorola's Cellular Infrastructure Group for deployment on the WLL project in
Hungary.  During 1996 and 1997, the Company shipped $6 million and $21 million
of product to Hungary, respectively.  In November 1995, the Company announced
an agreement with Motorola's Cellular Infrastructure Group ("CIG") providing
for CIG to purchase $100 million of Telular's fixed wireless terminals ("FWTs")
and provide funding for engineering and product development activities over a
three year period, commencing on January 1, 1996. During 1996 and 1997, the
Company shipped $6 million and $21 million, respectively, of product under this
agreement.


RELATIONSHIP AND TRANSACTIONS WITH TELULAR CANADA

         Telular Canada is a publicly-held Canadian corporation, shares of
which are traded on the Toronto Stock Exchange.  The Company does not own any
stock of Telular Canada, although DNIC owns approximately 379,266 of Telular
Canada's outstanding shares.  Telular Canada holds 750,000 shares of the
Company's common stock as of November 21, 1997.

         Pursuant to an exclusive distribution agreement between the Company
and Telular Canada, Telular Canada is the exclusive distributor of the
Company's products in Canada.  The distribution agreement expires in 2007, and
is terminable prior to 2007 for cause.

         Telular Canada holds title to the Canadian patents for the Company's
technology and the right to acquire by transfer, technology that allows Telular
Canada to manufacture and sell in Canada products incorporating the Company's
patented technology.  In addition, the Company has licensed to Telular Canada
the use in Canada of the mark "Telular(R)" and the Company's logo.  The
foregoing licenses to Telular Canada are without royalty to the Company.

         In February 1995, Global Data Inc. ("GDI"), a wholly-owned subsidiary
of Telular Canada, entered into a non-exclusive master distribution with the
Company to purchase and resell the Company's product in the United States.  The
agreement also will allow GDI to use the Company's trademarks and logos on its
sales literature, and will provide GDI with an open line of credit of $20,000.
During fiscal year 1997, the Company made sales to GDI and Telular Canada of
approximately $4,000.





                                      16

<PAGE>   17
RELATIONSHIP AND TRANSACTIONS WITH WIRELESS DOMAIN INCORPORATED (FORMERLY
TELEPATH CORPORATION)

         In three separate transactions on June 28, 1996, January 29, 1997 and
August 29, 1997, the Company acquired a 50% interest in Wireless Domain
Incorporated ("WD") for $1,500,000 in cash and common stock of the Company
valued at $2,643,500.  Wireless Domain is a radio developer, based in
Hauppauge, New York, that specializes in the design of advanced cellular and
personal communication services products. The agreement includes a multi-year
product development program designed to provide a new generation of
state-of-the-art fixed wireless terminals, which include both analog and
digital radio standards, for markets worldwide.  Under the agreement, the
Company purchases certain development services including the conversion of
Telular's patented interface technology into a chip set, integration of
Telular's patented interface technology with new and existing cellular radio
standards, and development of new feature functions for future generations of
analog and digital terminals. During fiscal year 1997, the Company purchased
services from Wireless Domain for approximately $2,700,000.

         On November 10, 1997, the Company acquired the remaining 50% of WD.
Under the terms of the merger, the Company issued 500,000 shares of common
stock and relinquished control of another 250,000 shares of common stock held
by WD valued at approximately $2.7 million.  The Company expects to achieve
more rapid deployment of new products with the full-time addition of WD's 29
engineers.

         The president of WD, Dan Giacopelli, has served as director, Executive
Vice President and Chief Technology Officer for the Company since October 28,
1997.


OTHER TRANSACTIONS AND EVENTS

         Hamman and Benn, of which George Hamman and Marvin Benn are
principals, have provided legal services to the Company.  Mr.  Hamman and Mr.
Benn are shareholders of the Company and shareholders of DNIC.  During fiscal
year 1997, the Company paid Hamman and Benn aggregate fees of $354,613.  Cash
payments totaled $331,365 and payments made in the form of common stock of the
Company were valued at $23,248.





                                       17

<PAGE>   18
         REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

         Executive compensation is administered by the Compensation Committee
of the Board of Directors. The Compensation Committee is a standing committee
composed of two independent Directors, David Mixer, Managing Director of
Columbia Capital, and Larry Ford, President and Chief Executive Officer of
Information Advantage.

         Since Telular's Initial Public Offering in January 1994, the
Compensation Committee of the Board of Directors has developed and administered
the Company's management compensation policies and plans. The Committee
reviews, recommends and grants salary and bonus incentives for executive
officers. The Compensation Committee also administers the Stock Incentive Plan
and is responsible for the selection of participants in the Plan and decisions
concerning the timing, pricing and the amount of grants or awards to be made.

         In fiscal 1997, the Company continued to pursue performance-based
compensation programs that provided significant equity incentives.  During
fiscal year 1997, no stock options were repriced.

         Before making compensation recommendations with respect to officers
during the past fiscal year, the Committee reviewed base salaries proposed by
the CEO, and evaluated each officer's experience and proposed responsibilities
and the salaries of similarly situated executives.  In determining its
recommendations for adjustments of officers' base salaries for fiscal 1997, the
Committee focused primarily on each officer's contributions towards the
Company's success during the fiscal year, in moving toward its long term goals
the accomplishment of goals set by the officer and approved by the Committee,
and the Committee's assessment of the quality of services rendered by the
officer.

         The CEO's compensation for 1997 was established pursuant to an
employment agreement negotiated prior to the CEO's acceptance of the position
in April 1996.  The CEO's compensation package has a significant equity
incentive component.  For fiscal year 1997, the CEO received a bonus of
$150,000, which was paid half in cash and half in stock.  Also, stock options
for 150,000 shares of the Company's common stock were granted to the CEO.

         In October 1997, the Company decided to reprice all outstanding
options then held by active employees and current directors.  This action was
taken in response to a sustained decline in the market price of the Company's
stock to a level well below the outstanding options' exercise price.  The
Compensation Committee determined that the discrepancy between the exercise
price was so great that the options had ceased to provide a sufficient
incentive to the option holders. Moreover, in connection with the hiring of new
executives, new options were being issued at an exercise price significantly
below that of the outstanding options.  In the view of the Compensation
Committee, this discrepancy could have become disruptive to employee morale.
The Compensation Committee upon recommendation of the CEO decided not to
provide merit or Cost Of Living Adjustments (COLA) to the CEO, executive
officers or employees for fiscal year 1998.  Instead, all employees have been
granted the opportunity to participate in two Company incentive plans.  In
addition, in October 1997, all employees were granted stock options under the
Company's Amended and Restated Stock Option Plan.

                                        David Mixer, Chairman 
                                        Larry Ford





                                       18

<PAGE>   19
                       PERFORMANCE MEASUREMENT COMPARISON

         The following graph compares total stockholder returns of the Company
since its initial public offering of Common Stock on January 27, 1994 to two
indices: the NASDAQ Composite Index and the Hambrecht & Quist Technology Index
(the "HQ-T"). The total return calculations assume the reinvestment of
dividends, although dividends have never been declared for the Company's stock,
and is based on the returns of the component companies weighted according to
their capitalizations as of the end of each monthly period.  The NASDAQ
Composite tracks the aggregate return of all equity securities traded on the
NASDAQ National Market System (the "NMS").  The HQ-T tracks the aggregate
return of technology companies, including electronics, medical and other
related technology industries. The Company's Common Stock is traded on the NMS
and is a component of the NASDAQ Composite.





                                       19

<PAGE>   20
                COMPARISON OF 44 MONTH CUMULATIVE TOTAL RETURN*
        AMONG TELULAR CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
                   AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX


<TABLE>
<CAPTION>
                                                          DOLLARS
                                      1/27/94     9/94       9/95      9/96        9/97
<S>                                     <C>     <C>         <C>       <C>         <C>
TELULAR CORPORATION                     $100     $  48      $  69     $  26       $  15
NASDAQ STOCK MARKET (U.S.)               100        97        134       159         218
HAMBRECHT & QUIST TECHNOLOGY             100       103        181       198         296
</TABLE>


* $100 INVESTED ON 1/27/94 IN STOCK OR INDEX-
  INCLUDING REINVESTMENT OF DIVIDENDS. 
  FISCAL YEAR ENDING SEPTEMBER 30.





                                       20

<PAGE>   21
         Telular Corporation's stock price on the last trading date of the 1997
fiscal year, September 30th, was $3.125 per share.  The latest sales price
attainable before the printing of this proxy was $3.125 per share on November
21, 1997.

                                      21
<PAGE>   22

 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The members of the Compensation Committee are Mr. Ford and Mr. Mixer.
Neither Mr. Ford nor Mr. Mixer is now or was at any time an officer of the
Company.

SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         All executive officers, directors and holders of more than 10% of the
Company's Common Stock reported all transactions in the Company's Common Stock
during fiscal year 1997 in timely filings with the Securities and Exchange
Commission ("SEC") as required under Section 16 (a) of the Securities and
Exchange Act of 1934 except for the following, which were filed after the due
date therefore: (i) One Form 4 Changes in Beneficial Ownership, reporting a
single transaction, for each of  William L. De Nicolo, Kenneth E. Millard,
Robert C. Montgomery and Frank J.M. ten Brink and (ii) One Form 5 Annual
Statement of Beneficial Ownership of Securities, reporting a single
transaction, for each of  William L. De Nicolo and Frank J.M. ten Brink.

SHAREHOLDER PROPOSALS

         Shareholder proposals submitted for evaluation as to inclusion in the
proxy materials for the Company's next annual meeting of shareholders must be
received by the Company not later than August 15, 1998, at the Company's
principal executive offices at 647 North Lakeview Parkway, Vernon Hills,
Illinois 60061.

OTHER MATTERS

         The Company knows of no other matters to be submitted to the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed proxy card to vote the shares they represent
as the Board of Directors may recommend.



                                  By Order of the Board of Directors



                                  Jeffrey L. Herrmann
                                  Chief Financial Officer, Senior Vice-President
                                  and Secretary





Vernon Hills, Illinois
December 15, 1997





                                       22



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