SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- ----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Telular Corporation
- ----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
<PAGE>
(5) Total fee paid:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
---------------------------------------------------------------------
(3) Filing party:
---------------------------------------------------------------------
(4) Date filed:
---------------------------------------------------------------------
<PAGE>
TELULAR CORPORATION
647 NORTH LAKEVIEW PARKWAY
VERNON HILLS, IL 60061
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 25, 2000
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 25, 2000, at 9:00 a.m. local time,
at the Sheraton North Shore Hotel in 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 seven directors to serve until the next Annual
Meeting of Shareholders and until their successors are duly
elected.
2. 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 19, 1999,
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
/s/Kenneth E. Millard
------------------------------------
Kenneth E. Millard
Chief Executive Officer and President
Vernon Hills, Illinois
December 20, 1999
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED.
<PAGE>
TELULAR CORPORATION
PROXY STATEMENT FOR 2000
ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited by the Board of Directors of Telular
Corporation, a Delaware corporation (the Company), for use at
its Annual Meeting of Shareholders to be held on Tuesday, January 25,
2000, 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 in 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 are intended to be mailed on or about
December 20, 1999, to all shareholders 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 19, 1999,
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, 11,709,544 shares of the Company's Common Stock (Shares) 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.
<PAGE>
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.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors will consist of seven 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. The proxies
solicited by and on behalf of the Board of Directors will be voted FOR the
election of the seven nominees listed below, unless authority to do so is
withheld as provided in the proxy. 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 27.6%
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, 1999,
are set forth below.
William L. De Nicolo, age 53, 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 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.
<PAGE>
Kenneth E. Millard, age 52, 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 from 1992 to 1996. 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.
John E. Berndt, age 59, has served as a director of the Company since
December 1996. Mr. Berndt is currently President of Sprint International,
an operating unit of Sprint Corporation. Mr. Berndt was previously
President of Flour Daniel Telecom, an operating company of Flour Daniel,
Inc. and President of New Business Development/Multimedia Ventures &
Technologies for Lucent Technologies, Inc. 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 58, has served as a director of the Company since March
1994. Mr. Ford joined ADC Telecommunications Inc. as Senior Vice President
and President of ADC's Integrated Solutions Group in October 1999. Mr.
Ford was previously President and Chief Executive Officer of Information
Advantage from April 1995 to August 1999. 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 48, has served as a director of the Company since
April 1995. Mr. Haning is a Senior Vice President of Motorola and has
been a Corporate Vice President with Motorola since 1990. Mr. Haning has
been with Motorola for the past 22 years. Mr. Haning is the designee of
Motorola for election to the Board pursuant to a Shareholders' Agreement,
see Certain Transactions -- Shareholders' Agreement below.
<PAGE>
Daniel D. Giacopelli, age 41, 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 October
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 45, has served as a director of the Company since
October 28, 1997. Mr. Warner also served as director for the Company
and its predecessor in 1993 and 1992. Mr. Warner is a Managing Director
of Columbia Capital Corporation (Columbia), 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.
There are no family relationships among any officers and directors of the
Company.
Board Committees and Meetings
During the fiscal year ended September 30, 1999, the Board of Directors
held four meetings. The Board has an Audit Committee and a Compensation
Committee. The Board does not have a standing Nominating 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
meeting 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 year 1999 consisted of
Mr. Berndt and Mr. Ford, and met five times during fiscal year 1999.
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 year 1999 consisted of Mr. Ford and Mr. Warner, met four times
during fiscal year 1999.
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 and
Mr. Giacopelli are employees of the Company. Mr. De Nicolo, Mr. Warner
and Mr. Haning are affiliated with a significant beneficial owner.
During fiscal year 1999, Mr. Berndt and Mr. Ford were the Independent
Directors. Each Independent Director is compensated in the form of stock
options for attending meetings of the Board or committee meetings of the
Board.
All directors are reimbursed for all reasonable expenses of attendance at
each meeting.
<PAGE>
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 19, 1999, (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>
Name of Number of
Beneficial Owner Shares Percent
---------------- --------- -----
<S> <C> <C>
Motorola 1,188,247 10.1%
1303 E. Algonquin Rd.
Schaumburg, IL 60601
Michael A. Roth and Brian J. Stark(11) 1,044,208 8.9%
1500 West Market Street
Mequon, WI 53092
DNIC Brokerage (1) 1,044,959 8.9%
20546 N. Milwaukee Ave., #356
Deerfield, IL 60014
Citadel Investment Group, LLC(12) 1,011,826 8.6%
225 West Madison Street
Chicago, IL 60606
Mark R. Warner (2)(3) 615,118 5.3%
201 North Union St., Suite 300
Alexandria, VA 22314
Robert B. Blow (2) 331,085 2.8%
6410 Poplar Avenue, Suite 395
Memphis, TN 38119
William L. De Nicolo (1)(3)(5) 1,102,498 9.4%
Kenneth E. Millard (3)(4)(7) 177,165 1.5%
John E. Berndt (3)(7) 21,250 *
Larry J. Ford (3)(7) 24,167 *
Richard D. Haning (3)(6) 1,188,247 10.1%
Robert C. Montgomery (4)(7)(9) 74,299 *
S.W.R. (Sandy) Moore (4)(7)(10) 0 *
Daniel D. Giacopelli (3)(4)(7) 224,490 1.9%
Jeffrey L. Herrmann (4)(7) 27,132 *
All Directors and Officers as a
group (10 Persons) (8) 3,454,366 29.5%
</TABLE>
<PAGE>
- --------------------------------
* Less than one percent
(1) Through his ownership of stock of DNIC, Mr. De Nicolo has an
indirect beneficial interest in 68.7% 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 and Mr. Blow have indirect beneficial interest in 5,250
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.
(3) The named individual is a director of the Company.
(4) The named individual is a Named Executive Officer of the Company
as of September 30, 1999.
(5) Includes 1,044,959 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.
(6) Includes 1,188,247 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.
(7) The number of Shares shown as beneficially owned includes options
that are exercisable within 60 days of November 19, 1999.
(8) Includes 367,515 Shares that Directors and Officers of the Company
may acquire pursuant to options exercisable within 60 days of
November 19, 1999.
(9) Officer's employment with the Company terminated on September
1, 1999.
(10) Officer's employment with the Company terminated on April 23, 1999.
(11) In a Schedule 13-G filing with the Securities and Exchange
Commission on October 18, 1999, Michael A. Roth and Brian J. Stark
stated that they believe the Company owes them 2,329,566 additional
shares of the Company's Common Stock, based upon an alternative
interpretation of the mandatory conversion formula used by the
Company to process the mandatory conversion of Preferred Stock on
October 15, 1999. The Company believes that it processed the
mandatory conversion correctly and the claim is unfounded. On
November 29, 1999, Michael A. Roth and Brian J. Stark reported to
the Company that they had reduced their holdings of Company's Common
Stock to 206,008 shares.
(12) In a Schedule 13-G filing with the Securities and Exchange
Commission on October 15, 1999, Citadel Investment Group. L.L.C.,
stated that it believes the Company owes it 1,918,268 additional
shares of the Company's Common Stock, based upon an alternative
interpretation of the mandatory conversion formula used by the
Company to process the mandatory conversion of Preferred Stock on
October 15, 1999. The Company believes that it processed the
mandatory conversion correctly and the claim is unfounded.
In a Schedule 13-G filing with the Securities and Exchange
Commission of December 6, 1999, Citadel Investment Group, L.L.C.,
reported that it has reduced its holdings of the Company's
Common Stock to 3,625 shares.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation earned
by the Chief Executive Officer and the four most highly compensated
executive officers whose salary and bonus combined exceeded $100,000
in fiscal 1999. During that period, no Named Executive Officer received
any restricted stock award, stock appreciation right or payment under
any long-term incentive plan.
<TABLE>
Annual Compensation
Long-Term
Compensation All
Awards Other
Name Year Salary Bonus Options(1) Compensation
- ---- ---- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
Kenneth E. Millard 1999 $250,000 $0 162,500 $2,922 (2)
Chief Executive Officer 1998 250,000 200,000 0 9,615 (2)
President and Director 1997 250,000 150,000 37,500 2,487 (2)
Robert C. Montgomery 1999 205,000(5) $0 80,250 $5,786 (3)
Chief Operating Officer 1998 205,000 100,000 0 7,885 (3)
Executive Vice-President 1997 189,323 75,000 1,875 46,799 (3)
Director
Daniel D. Giacopelli 1999 $200,000 $0 62,500 $0
Chief Technology Officer 1998 200,000 100,000 62,500 0
Executive Vice-President
Director
Jeffrey L. Herrmann 1999 $125,000 $4,359 26,250 $0
Chief Financial Officer 1998 112,500 52,025 10,000 0
Senior Vice-President
Secretary
S.W.R. (Sandy) Moore 1999 $95,279(6) $4,125 (4) 0 $0
Senior Vice-President 1998 177,509 23,725 (4) 12,500 0
1997 133,077 2,280 (4) 12,500 0
</TABLE>
(1) Represents the number of Shares underlying options granted during
each fiscal year.
(2) Amounts represent medical expenses in accordance with an employment
agreement.
(3) The 1999 and 1998 amounts represent medical expenses in accordance
with an employment contract. The 1997 amount represents relocation
expenses ($26,565), personal auto expenses ($10,605), and medical
expenses ($9,629) in accordance with an employment agreement.
(4) Represents sales commissions.
(5) Executive's employment with the Company terminated on
September 1, 1999.
(6) Executive's employment with the Company terminated on
April 23, 1999.
<PAGE>
Employment Contracts
On April 18, 1996, the Company entered into an 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 notice. Under the
agreement, Mr. Millard is to receive an annual salary of $250,000 and a
target incentive bonus of $200,000 payable quarterly, one-half in stock
and one-half in cash, under the guidelines of the Company's Senior
Management Bonus Plan. Mr. Millard was granted 125,000 options as part
of his employment agreement with the Company. Options to acquire 12,500
Shares of the Company's Common Stock at $12.25 per Share vested on
April 18, 1996. Options to acquire 37,500 Shares of the Company's Common
Stock at $12.25 per Share vested in 36 monthly installments from June 1996
through May 1999. Options to acquire 75,000 Shares of the Company's
Common Stock at $12.25 per Share shall vest on April 30, 2003 or earlier
if certain cliff vesting targets are met. Under cliff vesting, for each
$8.00 increase over a base price of $20.00 in the closing bid price on
Nasdaq for the Company Shares which remains in effect for 30 consecutive
trading days, options for 6,250 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 Shares has increased over the applicable base
price by more than $16.00. Under cliff vesting, during the first, second
and third years of Mr. Millard's employment, of the 75,000 options subject
to cliff vesting no more than 40%, 30% and 30%, respectively of the options
may vest. All options granted under Mr. Millard's employment agreement
terminate on the earlier of May 1, 2006 and the date that is 180 days after
Mr. Millard is no longer employed with the Company. Mr. Millard has been
granted options to acquire an additional 200,000 Shares of the Company's
Common Stock separate from his employment agreement.
Mr. Montgomery's employment with the Company was terminated on September
1, 1999. The Company has agreed to pay Mr. Montgomery his biweekly salary
until the earlier of the twelve months ended September 1, 2000, or such
time that Mr. Montgomery becomes employed elsewhere. While employed, Mr.
Montgomery had an employment agreement with the Company. The agreement
provided for an annual salary of $205,000; an annual target bonus of
$100,000, paid quarterly, one-half in stock and one-half in cash, under
the guidelines of the Company's Senior Management Bonus Plan; an option
to acquire 18,750 Shares of the Company's stock at $20.00 per Share, with
100% vesting on April 22, 1999; and up to one year's salary in severance
if terminated other than cause. Mr. Montgomery was granted options to
acquire an additional 141,750 Shares of the Company's Common Stock separate
from his employment agreement. Of all the options granted to Mr.
Montgomery, 86,280 are vested and remain outstanding as of November
19, 1999. If not exercised, these options will expire on March 1, 2000.
<PAGE>
On November 10, 1997, in connection with the Company's acquisition of
Wireless Domain, Inc., the Company entered into an employment agreement
with Daniel D. Giacopelli, pursuant to which Mr. Giacopelli agreed to
serve as Executive Vice-President and Chief Technology Officer of the
Company. The agreement provides for an annual salary of $200,000; an
annual target bonus of $100,000 payable quarterly, one-half in stock and
one-half in cash, under the guidelines of the Company's Senior Management
Bonus Plan; an option to acquire 62,500 Shares of Company's stock at
$12.25 per Share, with 100% vesting on October 29, 2004; and up to six
month's salary in severance if terminated for other than cause. Mr.
Giacopelli has been granted options to acquire an additional 62,500 Shares
of the Company's Common Stock separate from his employment agreement.
Employment agreements are terminable for cause.
<PAGE>
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, 1999.
<TABLE>
Individual Grants
% of Total
Options/SARS
Granted to
Employees Potential Realizable Value at
in Twelve Asssumed Annual Rates of
Months Stock Price Appreciation
ended for Option/SAR Term (1)
Options/SARS Sept. 30, Exercise Expiration ---------------------------
Name Granted 1999 Price Date 0% 5% 10%
- ---- --------- ---- ----- -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Kenneth E.
Millard 162,500 100% $3.75 10/27/08 $0 $207,246 $470,170
Robert C.
Montgomery 80,250 100% 3.75 10/27/08 0 102,348 232,192
Daniel D.
Giacopelli 62,500 100% 3.75 10/27/08 0 79,710 180,835
Jeffery L.
Herrmann 26,250 100% 3.75 10/27/08 0 33,478 45,951
</TABLE>
(1) 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.
<PAGE>
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, 1999:
<TABLE>
Number of Value of
Unexercised Unexcerised in the
Shares Options/ Money
Acquired SARS at FY-End Options/SARS(1)
Upon Value Exeris- Unexeris- Exeris- Unexeris-
Name exercise Realized able able able able
- ---- --- --- ------- ------- --- ---
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. Millard 0 $0 165,364 159,636 $0 $0
Robert C. Montgomery 0 0 86,280 0 0 0
Daniel D. Giacopelli 0 0 62,188 62,812 0 0
Jeffrey L. Herrmann 0 0 20,909 22,841 0 0
S.W.R. (Sandy) Moore 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 $1.94 based upon the closing price
of the Common Stock on the NASDAQ National Market System on the
last trading day of the fiscal year.
<PAGE>
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, Motorola has the right to nominate at least one director to
the Company's Board of Directors as long as it holds at least 10% of the
outstanding Shares of Common Stock, 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 such nominee. For the seven person Board to be elected
at the Meeting, this arrangement entitles Motorola to one 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 that 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, 1999.
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 1999 the Company received
approximately $2,002,000 in royalties from Motorola and purchased
transceivers and other equipment from Motorola for approximately $6,404,000.
<PAGE>
In November 1993, Motorola purchased from the Company 956,060 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 19, 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.
Relationship and Transactions with Wireless Domain Incorporated
(formerly Telepath Corporation)
Effective October 1, 1997, the Company acquired Wireless Domain
Incorporated (WD). Under the terms of the merger, the Company issued
125,000 Shares of Common Stock and relinquished control of the 125,000
Shares of Common Stock held by WD. Prior to October 1, 1997, the Company
had acquired 50% of WD in three separate transactions during 1997 and 1996.
Prior to the merger the Company purchased development services from WD.
The former president of WD, Daniel D. 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
1999, the Company paid Hamman and Benn aggregate fees of $614,410. Cash
payments totaled $338,681 and payments made in the form of Common Stock
of the Company were valued at $275,729.
<PAGE>
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, Mr. Ford and Mr. Warner.
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 and employees. 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.
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 1999. Instead, all employees were
granted the continued opportunity to participate in two Company incentive
plans. In addition, in October 1998 all employees were granted additional
stock options under the Company's Third Amended and Restated Stock Option
Plan.
The following table summarizes options repriced for past and present
executive officers:
<PAGE>
<TABLE>
TEN-YEAR OPTION/SAR REPRICINGS
Number of Length of
Securities Market Exercise Original
Underlying Price of Price Option Term
Options Stock at at Time New Remaining
/SARS Time of of Exercise at Date of
Name and Title Date Repriced Repricing Repricing Price Repricing
- -------------------- -------- -------- ----- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. Millard 10/28/97 37,500 $12.25 $19.12 $12.25 8.5 Years
Kenneth E. Millard 10/28/97 125,000 12.25 18.00 12.25 5.0 Years
Robert C. Montgomery 10/28/97 18,750 12.25 19.12 12.25 5.5 Years
Robert C. Montgomery 10/28/97 46,250 12.25 18.00 12.25 8.5 Years
Robert C. Montgomery 10/28/97 6,250 12.25 20.00 12.25 8.5 Years
Robert C. Montgomery 4/17/96 9,000 22.24 33.00 18.00 5.0 Years
S.W.R. (Sandy) Moore 10/28/97 12,500 12.25 22.25 12.25 9.0 Years
Jeffrey L. Herrmann 10/28/97 5,000 12.25 23.75 12.25 5.5 Years
Raymond M. O'Leary 4/17/96 6,000 22.24 33.00 18.00 5.0 Years
George Claudio Jr. 4/17/96 12,052 22.24 33.00 22.24 5.0 Years
Gordon Jenkins 4/17/96 3,000 22.24 33.00 22.24 5.0 Years
Timothy L. Walsh 4/17/96 2,500 22.24 33.00 22.24 5.0 Years
</TABLE>
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 year
1999, the Committee focused primarily on each officer's contributions
towards the Company's success 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 fiscal year 1999 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 components. In October of 1998, the CEO was awarded
162,500 additional Shares of the Company's stock options. During fiscal
year 1999 the CEO did not receive any cash incentive compensation.
Mark Warner, Director
Larry Ford, Director
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 Stock Market (U.S.) 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 Stock Market (U.S.) Index.
<TABLE>
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG TELULAR CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
DOLLARS
9/94 9/95 9/96 9/97 9/98 9/99
<S> <C> <C> <C> <C> <C> <C>
TELULAR CORPORATION $100 $ 145 $ 54 $ 33 $ 10 $ 5
NASDAQ STOCK MARKET (U.S.) 100 138 164 225 229 372
HAMBRECHT & QUIST TECHNOLOGY 100 175 192 287 267 514
* $100 INVESTED ON 9/30/94 IN STOCK OR INDEX - INCLUDING REINVESTMENT
OF DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
* TELULAR CORPORATION'S STOCK PRICE ON THE LAST DATE OF THE 1999
FISCAL YEAR, SEPTEMBER 30, WAS $1.94. THE LATEST SALES PRICE
ATTAINABLE BEFORE THE PRINTING OF THIS PROXY WAS $10.50 PER SHARE ON
DECEMBER 13, 1999
</TABLE>
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Mr. Ford and Mr.Warner.
Neither Mr. Ford nor Mr. Warner is now or was at any time an officer of
the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Kenneth E. Millard, Robert C. Montgomery, Daniel D. Giacopelli and Jeffery
L. Herrmann filed Form 4 statements on January 26, 1999 with respect to
transactions that occurred that month; however, to correct technical errors
in the vesting schedules set forth therein, amendments to the statements
were filed on November 19, 1999. All executive officers, directors and
holders of more than 10% of the Company's Common Stock reported all other
transactions in the Company's Common Stock during fiscal year 1999 in
timely filings with the Securities and Exchange Commission (SEC) as
required under Section 16(a) of the Securities and Exchange Act of 1934.
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, 2000, at the Company's
principal executive offices. Shareholders who intend to present a proposal
for the next annual meeting of Shareholders without inclusion of such
proposal in the Company's proxy materials are required to provide notice of
such proposal to the Company no later than October 31, 2000 at the
Company's principal executive offices. All notices should be sent to:
Telular Corporation, Attention: Secretary, 647 North Lakeview Parkway,
Vernon Hills, Illinois 60061.
Independent Auditors
The Board of Directors has appointed Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending September 30, 2000. 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 1999 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.
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
/s/Jeffery L. Herrmann
--------------------------------------
Jeffrey L. Herrmann
Senior Vice-President, Chief Financial
Officer and Secretary
Vernon Hills, Illinois
December 20, 1999
