10-K/A 1 l84727be10-ka.txt TELXON CORPORATION AMENDMENT #3 TO FORM 10-K 1 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K/A (AMENDMENT NO. 3) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-11402 TELXON CORPORATION --------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 74-1666060 ------------------------------------ ---------------------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION)

1000 SUMMIT DRIVE, CINCINNATI, OHIO 45150 ----------------------------------- ------------ (ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE) OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (330) 664-1000

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, $.01 Par Value --------------------------------- (TITLE OF CLASS) 7 1/2% Convertible Subordinated Debentures Due 2012 --------------------------------------------------------- (TITLE OF CLASS) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]. No [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]. The aggregate market value of registrant's Common Stock held by non-affiliates as of May 31, 2000, based on the last reported sales price of the Common Stock as reported on the Nasdaq National Market for such date, was $259,377,871. At May 31, 2000, there were 17,511,472 outstanding shares of the registrant's Common Stock. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2 This Amendment No. 3 on Form 10-K/A amends and restates in full the disclosures made by the registrant under Item 11 of Part III of the registrant's Form 10-K with respect to its fiscal year ended March 31, 2000 ("Fiscal 2000"), as previously amended, to correct understatements occurring at two places in the previously filed disclosure under that Item regarding the number of employee stock options granted to William J. Murphy during Fiscal 2000 and to add a clarifying disclosure to the footnote associated with his option grant information in the Summary Compensation Table. Specifically: The number of stock options shown for Mr. Murphy in the seventh column of the Summary Compensation table has been correctly restated as 71,500 shares, and the associated footnote has been expanded to reflect that the additional stock options included in the corrected total were granted outside the Company's 1990 Stock Option Plan for employees, consistent with the disclosure in footnote (4) of the table of Option Grants in Fiscal 2000 included in the registrant's Item 11 disclosures as originally filed; and The number of shares shown for Mr. Murphy in the second column of the second row of information for him in the table of Option Grants in Fiscal 2000 has been correctly restated as 25,000 shares (all other information in that row was correctly stated in the disclosure originally filed notwithstanding the understatement of the number of shares in the second column). Except as specifically discussed above, no changes have been made to the previously filed Item 11 disclosures as set forth herein. This Amendment No. 3 is intended only to amend the previously filed Item 11 disclosures so that the Item 11 information is correctly stated as of the original filing thereof on July 31, 2000 in Amendment No. 2 to the subject Form 10-K and not to update any of the Item 11 information to reflect any changes in that information, or any other developments relating to the subject matters covered by Item 11, which may have occurred since that date. PART III ITEM 11. EXECUTIVE COMPENSATION COMPENSATION OF EXECUTIVE OFFICERS The following table shows all annual, long-term and other compensation for services rendered to the Company in all capacities paid or awarded during each of its three most recently completed fiscal years to the Company's chief executive officer during any portion of Fiscal 2000, to the Company's four other executive officers serving at fiscal year end who received the highest combined salary and bonus compensation during Fiscal 2000 and to a former executive officer of the Company who, but for the fact that he was not serving as such at fiscal year end, would have been included among the four Company executive officers other than the chief executive officer who received the highest combined salary and bonus compensation during Fiscal 2000. SUMMARY COMPENSATION TABLE

96 3 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)

--------------- ! Option for the purchase of the indicated number of shares of Telxon Common Stock granted to the named executive officer pursuant to the Telxon Corporation 1990 Stock Option Plan for employees (the "Employee Option Plan"), except that 400,000 of the stock options to Mr. Paxton were granted outside the Employee Option Plan as part of an inducement essential to his entering into an employment agreement to join the Company as its new President, Chairman of the Board and Chief Executive Officer and 25,000 of the stock options to Mr. Murphy were granted outside the Employee Option Plan as part of the terms of his agreement to become the Company's Executive Vice President, Americas. . * Option for the purchase of the indicated number of shares of common stock of Aironet Wireless Communications, Inc. ("Aironet", a majority-owned subsidiary of the Company until the initial public offering of Aironet common stock on July 30, 1999; Aironet was subsequently acquired by Cisco Systems, Inc. in March 2000 at an exercise price of $3.50 per share under the Aironet 1996 Stock Option Plan for employees, directors and advisors (as amended through March 31, 1998, the "Aironet Option Plan"), granted by Aironet to the named executive officer as an advisor to Aironet. (1) Except as otherwise indicated by limiting dates, each of the named executive officers presently holds the position(s) indicated. (2) Except as otherwise footnoted, the amounts shown are matching contributions made by the Company under its Retirement and Uniform Matching Profit Sharing (401(k)) Plan ("401(k) Matching Contribution"). (3) The amount shown is the portion of his annual salary which accrued during the portion of Fiscal 1999 after he joined the Company on March 22, 1999. (4) In addition to these stock options granted to Mr. Paxton, the Company agreed to sell to Mr. Paxton, as part of an inducement essential to his entering into an employment agreement to join the Company, and Mr. Paxton agreed to purchase, 300,000 shares of Company Common Stock at a price of $8.719 per share (equal to the closing sale price for the Common Stock as reported on The Nasdaq Stock Market's National Market (the "Nasdaq NNM") for the last trading day prior to his entering into the Company's employ); Mr. Paxton completed that stock purchase on February 2, 2000. 97 4 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) (5) Mr. Biggs' compensation as the Company's Chief Technical Officer under his employment agreement consists of an award of 35,000 shares of restricted stock that was approved by the Company's Board of Directors on August 30, 1999. The amount shown represents the value of the shares at the closing price per share for the Company's common stock as reported on the Nasdaq NNM on the date of award. At March 31, 2000, 10,000 of those restricted shares remained unvested, subject to his continued performance of his services under the employment agreeement; based on the closing price for the Company's common stock as reported on the Nasdaq NNM on March 30, 2000, the value of the unvested shares on that date was $175,630. (6) Reimbursement of relocation and/or temporary living expenses. (7) In addition to a $4,297 401(k) Matching Contribution, includes a $14,274 payment for accrued but unused vacation and payments of and accruals for severance benefits aggregating $356,534 in respect of salary continuation plus $8,147 in respect of medical insurance. (8) Company contribution to personal retirement plan. EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS Mr. Paxton serves as Chairman of the Board of Directors and Chief Executive Officer of the Company through March 31, 2002 at a base salary of $800,000 per year. Mr. Paxton's employment agreement further provides for annual bonus compensation of up to $600,000 per year if he meets or exceeds the annual goals to be agreed upon between him and the Company's Board of Directors, components of which shall include operating earnings, backlog, revenue, inventory, quality control and cash flow. The employment agreement also obligated the Company to pay his transitional living expenses (housing, ground and air transportation), "grossed-up" for taxes, through March 31, 2000. The Company also pays the premium (currently $7,835 per year) under a $1 million term life insurance policy obtained by Mr. Paxton in April 2000, the benefits of which are payable to such beneficiary(ies) as he may designate. 98 5 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) If Mr. Paxton's employment is terminated by the Company for other than "cause" (defined in his employment agreement as behavior of Employee which is adverse to the Company's interests, including dishonesty, grossly negligent misconduct, willful misconduct, disloyalty, acts of bad faith, neglect of duty or material breach of the employment agreement or of any other Company agreement with him or Company policy applicable to its employees generally), his employment agreement obligates the Company to pay a severance benefit to him at a rate equal to his base salary for the greater of 24 months or the remaining term of the agreement, as well as his basic medical insurance premiums for 18 months. A resignation by Mr. Paxton following the Company's assignment of him to serve in any capacity other than his current offices or to perform tasks inconsistent with such positions will be deemed a termination by the Company without "cause" entitling him to the foregoing severance and insurance. Mr. Paxton is also entitled to the severance benefit if his employment agreement expires without renewal or extension. If any of the foregoing employment terminations occurs after a "change in control" of the Company of a nature which the Company would be required to report in its filings with the SEC (including, without limitation, (a) the acquisition by any person, entity or group of beneficial ownership of 15% or more of the combined voting power of the Company's securities in the election of directors, (b) liquidation of all or substantially all of the Company's assets or a merger, consolidation or reorganization in which neither the Company nor any entity in which the Company's stockholders own at least 50% of the voting power is the surviving entity, and (c) the current directors of the Company, or persons approved by them to succeed them (such current and successor directors constituting "Continuing Directors"), ceasing to constitute at least a majority of the Board), the severance benefit payable to Mr. Paxton is increased to an amount equal to 2.99 times his base salary and, to the extent that such payment and/or any other payments which he has the right to receive from the Company would constitute, alone or in the aggregate, an "excess parachute payment" under Section 280G of the Internal Revenue Code, payment by the Company of any excise tax imposed on such payments and any taxes due as the result of the Company's payment of such excise tax and other taxes, as well as the acceleration of the vesting of all then outstanding stock option grants and the ability to exercise all of his stock options for their full original terms. In the event of a Change in Control, Mr. Paxton has the right to elect to terminate his employment within 30 days of such event without regard to his reason therefor or within two years of the Change in Control if he has "Good Reason" (defined to include a reduction in his salary or benefits from pre-change in control levels or a requirement that he relocate from, or be based anywhere other than, the metropolitan area where his office is located prior to the change in control) to resign; upon any such election, Mr. Paxton is entitled to receive the increased severance and insurance benefits. If his employment is terminated by the Company within two years after a Change in Control, Mr. Paxton is entitled, until replacement benefits may be provided by a successor employer, to up to two years of continued employee welfare benefits. Mr. Murphy has an employment agreement with the Company for a term ending March 31, 2003, at a base salary of $325,000 per year. His employment agreement further provides for bonus compensation for each fiscal year during the term as determined by the Board of Directors in its discretion based upon the recommendation of the Chief Executive Officer or such other supervising officer as the Chief Executive Officer shall designate (the "Supervising Officer"). The agreement provides for a bonus potential for fiscal 2001 of up to $200,000. His employment also provides for his receipt of a $450,000 promotion bonus, the first $150,000 installment of which has been paid and the remaining two $150,000 installments are payable March 31, 2001 and March 31, 2002. Mr. Murphy or his estate is entitled under the employment agreement to the same disability and death benefits as are extended by the Company to its executive employees generally, and he is also entitled to severance benefits of twelve months base salary and, until replacement benefits may be provided by a successor employer, up to twelve months of continued employee welfare benefits in the event that his employment is terminated by the Company for other than "cause". By letter agreement, Mr. Biggs' employment has been continued at a salary of $250,000 per year, beginning August 7, 2000, with an annual bonus potential of 35% of his salary. His current employment agreement, which expires on August 6, 2000, provides for his receipt of 35,000 shares of restricted stock in full payment for his services thereunder. The restricted stock vests, subject to his continued employment, in installments over the term of the original agreement. Of the restricted shares, 10,000 shares remain unvested and subject to forfeiture until he completes his original term of service, at which time the shares will vest. His employment agreement also provides for the vesting of the shares in the event (a) Mr. Biggs' employment is terminated other than (i) by reason of his death or permanent disability or (ii) for cause, or (b) any of the following events (each a "Change in Control Event") occurs: (i) Mr Paxton ceases for any reason to be the Company's chief executive officer, (ii) the consummation of a transaction requiring stockholder approval and involving the sale of all or substantially all of the Company's assets or the merger or consolidation of the Company with or into another corporation, or (iii) any person, entity or group becoming the beneficial owner of Company securities representing 50% or more of the combined voting power of the Company's then outstanding securities. Vesting is also accelerated on a pro rata basis in the event of Mr. Biggs' death or permanent disability. Under the letter agreement, he is entitled to a one-year severance benefit in the event of a Change in Control Event, a six months' severance if he leaves Telxon after August 7, 2001, provided that he assists the Company is finding and training a qualified replacement for him. The letter agreement also provides for the continuation of the living expense allowance for housing, airfare and automobile expenses provided for under his original employment agreement. Mr. Biggs or his estate is entitled to the same disability and death benefits as are extended by the Company to its executive employees generally. Mr. Cassady has an employment agreement with the Company for a term ending June 6, 2002, at a base salary of $350,000 per year. His employment agreement further provides for bonus compensation for each fiscal year during the term as determined by the Board of Directors in its discretion based upon the recommendation of the Supervising Officer. Mr. Cassady or his estate is entitled under the employment agreement to the same disability and death benefits as are extended by the Company to its executive employees generally, and he is also entitled to severance benefits of twelve months base salary and, until replacement benefits may be provided by a successor employer, up to twelve months of continued employee welfare benefits in the event that his employment is terminated by the Company for other than "cause". 99 6 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) The Company has also entered into letter agreements with Messrs. Cassady and Murphy providing for certain severance benefits in the event such officer's employment with the Company is terminated under certain circumstances within two years after a "change in control" of the Company. If the officer's employment is terminated by the Company or its successor other than for "cause", disability or at retirement age or by the officer for "good reason", the officer is entitled to a lump sum payment equal to two times his annual salary as in effect prior to the change in control, continued benefits under all insured and self-insured welfare benefit plans in effect prior to the employment termination date for a period of two years or until such earlier date as the officer receives equivalent benefits from a new employer or reaches retirement age (in which case the terms of any retirement plan shall apply), and to the extent that such payment and/or any other payments which he has the right to receive from the Company would constitute, alone or in the aggregate, an "excess parachute payment" under Section 280G of the Internal Revenue Code, payment by the Company of any excise tax imposed on such payments and any taxes due as the result of the Company's payment of such excise tax and other taxes. "Good reason" will exist for an officer to terminate his own employment without losing his entitlement to such benefits if, without the officer's prior written consent, his job status, positions or responsibilities are reduced or otherwise inconsistent with those prior to the change in control, his salary or benefits are reduced from pre-change in control levels or he is required to relocate from, or be based anywhere other than, the metropolitan area where his office is located prior to the change in control. The events constituting a "change in control" following which the letter agreement's severance provisions apply are events of a nature which the Company would be required to report in its filings with the SEC, including, without limitation, (a) the acquisition by any person, entity or group of beneficial ownership of 15% or more of the combined voting power of the Company's securities in the election of directors, (b) liquidation of all or substantially all of the Company's assets or a merger, consolidation or reorganization in which neither the Company nor any entity in which the Company's stockholders own at least 50% of the voting power is the surviving entity, and (c) the current directors of the Company, or persons approved by them to succeed them, ceasing to constitute at least a majority of the Board; provided that any of the foregoing events shall not constitute a "change in control" if the officer or a group of which he is a part acquires, directly or indirectly, 15% or more of the combined voting power of the Company's securities. Each of the Employee Option Plan and Restricted Stock Plan under which one or more of the Company's executive officers have received grants or awards provide for the cancellation or forfeiture of then unvested stock options or restricted stock, and a limited, 30-day post-termination period for exercising his then vested stock options (generally extended to three months in the case of retirement, six months in the case of death and one year in the case of disability), in the event the recipient ceases to be employed by or an advisor to the granting or awarding entity, subject to the acceleration of vesting and/or the extension of the post-termination exercise period by the administering authority in its discretion. In the event of a "change in control" of the issuing entity, each of the Plans provides that, except as otherwise determined at the time by the board of directors of the issuing entity, all grants and awards then outstanding thereunder shall become fully vested, and the Employee Option Plan further provides that, except as otherwise determined at the time by the applicable board of directors, a cash payment shall be made to the holders of outstanding options equal to the amount by which (i) the highest price paid or offered in any transaction related to the "change in control", or at which the underlying stock has traded on any securities market, within the preceding 60 days, as determined by the board, exceeds (ii) the exercise price. The Employee Option Plan and the Restricted Stock Plan 100 7 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) define "change in control" to mean (1) the acquisition by any person, entity or group of beneficial ownership of 50% or more of the combined voting power of the issuing entity's then outstanding securities, or (2) the consummation of a transaction requiring stockholder approval and involving the sale of all or substantially all of the assets, or a merger or consolidation, of the issuing entity. EMPLOYEE STOCK OPTIONS The following tables provide information with respect to options granted to, and exercises by, the persons indicated during Fiscal 2000 and the value of unexercised options held by such persons at the end of Fiscal 2000. OPTION GRANTS IN FISCAL 2000

--------------- 101 8 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) (1) Except as otherwise footnoted, granted under the Employee Option Plan and becoming exercisable as to one-third of the underlying shares on a cumulative basis on each of the first three anniversaries of the grant date. (2) In the case of options granted under the Employee Option Plan, the exercise price shown is equal to the closing sale price for the Common Stock as reported on the Nasdaq NNM for the last trading day prior to the grant date. (3) Present value of the option as of the date of grant, calculated using the Black-Scholes option valuation model under the following assumptions: (a) based upon the Company's review of historical data concerning the exercise by employees of options for Shares granted under the Company's stock option plans and survey data concerning the experience of other companies, an executive may typically be expected to hold an option with a stated term of eight years for five years prior to exercise; (b) a stock price volatility of 72.92% (based on the changes in the market price for Shares over the five fiscal year period ended March 31, 2000, the length of which period corresponds to the expected holding period assumed in (a) above); (c) a risk-free interest rate of 6.66% (based on risk free rate is the rate on U.S. zero coupon bonds with a life equal to that of the options.) (4) Granted outside the Employee Option Plan at an exercise price per share negotiated as part of the terms of Mr. Murphy's agreement to become the Company's Executive Vice President, Americas, based on the market price for the Company's common stock as of the time he assumed those duties. Fully exercisable as of the date of grant. (5) Present value of the option as of the date of grant, calculated using the Black-Scholes option valuation model under the following assumptions: (a) based upon the Company's review of historical data concerning the exercise by employees of options for Shares granted under the Company's stock option plans and survey data concerning the experience of other companies, an executive may typically be expected to hold an option with a stated term of five years for three years prior to exercise; (b) a stock price volatility of 81.15% (based on the changes in the market price for Shares over the three fiscal year period ended March 31, 2000, the length of which period corresponds to the expected holding period assumed in (a) above); (c) a risk-free interest rate of 6.64% (based on risk free rate is the rate on U.S. zero coupon bonds with a life equal to that of the options.) (6) Present value of the option as of the date of grant, calculated using the Black-Scholes option valuation model under the following assumptions: (a) based upon the Company's review of historical data concerning the exercise by employees of options for Shares granted under the Company's stock option plans and survey data concerning the experience of other companies, an executive may typically be expected to hold an option with a stated term of eight years for five years prior to exercise; (b) a stock price volatility of 69.77% (based on the changes in the market price for Shares over the five fiscal year period ended March 31, 2000, the length of which period corresponds to the expected holding period assumed in (a) above); (c) a risk-free interest rate of 5.86% (based on risk free rate is the rate on U.S. zero coupon bonds with a life equal to that of the options.) (7) Present value of the option as of the date of grant, calculated using the Black-Scholes option valuation model under the following assumptions: (a) based upon the Company's review of historical data concerning the exercise by employees of options for Shares granted under the Company's stock option plans and survey data concerning the experience of other companies, an executive may typically be expected to hold an option with a stated term of eight years for five years prior to exercise; (b) a stock price volatility of 70.75% (based on the changes in the market price for Shares over the five fiscal year period ended March 31, 2000, the length of which period corresponds to the expected holding period assumed in (a) above); (c) a risk-free interest rate of 5.93% (based on risk free rate is the rate on U.S. zero coupon bonds with a life equal to that of the options.) 102 9 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND FISCAL YEAR-END OPTION VALUES

103 10 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) --------------- ! Options for the purchase of the indicated number of shares of Telxon Common Stock granted to the named executive officer pursuant to the Employee Option Plan except as otherwise explained in footnote (4) to the table of Fiscal 2000 Option Grants above with respect to 25,000 of the option shares granted to Mr. Murphy. * Option for the purchase of the indicated number of shares of common stock of the Company's former Aironet subsidiary granted to the named executive officer as an advisor to Aironet pursuant to Aironet's stock option plan. (1) Aggregate fair market value, based, in the case of options for the purchase of Telxon Common Stock, on the amount by which the closing sale price for Telxon Common Stock as reported on the Nasdaq NNM for March 31, 2000 exceeded the exercise price of all unexercised "in-the-money" (fair market value per share in excess of exercise price) Telxon stock options then held. COMPENSATION OF DIRECTORS CASH COMPENSATION The Company's non-employee directors each receive an annual fee of $25,000 per year. The non-employee directors also receive $2,500 plus travel expenses for each day of attendance at directors' meetings ($1,250 for a telephonic meeting), and $2,500 for each Audit Committee or Compensation Committee meeting attended (either as a member thereof or at the request of the Committee), unless the committee and the full Board meet on the same day, in which event compensation in the amount of $1,250 is paid for attendance at such committee meeting. Mr. Paxton, by reason of also being an employee of the Company, does not receive any compensation from the Company for his services as a director (see "COMPENSATION OF EXECUTIVE OFFICERS" above for the compensation payable to him in his capacity as an executive officer of the Company). STOCK OPTIONS Directors who are not employees of the Company or a subsidiary are eligible to receive options to purchase Shares under the Company's 1990 Stock Option Plan for Non-Employee Directors (as amended the "Director Option Plan"). However, all shares of Company Common Stock authorized for issuance under the Director Option Plan have been fully utilized for the granting of options thereunder. The Director Option Plan provides for each non-employee director to be automatically granted an option to purchase 25,000 Shares upon first being elected to the Board (an "Initial Grant") and to be automatically granted annually thereafter a 10,000 Share option (each a "Continuing Grant") on each anniversary of his last election to the Board during his continued 104 11 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) service on the Board. An Initial Grant becomes exercisable in equal thirds on each of the first three anniversaries of the grant date, whereas each Continuing Grant becomes exercisable in full on the third anniversary of its grant date. The Director Option Plan also permits the Board to make discretionary option grants under the Director Option Plan to any one or more of the Company's non-employee directors from time to time in addition to the foregoing automatic grants. Each option granted under the Director Option Plan has a seven-year term, which may be extended up to ten (10) years, and an option price per Share equal to the closing sales price of the Common Stock as reported on the Nasdaq for the trading day immediately preceding the date of grant. The options terminate three months following the optionee no longer being a director of the Company, six months following death and one year following disability. Options granted under the Director Option Plan are subject to the same "change in control" provisions as apply under the Employee Option Plan described under "EXECUTIVE COMPENSATION -- Employment Agreements and Termination of Employment Arrangements" above. OTHER ARRANGEMENTS Prior to his election to the Company's Board of Directors, the Company engaged R. Dave Garwood to provide employee training and consulting services to the Company valued at $154,000 relating to the adoption and implementation of its MRP-II material resource planning process. Mr. Garwood agreed to accept 20,197 shares of Company common stock as payment for his services. The shares vested in two approximately equal installments at the midpoint of the engagement and upon its completion in June 2000. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION As part of its five-year plan, "Telxon 2000," announced in August 1995, the Company established a program providing key Telxon employees with a long-term incentive opportunity to purchase stock in its technology subsidiaries, thereby encouraging them to support the development of the subsidiaries and their businesses with the same effort and dedication as in their service to Telxon so as to more closely align their objectives with the long-term goals of the Company as a whole. During the fiscal year ended March 31, 1996 ("Fiscal 1996"), the Company sold shares of common stock in its Metanetics Corporation subsidiary ("Metanetics") under the program at a price per share equal to that paid in a contemporaneous sale negotiated at arm's length with a third party investor. John H. Cribb, then an officer of the Company and now a member of its Board of Directors and its Compensation Committee, purchased 30,000 Metanetics Shares. In February 2000, the Company repurchased all of the outstanding minority stockholdings in Metanetics, including Mr. Cribb's shares, at a price of $6.73 per share. As a result, Mr. Cribb received a cash payment of $201,900 from the Company for his Metanetics shares, representing an approximately 0.6% interest in Metanetics at the time of the repurchase. 105 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 3 on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized. TELXON CORPORATION Date: October 31, 2000 By: /s/ WOODY M. MCGEE ------------------------------- Woody M. McGee, Vice President and Chief Financial Officer

TELXON CORP 10-K/A